Centamin thinks deep thoughts at Sukari

PERTH, WESTERN AUSTRALIA–The Sukari gold project in Egypt’s eastern desert has added resources and reserves so quickly over the past three years that owner Centamin Egypt (CEE-T, CEY-L) has become a lead contender to develop the largest new gold mine in the world.

Sukari will be the first modern gold mine for Egypt, which has a fabulous gold mining history punctuated by mining under the pharaohs, Roman conquerors and, in the 1930s-40s, the British.

Sukari has a recently updated gold resource of 7.46 million oz. in the measured and indicated categories, plus an inferred 3.7 million oz., all at a cutoff grade of 0.5 gram gold per tonne. The measured resource alone is 60.1 million tonnes grading 1.41 grams gold per tonne.

The construction phase now has about 700 workers at Sukari and, when the operation fires up by the end of this year, the permanent number will be about 300.

Plant and general project commissioning is under way, and earthmoving equipment is on-site to start on a big open pit on the Amun Zone. Centamin chairman Sami El-Raghy says that Sukari is on track for a late 2008 commissioning, and that ramp up in 2009 should see production reach 250,000 oz. per year.

The gold plant, brought in from Newmont Mining’s (NMC-T, NEM-N) now-closed Kori Kollo operation in Bolivia, will treat about 4 million tonnes per year. While it operated in South America at an annual capacity of 7 million tonnes, this was with softer material than Sukari’s harder ore.

Geologically, the whole of an imposing mountain is considered mineralized and, from the high ground around the Pharaoh zone, you can reportedly see the Red Sea.

Amun zone — the lowest part of the system — has been most intensely drilled. This covers about one-third of Sukari’s length. Based on its known resources and reserves, there is adequate Amun ore for a 25-year mine life, before Centamin moves up to mid-mountain to exploit the Ra and Gazelle zones.

Drill roads and cuttings are about to be carved into the higher Pharaoh zone. Drilling in the middle reaches of Pharoah last year gave some wide, low-grade hits in the Cleopatra and Antony zones.

Sami El-Raghy, an Egyptian by birth who spent years on gold mine developments in Western Australia, points out that the ore positions in each sector of Sukari are geographical rather than geological. The ore systems from Amun extend into Ra and Gazelle, and probably into Pharaoh.

Deeper drilling in the early days showed up the high-grade Hapi zone and ongoing exploration showed that it extended at depth from Amun into Ra. Recent drilling into the valley floor has shown another large, rich shoot underneath, dubbed Hapi 2.

Valley floor drilling into Gazelle two years ago returned intervals including 3 metres at 441 grams gold per tonne and 111 metres of 15.06 grams gold. At Amun, a hole returned 74.5 metres at 4.63 grams gold and Ra delivered some bonanza hits.

Drilling into Hapi at Amun last year included a series of bonanza grades over 1-metre intervals.

The ongoing search for success has prompted Centamin’s board — notably veteran Brian Speechley, the globetrotting Perth-based mine designer and planner — to develop a plan to excavate a decline to access Amun’s Hapi zone. This blueprint may limit the late deepening of the Amun pit, thus saving a costly late cutback on the pit. More importantly, it could provide a very healthy early cash flow from a rich-grade deposit.

The concept could involve starting an 800-metre-long decline behind the solid remains of the old British-era mine manager’s residence to intercept Hapi. Australian Ian Cox, recently appointed underground mine manager, would be responsible to realizing the idea.

El-Raghy says that if the board approves, a decline could be developed down to Hapi’s first ore position within nine months.

One issue to consider is whether the underground operation would be focused on the richer Hapi or a bigger, higher-dilution operation. The thinking at this stage is that the Hapi decline could haul plus-12- gram dirt.

Going underground at Hapi and adding a new semi-autogenous grinding mill to the plant could see combined open-pit and underground production moving towards 500,000 oz. gold per year.

About 35% of Sukari gold will report to the gravity circuit with the balance of oxide ore going to the carbon-in-leach (CIL) plant. The sulphides will go through flotation and grinding before heading to the CIL.

Sukari is seen as an important modern mining milestone for Egypt. El-Raghy believes it will be one of the country’s big revenue earners, behind existing liquid natural gas operations.

While about US$100 million has already been poured into Sukari and another US$200 million will be spent to get the total project operational, payback could be achieved within just three years.

Centamin expects to recoup all development costs before taxation is due, which could come into effect in year three and see the Egyptian government earning 40%, rising two years later to 45%.

There will be no other taxes or import duties. El-Raghy estimates that this represents an 11% taxation rate, particularly if, in future years, Centamin opens up other old mines and discoveries on the vast lease that envelops Sukari or on nearby areas the company is hoping to win — including former British workings at Um Ud.

During an earlier visit to the project, the author saw some ancient grinding artefacts from the Pharaonic era outside Sukari’s geology office and later Roman workings that gouged free gold from narrow veins.

El-Raghy believes the first miners at Sukari would have been winning gold for King Seti, father of the most famous pharaoh, Ramses II.

With the operation moving to a crescendo, Sami’s son Josef — who had been a successful Perth stockbroker before taking over as managing director five years ago — is now living with his young family in the El-Raghy home city of Alexandria.

Josef had a baptism of fire, for soon after taking over the helm at Centamin, then-Egyptian Mines Minister Ali El-Saledi mysteriously demanded Centamin halt all work at Sukari, and development stopped for more than a year.

There were unconfirmed reports in Australia that El-Saledi was associated with an Australian-born millionaire in Monaco who was eyeing Centamin.

The issue drew the attention of Egyptian President Hosni Mubarek, and El-Saledi not only lost his ministerial position during sweeping changes, but left politics.

The new mines minister, engineer Sameh Fahmy, also retains the petroleum portfolio. He is a keen advocate of the Sukari project, and on recent visits has brought with him some of Egypt’s senior business and political journalists.

–The author is a freelance journalist in Perth, Western Australia.