Gold Price Analysis – Insider: directors pile into this dividend stock
Seven Centamin (LSE:CEY) directors have bought more than £300,000 of shares in the gold miner after a rollercoaster year for one of the best yielding stocks in the FTSE 250 index.
Shares had been a record 232p after the gold price topped $2,000 in August, only to start this month below 100p after operations were halted within part of its flagship Sukari mine in Egypt.
Repairs to the unstable pit wall will take longer than expected, meaning production guidance for this year of between 400,000 and 430,000 ounces of gold is much lower than the 500,000 ounces expected in October.
Sukari, which is near the Red Sea in the Eastern Desert, is the company’s main asset and represented a milestone for the Egyptian mining industry when it entered production in 2009.
Despite a 6% fall in production to 452,320 ounces in 2020, Centamin’s annual results showed a 54% rise in underlying earnings last Monday, as it benefited from operating efficiencies and a 26% jump in the average realised gold price to $1,766.
A 91% increase in free cash flow to $142 million is behind a total dividend of $104 million, including a final divi of three US cents a share worth $35 million due for payment on 15 June.
The company’s policy is to ringfence the first 30% of free cash flow for dividends before surplus cash is returned to shareholders dependent on future growth requirements.
Centamin intends to recommend a minimum dividend of $105 million for 2021, highlighting its continued focus on shareholder returns based on a five-year trailing dividend yield of 6.1%.
The 2020 dividend offers a yield of 6.7%, which analysts at Jefferies note is well ahead of the average for the global gold industry at 2.6%. They have a price target of 170p, which compares with 140p for UBS and 145p at Peel Hunt.
The directors bought their shares last week at about 104p, with those doing so including the relatively new leadership team of chairman Jim Rutherford and chief executive Martin Horgan.
Investment banking veteran Rutherford, who was on the Anglo American (LSE:AAL) board for seven years until 2020, bought more than £50,000 of Centamin shares on Tuesday. Horgan, the co-founder and chief executive of Senegal-based Toro Gold until it was bought by Resolute Mining (LSE:RSG) in 2019, purchased about £26,000 of shares on the same day.
In the year since taking the helm last April, Horgan has presented the first part of a life of asset review targeting $100 million of cumulative cost reductions by 2024. This is being followed by a detailed look at how to unlock the potential of Sukari and surrounding area, led by a new geological team.
Centamin is also looking to expand its footprint along the Arabian Nubian Shield in Egypt and progress exploration on the Birimian terrane of West Africa. Further updates are due this year.
Horgan told shareholders: “Centamin is an established company — 10-year operating track record, seven-year dividend stream, premium dual-listed, FTSE 250 constituent, fully distributed capital structure with a robust balance sheet.
“This is an excellent platform from which the Centamin team can build from.”
The other directors buying shares in London last week were chief financial officer Ross Jerrard, non-executive director Dr Ibrahim Fawzy, who bought £146,804 worth of shares on Thursday, and Mark Bankes. Dr Catharine Farrow and Dr Sally Eyre bought on the Toronto Stock Exchange, where the company has its dual listing.
WPP’s Rogers hopes to win again
A £400,000 purchase of WPP (LSE:WPP) shares by chief financial officer John Rogers was made on Thursday with the advertising giant trading at its highest level in a year.
His only other previous purchase of WPP shares has already generated a paper profit of more than £250,000 after shares rose from 588p in September to 930p at the start of trading today.
Rogers, who joined WPP in May after previously working for Sainsbury’s as chief financial officer and then chief executive of Argos, bought his latest WPP shares at 925p. He has a requirement to hold shares equivalent to 300% of his £740,000 base salary.
Shares have made steady progress since hitting their pandemic low a year ago tomorrow, with recent annual results highlighting expectations for 2021 to be a year of solid recovery.
Debt at a 16-year-low has helped the turnaround, reflecting a change in strategy under which WPP raised £3.5 billion from the sale of more than 60 businesses and investments.
It also benefited from a dramatic shift towards digital media and e-commerce following “five years’ worth of innovation in five weeks” at the height of the pandemic.