Is Centamin a buy after a disappointing Q1 update?

There is a big disconnect between the Centamin share price and the underlying price of gold, which widened on Thursday after the Egypt-focused miner released a soggy Q1 update.

Total gold production for the period fell 1% to 104,821oz, while the grade of open pit mining output dropped 28%.

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“Gold miner Centamin has this morning reported gold production volumes and sales were down in the first quarter of 2024 versus Q1 23, however they fully expect production to increase into the year and have reaffirmed 2024 production and cost guidance,” said Mark Crouch, analyst at investment platform eToro.

The blip in Q1 may provide a buying opportunity for gold bugs seeking to gain exposure to the Sukari mine, Egypt’s first large-scale modern gold mine in the Arabian Nubian Shield.

“2024 has seen something of a gold rush, with the metal hitting multiple new all-time highs. Since January, Centamin’s share price has outpaced the price of gold, rising almost 25%, reaching a three-year high, compared with gold’s gains of 15%,” Crouch said.

“Geopolitical instability in the Middle East and Ukraine has almost certainly contributed to gold’s rise, but doubts remain over central banks’ ability to gain a handle on inflation, with CPI in the US rising for the third month in a row in March, casting doubts over rate cuts that were all but a given just a few weeks ago.

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“With analysts at CITI this week projecting $3000 gold within the next 18 months, Centamin and their investors look set for a profitable year ahead.”

While Centamin is first and foremost a play on the gold price and continued production at their Egyptian asset, there is the potential upside of an exploration campaign in close proximity to the Sukari mine and developments in Cote d’Ivoire.

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