Gold miner Centamin sees 74% lower profits in 1H14

Ahram Online, Thursday 14 Aug 2014

Reduced production at Sukari gold mine during first half of 2014 hits profits at Centamin

(Photo: Reuters)

Gold miner Centamin saw its profits dip 74 percent in the first six months of 2014 compared to the same period a year earlier, the company announced in a statement on Thursday.

The company's bottom line recorded $31.9 million in the first half of 2014, a significant drop from $123.6 million in the same period a year before.

Revenues fell 24.6 percent in the first six months of 2014 to $205.3 million from $272.5 million.

Second quarter profits dropped 78 percent year-on-year to $11.3 from $51.7 million as revenues for the same period declined 24 percent to $102.6 million from $134.3 million and the cost of sales climbed 16.1 percent.

Gold production from Centamin's only producing mine – Egypt's Sukari mine – dropped 13 percent to 81,281 ounces from 87,016 ounces in the second quarter year-on-year.

The extracted ore was also of lower grade than expected which resulted in higher costs of processing, said chairman Joseph El-Raghy in the statement.

However, the quality of ore is expected to rise following improvements in infrastructure, added El-Raghy.

The chairman estimated a fall in unit production costs while productivity rises and thus maintained the year's forecast.

The Sukari Gold Mine (SGM) is fully responsible for the operations in the mine and is jointly owned by the Egyptian Mineral Resources Authority (EMRA) and Centamin's subsidiary in Egypt, Pharaohs Gold Mine (PGM), on an equal 50 percent basis.

The concession agreement entitles the government to a three percent royalty fee from gold sales as well as a 50 percent share in net profits after PGM recovers all its operational expenses and exploration and exploitation capital costs.

However, a dispute between the two parties arose on the distribution of profitability, the eligibility of extracting ore from an area of 160 square kilometres and fuel prices.

Centamin restated in the earnings release that it believes there is no net profit share due to EMRA before 30 June 2016.

But the company announced the prepayment of $130 million to the government – represented by EMRA, of which $18.8 million were provided for in the second quarter of 2014.


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