Gold Finger Part 2

The man, the man with the midas touch....

Gold revisited at $2200

Dear reader,

I wrote about Gold blasting through $2,100 and so it continued to $2,200. Will it go higher?

Meanwhile I have reflected on the motley crew of gold shares I covered, after writing about Gold (38% of portfolio) at Royalty co. Trident, earlier today.

Do I have a revised view on Gold miners given gold’s higher price?

Revisiting my top trumps:

Centamin

Centamin’s average price per ounce sold was $1,948. Bearing in mind they have hedged just under 30% of production an average $2,200 gold price would massively boost profits.

A 10% increase would’ve boosted PAT by $86.3m. That’s nearly double the $92.2m 2023 number.

Costs meanwhile announced an eye popping $1,205 AISC in its recent FY23 results and outlook is $1200-$1350/ounce.

Caledonia (CLDN)

Again an average $1948/oz sale price. Deducting royalty and tax (and extrapolating the 9 months) a $2200 gold price, offset by a higher $1350 AISC ($100/oz higher), but without 2023’s extraordinary costs would likely boost profits by $11m. So an estimated doubling of profit for 2024.

Metal Exploration (MTL)

MTL on a $2,200 gold price working on the lower AISC of $1,000 (Per H&P research) and using a 70Koz (Per H&P) for FY24 production, gets me to $150m revenue, $70m COS, and Admin $10m to arrive at $70m op profit less tax is a 2X performance compared to 2023 but this is the profit that H&P forecast in any case.

Serabi (SRB)

On Tamesis FY24 PAT of $16.2m and assumption of $1,950 gold, $2,200 golf has the estimated effect to boost profits from $16.2m to $23.5m

Pan African (PAF)

Using Edison’s numbers of a $1,940 gold price moving this to $2,200 moves the PAT from $67m to around $91m.

Hochschild (HOC)

Putting $2,220 into my HOC profit model I go from $1,950 to $2,200 per ounce gold. The change in profit is $50m to $113m

Hummingbird (HUM)

An industrial dispute at HUM’s new Kourroussa mine has led this to fall by 75% from its peak nearly a year ago. I’m sure $2,200 gold would have an upside for HUM but I’m not sure I want to go to the effort to calculate it.

Conclusion

It appears CEY, HOC, MTL can all 2X profits from a “$2,200 gold price” (NB I’ve worked on the basis of a 10% increase from the general $1,950 price for $2,145 an ounce, being picky)

This suggests their total costs are 90% of revenue and therefore 110% turns 10% to 20% - doubles.

For SRB and PAF the margin is larger therefore the gain is smaller - costs maybe of 80% to the same 100%, so 110% turns 20% to 30% - a 50% increase rather than a double.

In my last article 35% agreed with me that CEY looked a good option. It’s interesting to see that over a 1 year span higher gold prices have spurred some shares to rerate - but not CEY. Even a strong FY23 result this week had a negligible effect on the share price. I dare say a doubling of profits and 2024 news flow* will awake it from its Egyptian slumber.

*CEY newsflow includes its Eastern desert exploration update, the Cote D’Ivoire Doropo DFS, increase from 450Koz to 470-500Koz production, the accelerated waste-stripping programme, 50MW grid project completion and the solar expansion study.

This is not advice

Oak