Centamin Centamin (CEY LN) yesterday provided a double negative of FY13E production guidance that was below previous plans and revised capital costs above previous guidance.

Neither factor was alarming, however, given that the former reflects a timing issue and the latter was already incorporated within our numbers.

We have revised our forecasts accordingly, with a reduction in our target price from 72.1p to 67.1p, reflecting the impact of lower FY13E earnings forecasts.

CEY remains an attractively valued gold growth play, but with high political risk given its stark exposure to Egypt. * CEY has revised FY13E gold production guidance to 320koz (at cash costs of $700/oz), versus previous guidance of 367koz (provided with the 5yr production plan in May’12).

The latest revision reflects delays to the Stage 4 expansion, with the bulk of commissioning activities now due to commence during the 2H13.

The plant is still expected to be fully operational (10mtpa rate) by the end of the year, although we would not expect it to deliver that volume in FY14. * The total capital cost estimate for the expansion now stands at $325m, up 13% from the planned $288m.

We had already assumed capex of $357m, incorporating our own contingencies, so this had no impact to our valuation. * Yesterday’s announcement is not a positive, but we recognise it as a timing issue and appreciate that 5 year mine plans are forever subject to change.

We have incorporated today’s guidance and have also, as a precaution, reduced our FY14E production by 7% to 368koz (the 5yr plan by comparison reflected 431koz).

Ironically, this reduced production also reduces our forecast tax liability, positively impacting the bottom line.

Our FY13E EPS has reduced from 28.6cps to 24.2cps, while FY14E has increased from 18.0cps to 20.1cps, assuming an average gold price of US$1,767/oz.

At the US$1587/oz spot price, our FY13E and FY14E EPS would be 19.3cps and 16.0cps respectively. * Our TP is based on an equal blend of NPV and FY13E earnings multiples.
To access the full note please click here Analyst: Hunter Hillcoat
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