Centamin Raising $60M For Sukari

VANCOUVER — Centamin Egypt (CEE-T, CEY-L) is raising $60 million for its 9-million-oz. Sukari gold project in Egypt through a bought-deal financing.

The company will issue just over 92 million shares at 65¢ apiece to a group of underwriters headed up by Thomas Weisel Partners Canada and Cormark Securities.

The deal includes a 13.8-million- share overallotment set at the same price that will be open for 30 days following closure of the bought-deal financing. If fully exercised, that would bring total proceeds to $69 million. The financing is slated to close Feb. 17.

Centamin says construction delays at Sukari and changes in the strength of the U. S. dollar relative to the Canadian dollar forced it to raise additional funds. The money will mainly go towards advancing development of Sukari.

Specifics on the delays were unavailable as after-hours phone calls to Centamin offices in Egypt and Australia went unanswered at presstime.

But in its quarterly statement for the period ending Sept. 30, 2008, Centamin warned that although it looked to have enough money to fund the project in the near-term, “it may be required to seek alternate funding for the balance of the capital requirements for its internal growth projects.”

At the time it had close to US$150 million in cash and was debt free.

While the company reports construction delays, it still says the US$216-million Sukari project, about 600 km southeast of Cairo, is on track for production in the second quarter of this year. Ownership of the project is shared 50- 50 between Centamin and the Egyptian Mineral Resource Authority.

If all goes according to its feasibility study, Centamin will eventually produce about 200,000 oz. gold a year for 15 years at a cost of US$365 per oz. gold. This past summer, Centamin revised cash costs upwards from under US$300 following hikes in commodity prices.

Setting the price of gold at US$600 per oz., the project showed an internal rate of return of 22.3% and a net present value of US$249 million. The company expects payback within the first three years of production.

The 15-year plan is based on mining 78 million tonnes grading 1.47 grams gold per tonne for 3.7 million contained ounces gold. That is about half Sukari’s measured and indicated resource estimate. All told, Centamin has pegged that at 184 million tonnes grading 1.52 grams gold for 9 million oz. gold.

Centamin will start mining in oxides, progress into mixed sulphides and oxides and end in sulphides. It will use a conventional ball mill and recover gold through flotation and cyanidation. Gold recoveries range between 62.8% and 92.2%.

Centamin has divided the Sukari Hill mineralization into four outcropping zones: Pharaoh, Gazelle, Ra and Amun. Viewed from the south, the toothy peaks of Sukari Hill rise east to west, beginning in the lower Amun zone and cresting in the western Pharaoh zone. Ra and Gazelle lie in between.

Mineralization has a strike length of 2.3 km and is 100 to 600 metres wide. A felsic porphyry hosts the gold mineralization that progresses from an easterly dip in the south to an overturned hangingwall at the contact zone in the north.

Beneath the four zones, Centamin has also defined the higher-grade Hapi zone, which the company is planning to develop underground. Any of this potential gold production would be in addition to the 200,000-oz.-per-year mining plan.

The planned pit-shell will eventually encompass the Gazelle, Ra and Amun zones.

This fall, Centamin reported construction was progressing well. It said it was in the midst of setting concrete for the mill and other facilities and had finished building earthworks and an ambitious water pipeline.

As the project is hundreds of kilometres away from the Nile, or any other source of fresh water, Centamin has solved its water problem by building a 26-km water pipeline that runs to the project from the Red Sea, which lies to the east.

Two pumping stations will suck seawater to a lined catchment pond at Sukari and Centamin will extract fresh water for elution and domestic purposes through a reverse- osmosis plant.

Electricity for the project will come from a planned 28-megawatt heavy-fuel oil generator.

On news of the financing, Centamin’s share price gained 1¢ to close at 74¢. It has about 881 million shares outstanding.