Will Centamin PLC Outperform Fresnillo Plc, Glencore PLC, Rio Tinto plc And BHP Billiton plc After Full-Year Results?

Are shares in Centamin PLC (LON:CEY) (LSE:CEY.L) more appealing than those of Fresnillo Plc (LON:FRES) (LSE:FRES.L), Glencore PLC (LON:GLEN) (LSE:GLEN.L), Rio Tinto plc (LON:RIO) (LSE:RIO.L) and BHP Billiton plc (LON:BLT) (LSE:BLT.L)?

Centamin PLC
Centamin PLC

Shares in Centamin PLC (LON:CEY) (LSE:CEY.L) have risen by 3.1% after it released full-year results for FY2016. Investors are likely to be encouraged by production of 551,036 ounces of gold, which is a 26% increase in 2015 and above the revised guidance range.

The company’s investment appeal is also enhanced in my view because its cash cost of production was $513 per ounce. This is down from $713 per ounce in 2015 and is below the revised guidance range. This was driven by higher production and reductions in mine production costs, mainly due to lower fuel prices.

Centamin’s all-in sustaining costs (AISC) were $694 per ounce, which is down from $885 per ounce in 2015 and less than the revised guidance range. Record processing throughput of 11.6Mt was an increase of 9% on 2015 and above the company’s base case forecast rate of 11Mtpa. The guidance for 2017 is 540,000 ounces of gold at $580 per ounce cash cost of production, with $790 AISC.

The company’s stock price has fallen by 0.5% in the last six months, which is a worse performance than other mining stocks such as Glencore PLC (LON:GLEN) (LSE:GLEN.L), Rio Tinto plc (LON:RIO) (LSE:RIO.L) and BHP Billiton plc (LON:BLT) (LSE:BLT.L). BHP Billiton’s shares are up 51%, Rio Tinto’s stock is 42% higher and Glencore’s shares are 75% up. Centamin’s performance is, however, better than that of Fresnillo Plc (LON:FRES) (LSE:FRES.L), which is down 23% in the last six months.

In my view, today’s results improve the investment case for Centamin shares. It has beaten investor expectations on production and costs, which I feel could push its share price higher. I’m bullish on gold for 2017, since I think uncertainty will rise throughout the course of the year and it could become a more popular investment strategy. Therefore, I feel Centamin’s stock could perform well on a relative basis in the long run.

Robert Stephens owns shares in Centamin and Fresnillo at the time of writing.

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