The Centamin share price (LON:CEY) has gained more than 26% in 2024, significantly outperforming the UK market. The FTSE 100 has added 6% over the same time period, whilst the FTSE 250 has gained a little over 8%. Is Centamin stock is a buy according to the analyst community, and what are the forecasts and price targets on the street.
If you are a ‘Gold Bug’ who believes in the long-term potential of gold price appreciation, and one that likes to dabble occasionally in gold mining stocks as a further hedge on inflation, than Centamin might be worth a closer look.
There is also an added extra to consider, with Centamin working on developing a competitive advantage over its competitors by setting itself up as a ‘sustainable’ mining company.
Optimising returns relies on picking the right trade entry point. The following Centamin share price forecasts draw on technical and fundamental analysis over the short, medium, and long term and outlines whether the stock could be a good addition to your portfolio.
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Where Will the Centamin Stock Price Be At The End Of 2024?
With a 12-month price forecast for Centamin stock still being intrinsically tied to the path taken by gold, it’s worth noting the positive price indicators for the metal. With most expecting the Federal Reserve to begin cutting rates this year, it could help push the yellow metal higher and, in turn, provide a boost to the Centamin share price.
If gold rallies, it could lead to further price gains for the Centamin stock price, which has performed well over the past year. Investment bank analysts are mostly bullish on the yellow metal. In February, Goldman Sachs said, “gold prices are poised to rise as central banks purchase the precious metal and as strong retail demand in emerging markets bolsters prices.”
The bank expects gold to climb around 6% in the next 12 months to $2,175 a troy ounce, which should bode well for Centamin.
Fundamental analysis shows that Centamin stock does not seem overvalued, with the balance sheet healthy.
One variable that could impact the CEY share price in the next year is the likelihood of the firm securing the rights to other mines. New mines can take ten years to come into production, which represents a long-term drain on capital and introduces the risk of the confirmed level of resources not being what was hoped for.
While the company says the Sukari mine is its primary focus, it does appear to be considering expanding its scope, with the firm stating:
“The Company’s solid financial position, strong cash flows, and development and operating experience provide us with a significant advantage in acquiring and developing other gold projects.” Source: Centamin Plc
Analysts are currently bullish on the stock. According to data compiled by TradingView, ten have assigned it a Buy rating and one a Sell rating. The average 12-month price target is 149.9p, suggesting a significant upside from current levels.
Who Is Centamin (LSE: CEY)?
Centamin Plc is a relatively small mining company that is a mid-cap enterprise. It was founded in 1970 and appeared on the Australian Stock Exchange in the same year.
As the result of a corporate restructuring, Centamin stock is currently traded on the London and Toronto stock exchanges under the ticker symbol ‘CEY’ on the LSE. The firm has offices in the UK, Australia, and Egypt, and its registered offices are in Jersey in the Channel Islands.
Due to its size, the stock is classified as ‘mid-cap’, and it is a constituent member of the FTSE 250 index. The company has consistently delivered dividends to its shareholders over the past several years.
Centamin has been exploring for gold in the eastern desert of Egypt since 1995. Its most prominent asset is the Sukari Gold Mine, located just 25 kilometres west of the Red Sea and 700 kilometres from Cairo. Reports released in 2023 state that the Sukari mine has a projected mine life of 11 years and 5.2 million ounces of gold in addition to the 5.5 million ounces produced since 2009.
Centamin has made a strong commitment to the health and welfare of its employees and to the sustainability of its mining operations and their impact on the surrounding landscape. This makes it stand out in a sector that is sometimes criticised for falling short on ESG and CSR criteria.
With investors paying greater attention to the operations of companies they invest in, the modern approach to engaging with stakeholders helps the firm stand out from the crowd. There is considerable potential buying pressure from investors who want to buy a stock that generates a capital return but does its best to minimise its environmental impact.
In addition to Sukari, Centamin also has existing operations in the Ivory Coast. The Ivory Coast projects include Doropo and ABC over its 5,310-square-kilometre territory.
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Centamin Long-Term Forecast
Two long-term trends could prove beneficial to the Centamin stock price over the next five years.
The first is that many investors believe that a commodity supercycle is forming or has already started. These multi-year trends can drive up the price of raw materials and mining stocks and are largely based on the time it takes supply to catch up with demand.
Huge demand for raw materials can be expected as the world moves to a low-carbon economy and adjusts to new work-life patterns after the pandemic.
Approximately 11% of mined gold is used in industry, with the most demand coming from manufacturers of electronic devices. Gold is a highly efficient conductor and corrosion-free, which results in it being a favoured material for connectors, switch and relay contacts, soldered joints, and connection strips.
New hardware will be needed for the devices that people use to work from home or to manage new EV infrastructure. Analysts at the broker Vantage Markets predict that the Global Consumer Electronics Market, which was valued at $728.1bn in 2021, will grow to $964.6bn by the year 2028.
The second long-term trend that could influence the share price of Centamin is the move toward ethical investing. Stocks that tie in with ESG investing strategies, which are sensitive towards environmental, social, and governance criteria, are in increasing demand.
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It’s forecast that global assets under management invested in ESG mandates will reach $50tn by 2025 and exceed $100tn by 2028. Miners aren’t necessarily the first stock that ethical investors search out, but institutional investors with large cash piles who have to invest in the mining sector can be expected to factor in ESG.
Centamin stands out as one of the most ESG-oriented mining stocks. The company has previously stated: “Responsible decision-making is at the centre of our ability to deliver long-term stakeholder value.”
The firm operates in jurisdictions that provide good access to an educated workforce while it also invests in its workforce through employee (and contractor) development and training.
The successful relationship that the company has built with Egyptian authorities and communities at the Sukari mine backs up its claim that: “We are serious in the application of ethical business practices, supported by robust systems of corporate governance, transparency and accountability.”
Is Centamin a Good Buy?
Mining stocks are considered to be at the higher end of the risk-return spectrum, and Centamin is no exception from that rule. The price chart illustrates the high volatility associated with the stock, but some investors are drawn to high-beta shares that overshoot to the upside and downside.
Timing trade entry and exit points are crucial to optimising returns. Stock forecasts for Centamin over one year and five years include plausible reasons why buying the stock now is a good idea.
However, the whipsawing price action does highlight the potential for downside risk. The firm is heavily dependent on one mine, Sukari, and one metal, gold. For more aggressive investors, the dips in the share price caused by those risk factors represent a chance to buy the dip.
Buying Centamin stock looks like a tempting proposition at current price levels.
