Centamin 2021 preview: Where next for the Centamin share price?

When will Centamin release 2021 earnings?

Centamin is scheduled to publish full year 2021 earnings on the morning of Wednesday March 16 at 0700 GMT. A conference call will follow at 0930 GMT.

Centamin 2021 earnings preview

Centamin has already revealed gold production declined to 415,370 ounces of gold in 2021 from 452,320 ounces in 2020. That was the midpoint of its annual target of 400,000 to 430,000 ounces.

The miner sold 407,252 ounces of gold in the year at an average price of $1,797 per ounce compared to 468,681 ounces in 2020, when average prices were $1,766. Having been unable to fully capitalise on higher prices, revenue in the year fell to $733 million from $828.7 million in 2020 and came in just shy of analyst expectations.

Plus, costs increased at a faster rate than gold prices last year amid the inflationary environment, as its all-in sustaining cash costs soared to $1,211 from $1,036 the year before, causing its margin to contract. That will contribute to lower earnings this year with analysts forecasting that pretax profit will drop to $213.8 million from $315.0 million the year before, while EPS is expected to fall to 10 cents from 13.5 cents.

The outlook for 2022 suggests Centamin could return to growth this year. The miner has already said it plans to produce 430,000 to 460,000 ounces and gold prices have risen sharply since Russia invaded Ukraine as investors flock to safe haven assets amid the uncertain geopolitical situation, with the metal now trading at around $1,965, having briefly surpassed $2,000 an ounce last week. Notably, Centamin does not have any hedging in place, meaning it is fully exposed to the spot market.

That offers an opportunity for profits to rebound in 2022, although the big question is how well Centamin can control costs this year after warnings its all-in sustaining cash cost will rise to the region of $1,275 to $1,425 per ounce. The wide range means the overall average cost this year will go a long way in deciding what sort of margin Centamin can deliver. Analysts currently believe revenue will rise around 9.6% in 2022 but are expecting earnings to drop for a second consecutive year with the consensus pointing to a 9.4% drop in pretax profit.

Centamin has said its capital expenditure budget has been cut to $215 million for 2022 from the $233 million spent in 2021. Of that, around $25 million will be spent on exploration work that will primarily entail completing the pre-feasibility study for the Doropo project in the Ivory Coast in the second half of 2022, drilling the adjacent ABC project, and starting exploration in the Egyptian Eastern Desert. The company has zero debt and ended 2021 with $257 million in cash and equivalents. The dividend for 2021 is expected to remain flat from the 9.0 cent payout made in 2020.

In December, Centamin delivered the largest increase in its gold reserves in 10 years after adding 1.1 million ounces of mineral reserves at its core Sukari gold mine in Egypt. The mine can continue for at least another 12 years and is the key to Centamin’s ambition to get annual production up to 500,000 ounces a year from Sukari alone within the next 10 years. Centamin plans to continue drilling Sukari in 2022 as it sees more upside for the project and is set to release a study looking at the potential to expand the underground aspect of the mine in the second half of this year. It has also said it is striving to cut annual costs at the project by $150 million by 2024, having raised this from an original target of $100 million late last year.

If all goes to plan, Centamin has said it aims to produce 450,000 to 475,000 ounces in 2023 at a significantly lower all-in-sustaining cash cost of $975 to $1,200 and then 450,000 to 500,000 ounces in 2024 at a cost of $900 to $1,175 per ounce.

Notably, the company plans to hold a virtual investor presentation on March 23, when it will provide more insight into its plans to improve its key Sukari gold mine and how it intends to unlock the ‘embedded growth opportunities’ within the business.

Where next for the CEY share price?

Centamin shares have been gradually climbing higher during the last three months and have tracked a rise in gold prices to climb almost 25% since the middle of December. The stock hit an eight-month high of 111p last week before hitting a ceiling and attracting sellers back into the market.

The current uptrend remains intact despite the rally coming to a stall over the last week. The RSI remains in bullish territory and is reinforced by the fact trading volumes have been on the rise over the past month. The 50-day sma has also recently moved back above the 100-day sma to provide a further bullish signal, although a recovery back above the 200-day sma would be a stronger signal.

Recaputing the eight-month high of 111p is the initial upside target. Beyond there, shares can eye the 117.3p that proved a level of resistance on several occasions last April and June before it can bring 123p into the crosshairs.

However, we could see the stock slide as low as 94p, in-line with the 50-day and 100-say smas, while keeping the current uptrend alive. We could see shares swiftly fall below the 90p mark should the uptrend be broken and start to reverse.

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