from investors chronicle

Centamin Egypt (first production: Q2 2009)

In its Sukari project, Centamin Egypt has defined probably the best gold project on Aim, with analysts estimating the final resource could reach a very substantial 15m ounces. Mining is scheduled to start in the last quarter of 2008 and the company remains on track to begin commissioning its plant in the second quarter of 2009. The main item on the critical path is completion of the engineering drawings, which should be received shortly.

Initial open-pit mining should yield 215,000 oz per year, to be followed by underground mining supplying an additional 130,000 oz a year from 2011. Additional open-pit capacity from 2013 should enable Centamin to achieve long-term production of 700,000 oz a year.

Valuation upside arises from the increasing gold resource, commissioning of the plant and first production, and the increasing likelihood of a takeover offer. A project of Sukari's quality will definitely interest major mining groups. These trade on PE ratios of around 14-18, whereas analyst models forecast that Centamin will trade on a PE ratio of around six for the first four full years of production. Broker Ambrian has set a target price of 80p for the shares, equivalent to a PE ratio of around 10, which would be immediately earnings-enhancing for the acquirer and provide an attractive premium to Centamin's shareholders.

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