Australian, Canadian and AIM-quoted Centamin Egypt has today announced a massive increase in its gold reserves at its Sukari mine in Egypt to 6.4 million ounces using a gold price of $700 an ounce. This anticipated increase, which brings reserves ever closer to the overall resource estimate of 12.89 million ounces measured and inferred makes Sukari potentially the biggest African gold project outside of South Africa, and in an area which has little or no recent gold mining history.
Centamin Egypt is listed on the Australian Stock Exchange (ASX:CNT), the AIM Market of the London Stock Exchange (AIM:CEY) and the Toronto Stock Exchange (TSX:CEE). The company has been exploring for gold in Egypt since 1995, and in 2005 was granted a 160 km2 exploitation lease over the massive Sukari Hill gold deposit.
The current mineral resource at Sukari is 9.39 million ounces Measured and Indicated, and 3.5 million ounces Inferred, with ongoing drilling expected to add significantly to this resource.
Construction on site is already under way and initial mining is planned to start up this year. When in full production the mining rate will be some 4.5 million tonnes a year of ore.
The latest announcement increases gold reserves for the project to the previously mentioned 6.4 million ounces, an increase of 2.7 million ounces (72%) from the previously reported 3.7 million ounces announced in March 2007. The new mineral reserves are based on drilling up to 25 January 2009.The Sukari mine is being developed in a number of stages and the mining and processing schedule developed for the mine uses an elevated cutoff grade through the early years to increase the head grade to the processing plant. It is currently assumed that the material between this elevated cutoff grade and the cutoff grade used for the Mineral Reserve estimate is stockpiled and treated at the end of the project life.Sukari will start as an open pit operation with first gold output anticipated before the end of the current quarter, and it will also concurrently develop a higher grade underground mine for which Australian contractor Barminco, has already been hired and will be operating on site from the middle of this year. An initial underground mining rate of 500,000 tonnes per annum at a grade between 5-10g/t Au is being targeted thus bringing higher grade ore feed into production earlier than otherwise would have been scheduled through surface mining at circa 2g/t. Within the initial 12 months of operation, the 6mx6.5m decline will progress 1,200m and begin to develop in ore roughly 200m below the valley floor. Initial ore from development work will begin at this stage with full production from the underground section being achieved approximately 18 months after commencement of the decline. Overall cash operating costs are expected to be between $350-$400 an ounce during the first 15 years of mining.Currently the mining fleet is in place, and plant construction and fine tuning is virtually complete.On the financing side there seem to be no serious problems ahead for the company. It recently announced a US$25m financing facility with Macquarie Bank. Together with the C$60m bought deal financing in February 2008, and initial cashflow from production, the company should have sufficient financing in place to complete the development of the mine including the underground operation, at its current design capacity. However the reserves and resources suggest that a mine and plant upgrade may be considered at a later date. So far the Macquarie loan facility remains undrawn.
Egypt, with little mining history to draw on remains a bit of an unknown with regard to sovereign risk, but initial portents are extremely positive and the general risk rating remains low with the country keen to benefit from the resources sector.
On today's new ore reserve announcement, Centamin's CEO, Joseph El-Raghy said This increase in the reserves at Sukari is an excellent result and is in line with our targets. The ongoing drilling program has been very encouraging and the Company is confident that this will result in further additions to the reserve and resource inventory. With this reserve increase and the plant soon to be in operation, the Company is pushing forward with its objective of significant growth and thus shareholder value.