Centamin unveils three-year plan for Sukari gold mine

Sukari is Egypt’s sole gold-exporting mine and the first large-scale modern gold operation in the North African nation. (Image courtesy of Centamin.)

West Africa-focused gold miner Centamin (LON:CEY) (TSX:CEE) outlined on Wednesday a three-year plan designed to cut costs and boost efficiencies at its Sukari mine, which has been affected over the past two years by operational issues and under-investment.

The company said it would spend $595 million to increase waste stripping at Sukari, which is Egypt’s sole gold-exporting mine and the first large-scale modern gold operation in the North African nation.

Capital Limited, the company that won the open-pit waste mining contract, will provide the extraction process service that will help Centamin access higher grade ore over a period of four years.

The plan will allow Sukari to produce between 450,000-500,000 ounces of gold from 2024 on

“The winning of the tender for the Sukari open-pit waste mining contract is a significant milestone for Capital – it is the largest contract win for the group since inception, adds substantial scale to our mining services division, as well as providing revenue diversification from our drilling services business,” executive chairman Jamie Boyton said in a separate statement.

Centamin’s new plan would allow Sukari to produce between 450,000-500,000 ounces of gold at an all-in sustaining cost of between $800-$900 per ounce from 2024 onwards.

Chief executive Martin Horgan told reporters on a call that the three-year guidance was characterized as an investment phase. “We are looking to reset the asset from a production basis [and focus] for now in margins and cash flow generation,” he said.

Analysts reacted positively to the news. UK investment firm Peel Hunt said the plan would be a “near term hit, [but] longer-term benefit.” BMO said Centamin’s near-term outlook was “realistic” and “should position the company well to achieve future guidance.”

The company, which has stepped up exploration across its three assets in West Africa, fended off a takeover attempt last year by Canada’s Endeavour Mining (TSX:EDV).

Turning the page

Centamin has proved resilient to recent challenges, beyond those brought by the covid-19 pandemic. After about six months without a top boss, in April it appointed Martin Horgan as its new chief executive officer.

Horgan did not dismiss on Wednesday the possibility of a new suitor attempting to acquire Centamin in the near future. “If somebody decides to knock on the door and have a conversation, we can’t control that – it’s a decision for shareholders.”

The company has also gone through some major board changes. Those include seeing Josef El-Raghy migrate from executive chairman to chairman, 18 years after becoming managing director.

In October, the miner lowered guidance for 2020 after stability issues at the mine’s west wall forced the company to halt mining in the high-grade zone.

Sukari, which began operations in January 2010, comprises a large open pit and an underground mine.

The operation contributes up to $900 million a year to Egypt’s gross domestic product.

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