Centamin PLC operates the Sukari Gold Mine in Egypt - one of Africa’s largest and lowest-cost gold mines. With gold trading near record highs, many traders are taking a closer look at gold mining stocks like Centamin as a way to profit from rising prices. 

This article explores Centamin’s business operations, share price performance, and the factors traders should consider before investing. 

What Does the Company Centamin Do?

Centamin is an Egyptian-focused gold mining company operating the Sukari Gold Mine since 2009. Sukari is located in south-eastern Egypt, approximately 700km from Cairo and 25km from the Red Sea. With an expected mine life of 2030, it’s one of Africa’s largest and longest-life gold mines.

The open pit mine has proven and probable reserves of 15.7 million ounces of gold and produces 500,000 ounces annually. Sukari is one of the most profitable gold mines globally, with enviable profit margins. Centamin is advancing underground mining operations, which are expected to extend Sukari’s lifespan.

Centamin also holds a broad portfolio of exploration assets outside Egypt in countries like Burkina Faso and Côte d’Ivoire. However, the growth and the Centamin share price are closely tied to its flagship Sukari mine, which accounts for its largest production and revenue share.

Are Centamin Shares a Good Buy?

With Centamin tightly leveraged to the gold price, it has delivered stellar returns for investors over the past years amid rising prices. However, analysts remain divided on whether Centamin stock remains a good buy at current levels near all-time highs. 

The company must first demonstrate that it can effectively mitigate risks to Sukari’s production. Since this mine accounts for a huge percentage of gold production, any disruptions to the site would severely impact Centamin’s output and financials. Unfortunately, Sukari has faced several setbacks in recent years, including disputes with the Egyptian government over profit sharing and problems with underground mining contractors.

Encouragingly, management has made positive Progress in renegotiating its agreement with Egypt and finding a new underground mining partner. They are continuing to enclose relationships with national regulators.

Centamin shares depend on several factors, such as the mentioned government disputes and many more that we will discuss in the following sections. The more you know about these share price influencers, the better you will understand the share price dynamics, which will help you decide whether it is a good share to invest in. 

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What is the Share Price of Centamin Gold Mining?

Over the past year, the Centamin share price has seen significant fluctuation and an overall downward trend. In December 2022, the Centamin share price closed at 112.90 pence. The price remained relatively steady into January 2023, closing at 111.05 pence. However, from February through October 2023, the Centamin share price declined quite sharply, falling over 25% from 102.05 pence in February to a low of 82.45 pence in October.

Several elements likely contributed to this protracted slide in the Centamin share price over most of 2023. Falling gold prices during the year reduced profit margins for the company. Issues with production capacity and cost control at Centamin’s key Sukari Gold Mine in Egypt may have also worried investors. Furthermore, high inflation and rising interest rates impacted stock markets globally, with mining shares like Centamin facing selling pressure.

The Centamin share price plunge bottomed out in October 2023 at 82.45 pence. After that, the closing price recovered noticeably to 96.70 pence in November, apparently encouraged by Centamin’s announcement of an improved production outlook. However, by mid-December 2023, despite gold’s rise, the Centamin share price pulled back to 93.35 pence, reflecting ongoing investor concerns about the company’s performance and uncertainty in financial markets.

What’s Behind Recent Centamin Share Price Moves?

There are several factors that can cause fluctuations in the Centamin share price, but the following are the most common reasons.

1. Gold Prices

As a pure-play gold miner, Centamin’s fortunes heavily depend on the price of gold, which drives the company’s revenues. Gold prices fluctuated in 2023 but trended downward amidst rising interest rates and bond yields, which dimmed gold’s attractiveness as an inflation hedge among some investors. This gold price erosion weighed the Centamin share price for much of 2023. 

However, a price stabilization late in the year, with gold recovering above $1,800/oz in November and December, likely contributed to the Centamin share price bouncing off its October lows. If inflation concerns accelerate again in 2024, lifting gold with it, Centamin’s stock could regain further ground.

2. Production Levels

Centamin experienced significant quarter-to-quarter swings in gold output from its flagship Sukari mine. After a weak Q1, production improved to meet guidance in Q2 and Q3 before slowing again in Q4 due to lower grades. These production hiccups added uncertainty over Centamin’s earnings trajectory, weighing on share prices and cost pressures linked to global energy price spikes. However, the recent Q4 miss was likely already priced in by year-end. With management guiding for improved output in 2024, any production strides could boost Centamin’s stock. Cost control remains critical, though.

3. Political Risk

As a London-listed miner operating solely in Egypt, Centamin is vulnerable to adverse shifts in the regulatory or fiscal landscape imposed by the Egyptian government. Concerns over potential tax or royalty hikes and even resource nationalism are examples of this risk. 

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Closing Thoughts

While Centamin’s leverage to gold prices and prolific Sukari mine make it potentially appealing, traders should exercise caution before investing. With fluctuating production and vulnerability to political risks, Centamin continues facing multiple uncertainties that have sunk its share price despite high gold prices. 

Before risking capital on Centamin stock, traders should monitor how these critical variables develop in coming quarters. Progress in resolving regulatory disputes and demonstrating reliable grade control and cost management could signal a turnaround. Patience in investigating all facets of Centamin’s workings is essential to gauge whether current headwinds persist. 

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