Centamin Plc £CEY - A Valuation on 14th June 2021

This Egyptian gold mine is low on the cost curve and full of high-grade reserves and indicated resources. But will monetary inflation continue to feed through to higher gold prices?

Since valuing Centamin in January — and dramatically underestimating the effect of the profit share royalty as a tax, thus overestimating the value of the business (thanks to Devrim for highlighting this) — the stock has traded sideways.

Centamin shares have, essentially, traded sideways since we last valued them in January.

In that valuation, we highlighted how closely linked the company’s performance is to the underlying price of gold, their substantial reserves and the added equity risk of being in Egypt, Burkina Faso and Côte d'Ivoire. Moreover, we pointed out a positive historical correlation (0.86) between the gold price and the USD M1 Money Supply.

But, in February, the Fed redefined M1 to include all savings deposits. This alteration drastically changed the M1 Money Stock data and rendered our simple regression model for forecasting gold prices using M1 obsolete.