Centamin (CEY)  97.7p

Market cap: £1.13 billion

A key reason to hold gold in a diversified portfolio is protection against economic and geopolitical uncertainty and there is plenty of both around in 2024. This is helping to sustain prices for the precious metal above $2,000 per ounce.

As well as direct exposure to the gold price, investors could consider buying a gold miner where operational progress can provide upside on top, albeit with operational risk attached.

We think Egyptian gold producer Centamin (CEY) represents an attractive opportunity on this basis. Chief executive Martin Horgan tells Shares the company is heading into the final stretch of a three-year investment programme which has set the company up for a ‘pretty good’ 2024, ‘re-establishing costs at the lower half of the industry curve’.

AISC (all-in sustaining costs), a key metric for the gold mining sector, came in a touch below guidance in 2023 at $1,220 per ounce.

The majority of the company’s recent investment has been concentrated at the company’s flagship asset – the 50%-owned Sukari gold mine in Egypt’s eastern desert. Horgan acknowledges the company’s privileged position of being paid for its gold in US dollars – removing any exposure to currency risks. Added to this, the company has been operating Sukari since 2005 and producing gold since 2009 – a period which has seen several spells of instability in Egypt.  

Broker Canaccord Genuity is forecasting the company could achieve record earnings in 2024 off the back of its spending programme thanks to higher production and lower costs. Based on Canaccord’s forecasts, the shares trade on a 2024 price to earnings ratio just 5.6 times. They also offer a healthy prospective yield of 4%.

The income stream on offer at Centamin is bolstered by an enviably strong balance sheet position with the company reporting net cash of $93 million as at the end of 2023.

One detractor from the Centamin investment case is the lack of diversification, with its fortunes almost entirely tied to Sukari. There could be a key milestone for the group in this respect later this year with the anticipated final investment decision on the Doropo project in Cote D’Ivoire. In the event of Doropo being given the green light, Canaccord believes it could be in production as early as 2027.

This, and evidence the company is on track to hit its targets of 470,000 to 500,000 ounces of gold production and AISC of $1,200 to $1,350, could, through the course of the year, act as catalysts for the stock.

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