Centamin share price could benefit as gold’s momentum continues

Centamin (LON: CEY) share price bounced back on Friday as traders focused on the rising gold prices. The stock jumped to 83.90p, higher than this week’s low of 77.50p. Despite the rebound, the shares remain over 33% below the highest point this year.

Gold prices jump

Centamin is a small-cap company that has gold mining operations in Africa. The firm’s primary mine is Sukari, which is located in Egypt. Its other operations are in Ivory Coast.

The company published its quarterly results last week. These results revealed that its gold production rose to 101,370 ounces. This means it has mined over 321k ounces of gold in the first nine months of the year. 

Its total revenue jumped to $200 million in Q3 and to $626 million in the first nine months of the years. This happened as its average gold price came in at $1,933 and its capital expenditure rose to $59.1 million.

Centamin hopes that it will produce between 450k and 480k ounces of gold per year. It also sees its capital expenditures being at $273 million. Therefore, if gold prices continue rising and remains at $2,000, it means that the company’s annual revenue will be between $900 million and $960 million. 

Analysts believe that gold will jump to over $2,000 in the coming months as central banks continue their purchases. Therefore, with Centamin’s market cap of 947 million pounds, I believe that the company is relatively undervalued.

Its next potential catalysts will be the rising gold prices, the recent regulatory clarity in Egypt, and the ongoing M&A activity in the gold industry. Newmont Mining is acquiring Australia’s Newcrest in a $16 billion deal. A few months earlier, Pure Gold was acquired by West Red Lake Gold Mines.

Centamin would be a good acquisition target because it is fairly cheap and has access in markets that major players are not in. 

Gold stock investors still haven't noticed that #gold is no longer following #Treasuries lower. In fact, Treasuries are down again today and gold is up $14 to $1,985. The last time gold prices were this high, gold stocks were over 20% higher. Gold stocks have a long way to rise.

— Peter Schiff (@PeterSchiff) October 25, 2023

Centamin share price forecast

CEY chart by TradingView

The daily chart shows that the Centamin stock price has been in a strong bearish trend in the past few months. Along the way, the shares have formed a falling wedge pattern, which is usually a bullish sign. It now sits at the key support since this price is the 78.6% Fibonacci Retracement level.

The shares have moved below the 50-day and 100-day moving averages. The MACD has moved below the neutral level. Therefore, because of the falling wedge, there is a likelihood that the shares will bounce back in the coming months. If this happens, the next level to watch will be at 100p, which is about 23% above the current level.