Centamin PLC
LSE:CEY
Earnings Call Analysis
Q3-2023 Analysis
Centamin PLC
The company prides itself on its safety record, with no Lost Time Injuries (LTIs) reported and over 7 million hours of LTI-free operations, a strong indication of an efficient and responsible management team. Although there was a slight increase in total recordable injury frequency, the severity has decreased with injuries now lower in terms of days lost, down from 40 to 20 days, indicating a productive reporting culture with fewer serious injuries. In production, the company reported slightly over 100,000 ounces for the quarter, although it faced some challenges due to preventive maintenance which impacted output, bringing it to about 70% of normal rates. Despite this, the mining rate was maintained, and with flexibility in the mining plan, the company could still meet guidance, albeit at the lower end, without jeopardizing next year's performance.
On the financial side, the company saw its All-In Sustaining Costs (AISC) come in at $1,266 for the quarter and $1,240 year-to-date, reflecting strong cost control measures and prudent budgeting. This positions the AISC towards the lower end of the guided range of $1,250 to $1,400. They also realized savings in capital expenditures (CapEx), attributed to efficiencies in the open pit fleet and lower-than-expected diesel prices, allowing the company to pull forward some of next year's CapEx to maintain its annual guidance. These savings have been reallocated to enhance fleet capacity and support other key projects.
Highlighting its commitment to sustainability, the company celebrated the first anniversary of its solar plants which have resulted in significant savings of diesel and reductions in carbon emissions. These efforts align with global targets for net zero and carbon reduction. The life-of-mine plan was also a focal point, showcasing comprehensive work over three years that set out to solidify the company's world-class asset status through cost reductions, decreased risk, and a lower carbon footprint. Furthermore, the company anticipates additional catalysts for improvement over the next 12 to 18 months, underscoring the pursuit of continuous optimization. With regards to long-term planning, they are preparing for the finalization of their Detailed Feasibility Study (DFS) and Environmental and Social Impact Assessment (ESIA) activities, aiming to bolster their growth strategy and operations for 2024.
Important milestones were achieved in exploration activities outside the primary mining area, with seven priority targets identified around the Sukari concession. An agreement in principle with the government on new mining code terms signifies a positive step forward for regulatory compliance. Looking ahead, they await the assay results from their inaugural drilling campaign and are preparing to update stakeholders on the potential outcomes later in the year. This proactive approach in exploration and government relations reflects a strategic focus on growth and responsible mining practices.
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Hello, everyone, and thank you for standing by for the Centamin Third Quarter Results Call. My name is Daisy, and I'll be coordinating your call today. [Operator Instructions] I would now like to hand over to your host, Martin Horgan, CEO of Centamin, to begin. So Martin, please go ahead.
Thank you very much. I will start with an apology for being a few minutes late. The joys of technology, I connected my Apple but -- to my phone's dial in, at which point they run out of battery and died. And I happen to scramble to get an alternative headset. So my apologies for keeping everybody waiting this morning, but thank you for dialing in. As I've mentioned, I'm Martin Horgan, CEO. I'm joined by my colleagues today, Ross Jerrard, CFO; and of course, Alex on comms. We'll take to the Q3 results in the usual format, a bit of an overview from myself and then open it up to Q&A for Ross and I to take you through that, and then we'll wrap up in there as well. So in terms of the quarter, some of the safety, as we like to do. Look, another safety -- another safe quarter delivered with no LTIs. We're now up to about 7 million hours of LTI-free operation, which I'm delighted with that results. Interestingly, looking at the total recordable injury frequency rate that's published there, that is up slightly, and that's something that we've been focusing on. And actually, when we just do the guidance of those numbers, what we recognize is that, actually, although we're seeing more incidents being recorded, the severe instance is significantly down. And what we're seeing is in 2020 in terms of lead time before returning to work, the recordable injury is around 40 days and now we're down to 20 days. So that tells us that actually what we're seeing is a good reporting culture of more issues being reported, but actually more minor injuries. So those high potential injuries and significant injuries are reduced. And we're seeing small things around like lacerations, seeing there's medical injuries that allow people to return to work almost immediately, if not very quickly thereafter. It does remain a focus. We'll continue to look to work on that. But more broadly, I think we remain a safe and good site. I honestly believe that safety stats are a good proxy for a good management team running our site well. In terms of production, just over the 100,000 ounces for the quarter, about 101,000 ounces. Britain was impacted slightly during the quarter through in September. I think it be flat as part of the life of asset last week. As part of the routine middle reline, we take -- undertake an inspection of the facility during that reline process. We picked up a couple of areas that we believe could warrant some preventive maintenance. So in discussion with site management, with the OEMs and the mill provider and also management, we decided to get out ahead of that issue and perform some preventive maintenance repairs as well. Now I think that was the correct thing to do for the long term. It's prudent management. We could have sort of left it to run, and it would have been probably okay, but we decided to take that risk off the table. Glad to say that the repairs are reflected in country, and the mill has been running since the 1st of October. So some success to the navigated. And of course, because of the flexibility we have now, we were able to, one, keep the process facility moving. We produced at about 70% of our normal rate over that repair period. And actually, we've maintained the mining rate to normal, allows us to build up a good stockpile of good volume and great material on the ROM pad over that period as well. And of course, with the additional flexibility we have now in the mining plan, and when looking at the sort of ability to navigate Q4 despite this minor hiccup, we're able to maintain guidance, albeit at the lower end as well. So sort of the downside of the negative was a slightly rotation on sort of what was heading to be a good year in terms of mid range guidance. But what I'm really pleased about, though, is it was an issue that was identified preemptively prudent and the course of action was taken place, plans were put in place then to navigate that and allow us to carry on and deliver 2023 as planned, albeit slightly down but also without cannibalizing 2024 as well. So when we looked at the production numbers, of course, one of the things you then could move on to is costs. And of course, we kept mining running, we kept the process plan largely running apart from SAG1, obviously, and pushed on. And of course, the lower ounce production profile, one is then concerned about what does that do to the unit cost. So delighted again to see a really strong effort around the cost base. And despite that sort of slightly lower than planned production, AISC still came in at $1,266 for the quarter and year-to-date, $1,240. So really strong performance there. I think that really just reflects the focus on cost control at sites and some prudent budgeting to them as well. And with that strong performance and then heading into the final quarter, that does allow us now to repay towards the lower end of our stated range of $1,250 to $1,400 -- sorry, to $1,400, apologies, at the bottom -- at the lower half of that range as well. So delighted with the cost -- the continuing cost performance at Sukari. From a CapEx perspective, we realized some savings over the year-to-date, maintenance around our open pit fleet and also the strategy changed there and also lower than realized diesel prices has allowed us to perform sort of on a cheaper basis and reduce that CapEx. And with those savings, we decided to accelerate some of next year's capital expenditures into this fourth quarter, allow us to maintain the overall guidance for CapEx this year and bring forward some of those key projects, most notably around additional fleet capacity in the open pit to deliver a new life of mine plan and that all important good connection as well. So delighted with the CapEx performance there as well. Speaking of CapEx and projects, first anniversary of our solar plants and delighted with that. Lots of people talk about plans and aspirations and targets for net zero and carbon reduction. I'm delighted Centamin is already delivering this already. 22 million liters of diesel saved over that last year since about [ bang ] on time we thought it would be and about 60,000 tonnes of CO2 equivalent as well. So that's a fantastic effort on the team and delighted to see that project coming through saving costs and importantly, net carbon as well. We delivered the life-of-mine plan last Thursday, really, really happy with that. I think that was a fantastic outcome and a real culmination of 3 years worth of work to pull that together with our strategy of looking to put a world-class mine around the world class orebody at Sukari. The headline numbers of [ Altus ] cost down at lower risk and reduce carbon. I think that really encapsulates the life of mine plan. And I'm delighted to say that not resting on our laurels there, we still see quite a few additional catalysts that we can deliver over the coming sort of 12 to 18 months as we look to further refine and optimize and build on that foundation of what is a really solid plan. It really does reconfirm Sukari to the Tier 1 status of a world-class asset as well. In terms of EDX outside of Sukari, our recent exploration, a couple of big milestones in the quarter. Obviously, we agreed in principle the new terms of the mining code with the Ministry of Petroleum, His Excellency Tarek El Molla. Delighted to got that work concluded over the third quarter. That sorts of arranged with our partners and Tarek and our counsel and advisers with Mackenzie working with government to flesh out the code, and delighted that we're able to conclude those negotiations in Q3. In parallel with that, we've been busy in the field. We generated 7 priority targets from our initial exploration work in and around Sukari concession in the Nugrus block. I'm delighted to say that we've just about completed our first inaugural drilling campaign to test 7, which became 8 targets with further success around mapping and some work, and that work has now concluded. So with that work done, we're now busy waiting for the assay to return from the lab. Also when we got those assays back, we look forward to updating you later in the year on the potential of the EDX and the work completed there as well. And staying on growth, Doropo, obviously, TSF delivered early this year. Third quarter, we really saw sort of the DFS and ESIA activities step up under the level. ESIA work is ongoing right now, a lot of public and social consultation going on in the field of impacted communities, and preparation and documentation around the ESIA exhibition later this year. And of course, the DFS, we're winning in parallel with that, ready for submission and finalization in the first half of 2024. So another significant quarter achieved, lots of progress made across the portfolio, lots of sort of highlights of the life of mine plan, the EDX drilling, the mining code and so on, a well-navigated third quarter from an operational perspective, both ounces and costs, and sets us fair for a solid 2023 as we look forward to that new life of mine plan getting in next year in 2024. So that is the overview. I'd now like to hand over to questions, and happy for Ross and I to answer any comments you may have.
Our first question today comes from Marina Calero from RBC Capital Market.
I just have a question about the seasonality in your 2024 guidance. Can you give us a bit more color about the profile of transaction cost and CapEx next year?
Sorry, Marina, I really struggled to hear that. So you talked about the 2024 plan. I'm sorry, I missed the question. You were looking for more clarity around what, sorry?
Yes, sorry, I think my line have been -- is it better now?
That's better. Yes, thank you.
Yes. Now I was just asking if you could give us more color about the expected seasonality in your production cost and CapEx numbers next year.
Okay. Okay. Well, look, I would say that, obviously, the 2024 number that we gave as part of the life of asset, it did have a range within that. And of course, we are heading into our budget cycle for this year for 2024. And there's a number of sort of moving parts within that when trucks arrive, when we sort of tie in the grid, when some other CapEx projects move through as well.
So I think if it's okay, what it suggests is allow us to complete that sort of usual budget cycle where we engage with site management, allow us to get that through the Board, and get that approved and signed off the plan for next year. So Ross [indiscernible] to site in November to run through the final iteration of that. And I think once we've got that locked in, obviously, the operational and the strategic considerations harmonized, then we'll be able to give you guys a bit more color and clarity as to where things are as well. So if you can bear with us a few more weeks, Marina, we'll be able to complete that usual budget cycle work stream and then get out there with a bit more clarity and breakdown on some of the specifics on a quarter-by-quarter, half-by-half basis for you.
That's great. And one more question for me. On the EMRA procedure, do you have any outstanding recoverable amounts or that's something you're also looking into ahead of your budgeting cycle?
So I'll ask Ross to comment. With the best of my knowledge, by the mid-year, we were pretty much up to date on cost recovery. So Ross, I think by -- obviously, we did it on a 6-month by 6-month basis. But as of the latest date, Ross, I believe we were pretty much fully up to date on cost recovery of what is due?
That's correct, Martin. Marina, yes, basically, we have shared we're basically up to date for end of June. We do have amounts that crystallized during the 6-month period, which we're working on. But yes, we're largely up to date from a cost recovery perspective.
[Operator Instructions] We have no further questions. So I'd like to hand back to management for any closing remarks.
Sorry, maybe just check with Alex. Is there any web-based questions, Alex? Apologies to coming through.
There are not any questions through the webcast. Thank you.
Okay. Perfect. Well, in that case, I would just like to thank everybody again joining the call. My sincere apologies again for being late at the start of the call. And as I say, technology is great and so it doesn't work. And thank you for the time this morning for listening. And as ever, if you had any further sort of follow-up questions that you think about over the course of the day or the coming days or weeks, feel free to reach out at the usual channels or myself or also Alex. We'd be happy to follow up with you there up as well. So I wish you all a very damp Thursday here in London, and I look forward to talking to you all soon again. Thanks very much.
Thank you, everyone, for joining today's call. You may now disconnect your lines, and have a lovely day.