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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (35825)	4/20/2009 9:12:29 PM
From: LoneClone	Read Replies (1) \| Respond to of 193231

Centamin Anticipates Producing Gold At A Rate Of 300,000 Ounces Per Year In 2011, And There Will Be More To Come By Charles Wyatt minesite.com To kick off a comment on AIM, ASX and TSX-listed Centamin Egypt one can do no better than quote a few lines from our round-up of events in London’s mining sector last week. This is what our correspondent wrote, “Centamin is a genuine success story and reflects the dogged persistence of its management, in particular Josef El-Raghy who has been with the company since it was founded by his father more than a decade ago. This is particularly so when remembering the years of stagnation when various officials within the Egyptian state system were trying to engineer its confiscation. Centamin came through that process - unlike the careers of the officials concerned - and its shareholders look set to enjoy the fruits of their persistence”. He touches on a point that many overlook with this company. Josef and his father were working in the Land of their Fathers. There was an especial pressure on them to develop Egypt’s first modern gold mine in the light of ancient history. Egypt was the "Golden Land" of the ancient world and the precious metal was widely used for jewellery and ornaments. Belief in the magic and spiritual power of gold led the Egyptians to bury their dead adorned with golden amulets and jewels, to rest among storehouses of treasures for enjoyment in the afterlife. An inscription on the wall of a temple cut out of rock in the early 12th century BC reports that gold mines at Wadi Abbad, which is to the north west of Centamin’s Sukari project in the Eastern Desert, were owned by the temple of Seti at Abydos. Lest anyone should think that this is a small project run by management simply hankering after a place in Egypt’s modern history of gold mining, it should be pointed out that Centamin is now one of the largest mining companies on AIM with a market capitalisation of more than £500 million. Last week it announced that its total reserves at the Sukari gold project had increased from 3.7 million ounces of gold to 6.4 million ounces, an increase of 72 per cent. This new reserve has been calculated from a resource estimate in the measured and indicated categories of 9.39 million ounces at an average grade of 1.5 g/t gold so, as Josef El-Raghy points out , there is clearly scope to move more resources to reserves, while resources will surely increase as a result of the ongoing exploration programme. The new reserves were based on drilling carried out up to the end of January this year, using a conservative price of US$700/oz for gold. The definitive feasibility study on Sukari was announced back in January 2007 so a lot of the data is out of date, but this fact can be ignored as the basics on which it was based have improved in the meantime. In addition to the reserves, the gold price is also a lot stronger and the whole project has advanced significantly. At the time the conclusion was that a four million tonne/year plant producing an average of 200,000 ozs over a 15 year mine life at a gold price as low as US$500/oz would be robust. The total capital costs were estimated at US$216 million and the average cash operating costs at US$290/oz. Since then there has been slippage in timing as commissioning and production was originally scheduled for the 3rd quarter of 2008, but what does six months matter when the world has been undergoing an economic crisis? The study was based on open pit mining over the 15 years followed by a 6 year period of treating low grade stockpiles. It has to be borne in mind that Sukari is in a remote position in the Eastern Desert and process water has to be pumped around 25 kms from the Red Sea. It is then held in a raw water pond before being pumped to a water treatment plant for purification. Also power cannot be taken from a neighbouring grid, so a 28 MW power station has been constructed on site which will use heavy fuel oil. No changes to either of these, but Josef has recently announced a major change in the mining plan. Barminco, one of Australia’s leading underground contractors, is mobilising personnel and equipment to Sukari to start underground mining on 1 July. A decline is being driven 1,200 metres to a depth of 200 metres and when it has reached target depth first ore from development will be processed. Full production from underground mining should start in January 2011 at a rate of 500,000 tonnes/year, and at a grade o between five and 10 grammes per tonne compared with a grade of two grammes per tonne for the open cut ore. On the telephone from Egypt Josef El-Rahgy confirms that the impact on production will be significant, as even towards the lower end of this spread of grades this new plan should take output up to an annual rate of production of 300,000 ounces in 2011. It will rise well above 200,000 ounces in the latter half of 2010. He remains confident that everything is now on track, but is taking one step at a time. The power generator will be commissioned in May and the crushers will follow. Looking even further ahead, however, he sees scope, based on the reserves, to double production from both underground and open cut and this means that he has production of 600,000 ozs in his sights which would take Centamin well up the mid-tier league. Obviously this will necessitate an expansion in capacity for the treatment plant, but it will be funded out of cash flow, and anyway Centamin has just agreed a US$25 million loan facility with Macquarie Bank. As Josef pointed out at the time, his company has adequate funds to take Sukari through to commercial production, but this low interest facility is an added safeguard and, most importantly, does not require any hedging. At the moment he has plenty on his plate and is unlikely to start thinking about plant expansion before the end of next year. What he does admit, however, is that there are a number of other prospects within the 160 sq kms Sukari lease, of which Um Kola, Sabahiya and Sukari East are the most significant. Exploration continues. He also says he would be very disappointed if the Egyptian government did not give Centamin priority on any other gold projects in the country after what has been achieved. There will be 1,200 people employed at the mine when production starts and it has never been an easy journey.