comments from minesite

November 18, 2008
Centamin’s Unique Position In Egypt Puts A Potentially Greater Value On It Remaining Independent

By Charles Wyatt

A very shrewd move from Josef El-Raghy, chief executive of Centamin Egypt, back in August, in appointing Trevor Schultz as Executive Director of Operations. Thus Trevor is on board during the critical period leading up to completion of construction and pour of first gold which is due in the second quarter of next year. It is at this stage that unforeseen problems sometimes creep into a project, but Trevor has been through all this before and can provide additional technical support gained during more than 40 years of experience with leading international mining companies, including BHP, RTZ/CRA, Pegasus Gold and Ashanti Goldfields.

His roles at very senior levels with these companies have included involvement in the development of several new mining operations in Africa, South America and the USA, negotiations with various governments and their agencies, and negotiations for project financing and capital raisings. Most recently he was chief executive of Guinor Gold during the construction and commissioning of the seven million tonnes per year LEFA gold mine in Guinea. As Josef points out, this is a man who manages a construction/development project on site, and he is doing so at Centamin’s Sukari project in Egypt.

At least he will not have to look over his shoulder to see if there is sufficient funding to carry the project through to production. Last November Centamin raised gross proceeds of C$134.4 million on an underwritten basis. This left the company debt free, unhedged, and able to pursue further exploration and development activities, including the underground development of the high grade Amun Deeps zone. The latest reserve/resource estimates in October confirm just what a big project Sukari is, and there is clearly more to come.

As a result of drilling over the previous three months, measured and indicated resources have recently grown by another five per cent to 9.01 million ounces of gold, while the inferred resource has increased by approximately four per cent to 3.3 million ounces. This latest increase in resources came from the Amun zone, where the drill did not prove man enough to contend with porphyry mineralization once it had reached one kilometre in depth, so the fact remains that mineralization is still open beyond this depth. The drilling also focused on upgrading inferred resources to measured and indicated around the Hapi zone - an underground mining target - and here one intersection graded 14.26 grammes per tonne over 22 metres from a depth of 257 metres.

The definite feasibility study at Sukari was completed nearly two years ago and it concluded that a four million tonnes per year plant could produce 200,000 ounces of gold per year and would turn a profit for at least 15 years. Two years is a long time in current conditions so the company updated its figures in June and came to the conclusion that any increase in capital cost would be by no more than 15 per cent, although average cash operating costs have increased to US$365 per ounce due to the higher cost of consumables. It might be a fair bet that some of these consumable prices have fallen since then, but Josef El-Raghy is not leaving any hostages to fortune. He is now responsible for 700 workers on site and the number will rise to 1,000 by the time the Stage 1 oxide plant is completed. That will rise again as the Stage 2 sulphide plant is completed a few months later.

The official mining schedule from open pits over the initial 15 years anticipates that only 78 million tonnes of ore will be mined, at an average head grade of 1.5 grammes per tonne gold, and producing 3.7 million ounces of gold over an initial 15 year period. Admittedly the waste to ore trip ratio is high, but selective mining techniques will be used to separate ore from waste. These figures are clearly on the conservative side as they only involve mining just over 40 per cent of the current measured and indicated resources. Nor is there any mention of the future potential of an underground mining operation though the Hapi zone is already referred to as an underground mining target. One step at a time is Josef’s motto, and the next big step is to get into production.

He does admit, however, that plans to enlarge the plant and thus increase throughput are now on the table. Even as the construction phase approaches an end his company is back in engineering mode. It’s helpful that the site layout deliberately leaves space for expansion. But one tends to get the impression that Josef does not want to put all his goodies in the shop window at the moment. As has been suggested many times before this is a project of size to attract a major but it would be nice if the share price was nearer its 80p March peak rather than to the current 28p before any talks started. Mind you, Centamin has as good a team as any and its operating experience in Egypt gives it a significant first-mover advantage in acquiring and developing other gold projects in the prospective Arabian-Nubian shield; Sukari will be the first large-scale modern gold mine to be developed in Egypt. Josef is operating in the land of his fathers, so understands how to deal with the government as his company’s partner. No acquisitor could live up to these claims so the company could prove even more valuable to its shareholders, over time, by remaining independent.

http://www.minesite.com/nc/minews/singlenews/article/centamins-unique-position-in-egypt-puts-a-potentially-greater-value-on-it-remaining-independent/1.html