There’s an abundance of top income shares available to buy today and Centamin (LSE: CEY) is one that I’d happily purchase before the close of January. I’d load up not in anticipation of some hot financial or operational updates but in case gold prices heat up again.
The Egypt-focussed miner has already impressed the market today with some splendid production numbers. In a release, it advised that fourth-quarter gold production at its Sukuri mine leapt 51% from the previous three months to 148,387 ounces, meaning that year-on-year production rose 2% in 2019 to 480,529 ounces. And Centamin said that output should creep higher again in 2020 and clock in at between 510,000 and 540,000 ounces.
The FTSE 250 digger’s share price has crept 3% higher in Thursday business on the back of the release, one so strong that market makers have shrugged off a serious pullback in bullion prices over the past 24 hours. With tensions easing between the US and Iran following earlier military hostilities, gold was recently back at $1,550 per ounce and some way off the seven-year peaks above $1,580 struck on Tuesday.
War talk
I would caution anyone against discounting another surge in bullion values before the month is out, however. Fears of serious conflict in the Middle East have receded following Iran’s limited airstrikes on American bases in Iraq, and US President Trump’s pledge to hit Tehran with fresh sanctions rather than more military action.
This is a tense situation that could worsen again at any moment, however. The assassination of Qassem Suleimani in Baghdad last week saw Iran put the 2015 nuclear accord on the bonfire, and the US will want to be seen doing all it can to stop Tehran stockpiling and enriching uranium again. The fact that 2020 is an election year raises the pressure on President Trump to both talk and act tough, too.
It’s clear that some within Washington circles are keen to stress that Iran’s retaliatory strikes in Iraq this week are not necessarily that restrained, either. Chairman of the Joint Chiefs of Staff Mark Milley has said that he believes missiles were intended to take out US servicemen, contrary to what Iranian leaders say and suggesting that huge tension remains.
Opportunity
These unfortunate developments in the Middle East have added to the existing geopolitical and macroeconomic factors that have heated up gold prices over the past year or so and led to expectations that bullion will keep on rising.
Accordingly, City analysts expect profits at Centamin to leap 44% in 2020, the bottom line likely assisted by those aforementioned production increases too. This has the knock-on effect of not only leaving the business dealing on a rock-bottom price-to-earnings growth (PEG) readout of 0.4 for the year, but also leads to predictions that dividends will keep rising. Thus the FTSE 250 firm also has a mighty 5.2% forward yield.
Owning gold or gold producers as a hedge in times of turbulence is always a good idea, and I’d happily buy takeover target Centamin today and hold it for a decade. The business rebuffed a takeover approach by Canada’s Endeavour Mining in December, and the suitor now has until Tuesday (14 January) to put in a firm offer or go away. Regardless of how this episode pans out, though, I reckon loading up on the London-listed digger is a worthwhile idea right now.