Centamin has announced that the Sukari Gold Mine in Egypt is switching from contractor-mining to owner-operator with immediate effect.

Centamin believes the transition will deliver “significant cost savings” – generating long-term cost savings of an average US$19mn per year from 2023 onwards compared to the 2021 cost base – and improve operational control and mining flexibility, whilst also enabling upskill the local workforce.

The decision to move to owner mining, following the expiry of the current five-year contract, has been based on:

• Reserve growth – the 200% increase in Sukari underground Proven and Probable Reserves, as announced in December 2021, underpins an eight-year underground life of mine, with identified near-term growth targets to extend beyond a 10-year life of mine
• Leadership team – the operational leadership at Sukari has been significantly strengthened, with experienced underground expertise and increased investment in the development of the national workforce
• Operational benefits – an owner-operator model including risk-based analysis against the submitted contractor-mining tender proposals identified significant operating synergies for the broader Sukari operations
• Mine life extension and upside – 90,000 metres of underground drilling is budgeted for 2022, including identified near-term growth targets to extend the underground beyond a ten-year life of mine and helping to support the underground expansion study which is due for completion in H2 2022.

CEO Martin Horgan said the decision to transition the underground to owner mining reflects extensive planning and evaluation to determine the most effective operating model as we continue to grow and maximise the value of the Sukari orebody.

“Following a 200% increase in underground reserves with further identified growth opportunities and an underground expansion study underway, we believe this move best places us to extract the maximum value safely, efficiently and cost-effectively from the expanding underground operations,” he said. 

Centamin has produced in excess of 4Moz of gold from Sukari, generating US$1bn in free cash flow and significant stakeholder opportunities and returns.

Underground mining

A detailed transition plan to owner-operator mining is in place with implementation underway, including utilising a third-party underground mining specialist to assist with workforce training. The company has also executed its contractual right to purchase the current underground mining fleet from the incumbent contractor for a total capital cost of US$10.5mn to be paid in Q1.

Underground drilling

Following the completion of an independent tender process, the company has awarded Geodrill a five-year contract to provide underground drilling services, including a minimum of 90,000 metres of drilling per annum and introducing reverse circulation drilling to the underground which is faster and enables larger samples to be taken. The contract is to commence this quarter.

2022 guidance

There is no change to the 2022 annual production and cost guidance. As a result of purchasing the incumbent contractor underground mining fleet, the annual capital expenditure guidance for 2022 is increased by US$10.5mn to US$225.5mn.