new minesite article

May 06, 2008
Delays At Sukari Unlikely To Put Off The Majors Eyeing Centamin Egypt

By Our Man in the City

A mere shortage of concrete has pushed back first production from Centamin’s giant Sukari gold mine in Egypt. The three month delay is nothing to worry about, according to the company’s house broker, Ambrian. “These small delays happen to most new mines around the world,” says analyst Brock Salier, trying to ease concerns that one slip-up will lead to greater delays as Centamin tries to finish the final phases of development. “This is now a major construction project. Everything is on site and Centamin is taking a systematic approach to assembling Sukari”.

Sukari is one of the biggest gold mines to be brought into production by anyone other than a major for many years. It’s certainly one of the largest gold projects in Egypt, a country relatively new to mining, as small to middle-sized oil plays have traditionally been dominant in the natural resources space. This means Sukari could become the benchmark for how future gold mines are developed in Egypt.

The processing plant was meant to have been commissioned towards the end of this year but delays laying the concrete foundations for items like the crusher, CIL tanks and power plant have now nudged commissioning back into the start of 2009. “The biggest risks for causing bottlenecks in the development have now gone,” says Mr Salier. “Construction can now press ahead, alongside continued drilling.”

The long list of tasks to undertake in the next year means chief executive Josef El-Raghy isn’t too keen on making time to speak with the media. There’s a sea water pipeline and tailings storage facility to complete, for example. Now that Sukari is fully funded to production and revenue generation is almost around the corner, publicity is the least of his concerns, so Minews is denied the opportunity to speak with the great man. He’s got work to do in continuing to add ounces to Sukari’s resource and making sure that thirteen years of exploration work in Egypt finally delivers a working mine.

The deposit now stands at 8.12 million ounces at the measured and indicated level, a nine per cent increase on the previous figure reported in December 2007. Add in 3.5 million ounces of gold at the inferred level, and Sukari is one big project. It’s only going to get bigger, according to Ambrian’s Mr Salier. He reckons the total resource will eventually reach 15 million ounces. Centamin continues to drill and that ongoing process prompts the house broker to remark that there is a “high likelihood” that the company will sustain its current 100,000 plus rate of adding ounces each month. The company is looking for new extensions of Sukari, and is also conducting regional drilling. Another resource update is expected in early June.

Once pre-stripping has been done later this year, Centamin’s plan is to start off annual production in the first quarter of 2009, with a view to producing 300,000 ounces per year and then re-optimising the project, according to Mr Salier. The company will begin with open pit mining, then advance underground, where it has an initial target of mining 500,000 tonnes per year. Centamin plans to release details by early summer on how the underground operations will work. It’s perhaps too early to speculate on the exact nature of the expansion plans, but Mr Salier believes there’s a possibility either that the open pit section will be extended, or that additional portals for underground mining will be used.

It’s probably inevitable that Centamin will be acquired by a major metals producer, given the size of Sukari. The moment production starts, it will be a sitting duck. It would be positive for the mining industry if Centamin could retain its independence, as there are relatively few up and coming producers with assets that can support any serious aspirations to becoming the next major mining house. Alas, gold deposits over 10 million ounces are “increasingly rare”, says Mr Salier, and he points out that all the gold mines producing above Centamin’s first stage mining plan of 315,000 ounces per year are owned by majors. And the majors continue to seek similar projects. So enjoy the ride while it lasts.