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    Centamin (Egypt) Starts To Give Interesting Clues To Full Potential Of Its Sukari Gold Project.

    At first sight the latest announcement from Centamin Egypt, a company listed on both th ASX and AIM, is not that exciting. The resource at the Sukari Hill project in the eastern desert of Egypt has increased from 1.73 million ounces to 2.04 million ounces of gold and the independent review of the bankable feasibility study for the development of a 2 million tonne per annum processing facility is positive. Nothing out of line with expectations there., so why has the share price been creeping up in anticipation of the announcement? The answer lies dotted around the announcement , rather than in the headlines.

    For a start it has to be appreciated that the Sukari Deposit is a large mineralised system that outcrops for 2.5 kms and is up to 400m wide. The system has been divided into 4 zones which have been named the Amun, Ra, Gazelle and Pharoah zones. All the drilling so far has focussed on the Amin zone which is at the southern end of the Sukari Hill and represents only about 10 per cent of the total system. However the current infill and step out drilling into the Ra Zone has resulted in additional higher grade inferred resources that are outside the existing optimised pit shell used for the current resource calculations and justifies the company’s decision to continue drilling to expand the current resource.

    So here is the first clue and the second is like unto it as the company admits that due to recent slower than anticipated drilling rates being achieved by the current contractor due to equipment breakdowns, the company has engaged Stanley Mining Services Pty Ltd who are deploying two diamond rigs from Tanzania. These rigs are expected to arrive at site by the end of the month. In other words if everything had gone right the resource could have been increased by a substantially greater amount. And once the resource is over the 4 million ounce mark and further resources are converted into reserves it makes obvious sense to enlarge the capacity of the plant.

    Yes, here it is. The new managing director Josef El_Raghy says that “It is anticipated that the Sukari resources will support a 4 to 5 million tonne per annum operation at the next bankable feasibility study review. This study forms the foundation of the company’s strategy to become a substantial producer of gold.” In other words the present resource and treatment capacity is just a base case to prove that Centamin is on track to be a successful and significant gold producer. Double, or even treble the base case and investors can get nearer to understanding the potential of the project as no problem is visualised in expanding the base case ultimate pit limits to the larger pit shell limits optimised with the inclusion of the inferred resources.

    This bankable feasibility study showed cash costs of US$182/ ounce and, at a 8% discount rate , a net par value of US$23 million. But when the resource base is increased significantly, as expected, by infill drilling, the cash costs have the potential to fall to US$164 /ounce, with net par value rising to US$55 million on the 2 million tonne per annum scenario. So now we are hot on the scent. Even this projection does not. take into account the full potential of the project where an exhaustive drilling campaign continues and has resulted in some spectacular grades such as 28m @ 6.85g/t including 3m @ 56.83g/t. More drilling results will probably be announced shortly and these will show that the company is well on the way to doubling the resource.

    Once this has been confirmed another bankable feasibility study will be released based on a treatment capacity to at least 5 million tonnes/year. This should cut cash production costs further as the base case took account of only an 80 per cent rate of recovery, whereas recent tests indicate it could be nearer 90 per cent. Add to this the fact that Sukari is a hill in a desert. The fact that it is a hill means that stripping ratios should decrease once a start has been made and the fact that it is in a desert means that environmental problems are minimised. Much more news will be released before Christmas and this should be worth waiting for.

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