Egypt biggest gold miner suffers 24pct profits drop in Q2/2012

Egypt-focused miner Centamin posted a 24 per cent drop in second-quarter profit due to higher costs and as it did not sell as much gold in the period as it produced, but it maintained its production forecast for 2012.

Centamin on Tuesday posted pretax profit of $42.1 million in the three months ended June 30, compared to the $55.7 million it made in the same period last year, just under a company-supplied consensus forecast of $43.8 million.

The cost of producing the gold rose 13 per cent to $565 per ounce in the period, down from the first three months of the year but higher than the $498 cash cost per ounce in the same quarter last year. That was offset in part by an average sales price which was 4 per cent higher.

The company sold 60,673 ounces of gold in the period, compared to the 67,422 ounces it produced, allowing inventory to build up. In contrast, in the same quarter last year, it produced 47,991 ounces and sold 50,262 ounces.

Centamin guided that production would come in at 250,000 ounces for the year, a 25 per cent rise on last year, maintaining its forecast despite two temporary closures of its mine due to labour unrest.

It also said it still expected cash costs to come in at $550 per ounce for the year, but said that due to challenging political and fiscal conditions in Egypt, it had been buying fuel at an international price, rather than with Egypt's national industry subsidy for diesel.

The higher fuel costs, which meant cash costs were actually $729 per ounce in the second quarter, were being treated as prepayments for the time being.

"The company will look to recover any funds advanced thus far at this higher rate should negotiations or proceedings be concluded successfully," Centamin said.