Centamin gets big boost in reserves

Centamin Egypt (CEE-T, CNT-A, CEY-L) has taken in some bullish news as it drives towards production at its Sukari Gold mine in Egypt.

The company announced that total reserves at the project were boosted by 72% or 2.7 million oz. Total reserves now stand at 6.4 million oz. while the previous estimate from March of 2007 had them at just 3.7 million oz.

The new reserves are based on drilling done up to the end of January and used a gold price of US$700 per oz.

Using cut-off grades of 0.4 grams per tonne for oxide and sulphide material, and 0.5 grams per tonne for transitional, the open pittable reserve breaks down as 142 million tonnes with an average grade of 1.4 grams per tonne. The previous estimate, while not having nearly the tonnage, did have a slightly higher average gold grade of 1.5 grams per tonne.

The reserve comes out of measured and indicated resources of 191 million tonnes grading 1.5 grams for 9.39 million oz.

Centamin is in the midst of building a 4 million tonne per year plant at the site, that will turn out 200,000 oz. of gold per year at an average cash cost of US$365 per oz. over the planned 15 year mine life.

It estimates that it will cost US$216 million to construct the mine and expects first production to come in the second quarter of 2009.

On April 2, it announced it acquired more financial security by doing a deal with Macquarie Bank that gives it a loan facility of up to US$25 million.

While the company says it already has the funds necessary to finish the mine – it did a $60 million bought deal in February – the facility gives it access to more funds at a low cost just in case.

“We felt it was prudent to secure the loan facility at negligible cost, in this low interest rate environment, leaving the company in an even stronger financial position,” Josef El-Raghy, chief executive of Centamin said in a statement.

Centamin will issue 1.6 million share options to Macquarie with a strike price of $1.06, expiring at the end of 2012.

If it does draw down from the facility, the company won’t have to enter into any hedging arrangements.

In Toronto on April 9, the company’s shares finished a penny higher at $1.00 on roughly 3 million shares traded.