Centamin releases 2Q21 report

Highlights

• Gold production for 2Q21, was 100 228 oz, bringing production for 1H21 to 204 275 oz, and the company remains on track to achieve 2021 guidance.
• Revenue generated of US$177.5 million from gold sales of 97 229 oz at an average realised gold price of US$1822/oz sold.
• Cash costs of US$883/oz produced and all-in sustaining costs (AISC) of US$1290/oz sold.
• Opencast operational performance delivered ahead of schedule, resulting in record quarterly total material moved of 25.6 million t (1H21: 48.2 million t).
• Better than budgeted group free cash flow of US$6.9 million reflected stronger gold price and lower CAPEX, offset by accelerated open waste-stripping programme and increased exploration activities.
• Completed the West African portfolio strategic review, confirming positive growth potential at the Doropo Project, and commenced the pre-feasibility study (PFS), scheduled for completion in 1H22.
• Awarded the engineering, procurement and construction contracts for the Sukari 36 MW solar farm and 7.5 MW battery-energy storage system, scheduled for completion in 1H22.
• Strong balance sheet with no debt, no hedging and cash and liquid assets of US$312.1 million, as at 30 June 2021, after US$34.5 million dividend distribution on 15 June 2021.

Martin Horgan, CEO, commented: “Centamin has delivered another solid operational performance and we remain on track to meet full year cost and production guidance. During the quarter, excellent progress was made with the Sukari waste-stripping programme which has significantly outperformed budget and resulted in record material mined. This is testament to our team at Sukari delivering improvements in operating efficiencies and further supported by the quick mobilisation and ramp up of the waste-stripping contractor. We look forward to announcing our detailed half-year financials and declaring the interim dividend on Thursday 5th August.”

Outlook

• 2021 gold production and cost guidance maintained: 400 000 – 430 000 oz at cash costs of US$800 – US$900/oz produced and AISC of US$1150 – US$1250/oz sold.
• 2021 CAPEX guidance maintained: US$225 million, with a 65% spend in 2H20 (previously 55%) due to timing adjustments to the payment schedule.
• 2021 exploration expenditure increased to US$17 million (previously US$5 million), including progressing to PFS at Doropo, following positive strategic review of the company’s West African portfolio.
• Recently agreed exploration license terms for a total 3164 km² land package in Egypt’s Arabian Nubian Shield subject to final legal formalities expected to be completed in 3Q21.
• Sukari Life of Asset (Phase 2) optimisation work programme is scheduled for completion in 4Q21.

Health and safety

Operational safety remains a strict focus throughout the Group in creating a safe work environment which supports a healthy and productive workforce. In 2Q21, there were three lost time injuries (LTI) (1H21: four) resulting in a lost time injury frequency rate (LTIFR) of 1.19 per one million site-based hours worked (1H21: 0.81). The total recordable injury frequency rate (TRIFR) for 2Q21 was 5.15 per one million site-based hours worked (1H21: 3.45). Both lagging indicators are better than the target for the year.

In 2Q21, Centamin experienced no material production, sales or supply chain disruptions due to COVID-19 at Sukari or the exploration projects in West Africa. Full COVID-19 protocols remain in place. The company has implemented strict test, track, isolate and safety measures for the long-term, acknowledging the duration of the pandemic and the lasting impacts remain uncertain. Consequently, the company has increased its staffing levels as appropriate.

Production (1Q21 vs 2Q21)

Delivered as planned, Sukari gold production for the quarter was 100 228 oz. Gold production for 1H21 was 204 275 oz which is in line with budget and on track to meet 2021 guidance.

Opencast mining

Record quarterly total material moved of 25.6 million t (1H21: 48.2 million t), a 13% increase q/q, driven by improved operating efficiencies and productivities.

Opencast ore mining in 2Q21 continued to focus on the low to medium grade Stage 5 North area. More low grade ore tonnes continued to be mined than scheduled, driven by ongoing conversion of waste to ore from pre-production drilling. Total opencast ore mined for the quarter was 3 million t (1H21: 6.8 million t), a 19% reduction q/q, at an average mined grade of 0.76 g/t gold (Au) (1H21: 0.77 g/t Au), unchanged q/q.

Record total opencast waste material mined for the quarter was 22.6 million t (1H21: 41.4 million t), a 20% increase q/q, driven by operational outperformance in the open pit waste-stripping programme, which has ramped up ahead of schedule. The strip ratio for the quarter was 7.4:1 (waste:ore) (1H21: 6.1:1).

During the period, the opencast interacted with a known underground void with no material impact on operations or production, highlighting the effective progress of the Void Management Plan to ensure the safety of the team and equipment, and delivery against the opencast mine plan.

Underground mining

Total ore mined was 223 000 t (1H21: 393 000 t) at an average combined (stoping and development) grade of 4.67 g/t Au (1H21: 5.18 g/t). This represented a 31% increase in tonnes q/q and a 20% reduction in grade q/q and was in line with the planned stoping sequence for 2021.

The underground ore split was 134 000 t of ore mined from stopes, at an average grade of 5.23 g/t Au, and 89 000 t of ore mined from development, at an average grade of 3.84 g/t Au.

Improved underground staffing levels were achieved during the quarter, and the company continues to work closely with the underground contractors to mitigate the impacts of reduced staffing levels due to COVID-19 to ensure the delivery of operating targets.

Processing

During 2Q21 there was a planned maintenance shutdown to replace the girth gear on one of the two SAG mills. This was originally scheduled for 3Q21, but availability of staff, equipment and supplies allowed the work to be brought forward to 2Q21.

The plant processed 2.8 million t of ore (1H21: 5.8 million t ), a 7% reduction q/q, at an average feed grade of 1.19 g/t Au (1H21: 1.17 g/t), a 3% improvement q/q. The metallurgical gold recovery rate was 89.3% for the quarter (1H21: 88.8%), an improvement of 1% q/q. During the quarter, the low grade stockpiles increased from 18.3 million t to 18.8 million t at 0.46 g/t Au.

Mineral resource management

During the quarter, 66 858 m of grade control and resource definition drilling was completed at Sukari (41 718 m in the opencast and 25 140 m in the underground). The geological relogging programme, which commenced in 1Q21, progressed well, completing 29 sections of the total 107 sections with the full programme scheduled to be completed by 2H22. An updated structural model was completed in 2Q21 and will be integrated into the full geological model in 3Q21. An updated Sukari mineral resource estimate, which will underpin the Life of Asset (Phase 2) review, will be completed by the end of 2021.

Capital projects

Total CAPEX in 2Q21 was US$41.3 million (1H21: US$78.3 million), which was an 11% increase q/q and below budget for 2Q21 as certain payments have been rescheduled to 3Q21. Sukari capital projects progressed well including the second tailings storage facility (TSF2) Stage 3 lift, final stages of the camp upgrades and commissioning, ongoing development of the paste-fill plant and reagents handling area at the process facility.

In 2Q21, the company awarded the 36 MW solar farm and 7.5 MW battery-energy storage system engineering, procurement and construction contracts. The project is scheduled to be commissioned by the end of 1H22. The solar plant will provide partial power source to the processing plant during daylight hours, reducing diesel fuel consumption by an estimated 22 million l/y, saving up to US$13 million in costs and lowering carbon emissions by an estimated 60 000 tpy CO₂-e. Project spend in the quarter was US$4.4 million, with US$30.8 million budgeted for 2H21.

Sales and costs

Gold sales for the quarter were in line with budget at 97 229 oz (1H21: 203 802 oz), a 9% decrease q/q. The average realised gold price for the quarter was US$1822/oz (1H21: US$1799/oz), up 2% q/q. Revenues generated of US$177.5 million (1H21: US$367.4 million), were down 7% q/q, driven by scheduled lower gold sales and offset by a higher realised gold price.

Total cash costs of production were in line with budget at US$88.5 million for the quarter (1H21: US$164.8 million), a 16% increase q/q, driven by scheduled higher mine production costs as a result of more tonnes mined than scheduled and partially offset by movements in inventory on ounces produced, due to the increase in low grade stockpiles. Unit cash costs of production were US$883/oz produced (1H21: US$807/oz), a 20% increase q/q and as scheduled.

Total AISC were better than budget at US$125.4 million for the quarter (1H21: US$241.7 million), due to certain non-critical sustaining capital items moving from 2Q21 to 3Q21. This marked an 8% increase q/q. Unit AISC of US$1290/oz sold (1H21: US$1186/oz), an 18% increase q/q, reflecting the increased tonnes mined and lower gold sales.

Corporate

West Africa Exploration Programme

A strategic assessment of the company’s West African exploration portfolio was completed in 2Q21 to evaluate the potential development prospects of the portfolio, to rank each project and to define the pathway to realising value:

• The Doropo Project (Côte d’Ivoire) showed strong development potential with the completion of a positive preliminary economic assessment (PEA), following which the Board approved the commencement of a PFS, scheduled for completion by 2H22.
• The ABC Project (Côte d’Ivoire) continues to deliver greenfield targets along the 60 km Lolosso Gold Corridor (LGC) and the Board has approved an exploration programme for the Kona and FarakoNafana permits for the period to June 2022.
• The Batie West Project (Burkina Faso) PEA demonstrated a viable project, and the Board has approved the assessment of third-party development options as the project does not currently meet Centamin’s investment criteria.

Egyptian bid round

The company's government partners, the Ministry of Petroleum & Natural Resources and the Egyptian Mineral Resource Authority (EMRA) launched an international bid round process in February 2020 for the exploration of gold in a series of blocks covering the Eastern Desert in Egypt (bid round).

Centamin submitted bids for several prospective exploration blocks in September 2020. In July 2021, Centamin agreed exploration terms over three blocks (incorporating 19 licenses) covering 3164 km², subject to final legal formalities which are expected to be completed in 3Q21. All ground in the Bid Round comes under the new Egyptian mining code following a tax, rent, royalty framework. New licenses are independent from, and therefore do not impact, the Sukari Gold Mine Concession Agreement (Egyptian Law 222 of 1994).

Read the article online at: https://www.globalminingreview.com/finance-business/22072021/centamin-releases-2q21-report/