Australian AIM listed gold miner Centamin is set to be catapulted into the big time as the resource they have been working since 1995 in Egypt finally nears commercial production. In a Telegraph article Centamin announced they have started gold exports to Johnson Matthey and reserves at Sukari Hill have been identified in the region of 13 million ounces making it potentially North Africa’s largest deposit according to an article in Mineweb. The average grade is put at 1.4g/metric ton and approximately 5 million tons of ore are expected to be mined per annum when the open pit operation reaches full production later this year. Processing is intended to run at 4 million tons of ore creating an oreÃ‚Â stockpile for later years when the mine ceases. The cut-off grade will be managed to process material of around 1.87g/ton in the early years leaving the stockpile to average some 0.66g/ton. This creates an enhanced cash flow in the early years to pay down debt and at a run rate of 4 million tons per annum should yield about 240,500 ounces of gold which at current prices should make Sukari highly profitable. The original operating costs were put at US$365/ounce although they may have increased somewhat since then but even so providing political interference can be avoided, Centamin have developed a valuable asset at just the right time in terms of the gold price. According to the Telegraph article production is intended to increase up to 500,000 ounces per annum by 2012 although that may take some doing from the current standing start. At the very least, the mine has a 15 year life and probably closer to 25-30 as the limits of the deposit have yet to be established.
Not many new sizeable reserves come on stream nowadays and those that do are often located in unstable areas putting them at high risk of political interference, such as in Venezuela where the Canadian miner Crystallex recently pulled out of a proven high quality resource because of a refusal by the Venezuelan Ministry of the Environment to approve permits since April 2008. The Las Cristinas resource is said to contain some 27 million ounces of gold and one can only imagine what a benefit such revenue would be to a cash strapped Venezuela. Clearly common sense doesn’t have much weight in such regimes and one can only hope Centamin’s long standing relationships in Egypt serve them better than Crystallex’s did in Venezuela.