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Dasut thanks very much - excellent and encouraging response
Dasut I agree wholeheartedly.
DFS will tell us much more,.
3Bear
Just to add a little more to the contractor owner miner discussion.
At the start up stage of a mine there is a period of time relating to "Opening up the mine" this includes access roads, base camp, foundation work for the Process Plant, Power House, Workshops, Offices etc. There will be a need to expand the housing area, maybe relocating villages and the list goes on and involves construction works that has nothing to do with the expertise of the mining company. This is where you involve local contractors and mining contractors both of whom you will have been talking to in detail for a considerable length of time to ensure equipment is timed to arrive at pre planned times.
The early involvement of contractors is crucial to the overall mine plan to ensure on site facilities and systems are in place and planned for.
One of the difficult decisions is determining what size truck is applicable to the mine and equipment suppliers will have been discussing numerous scenarios. Contractors will also have their own ideas based on the practicalities of the mine location and their own local experience. Often start up trucks and all of the equipment related to the truck fleet is determined by what is available quickly from the contractor and will maybe be a smaller truck than the mine equipment study recommends but the recommendation and what is quickly available compromise can be backed up by getting into the ore quicker.
Some will say contract mining is more expensive than owner operator and yes I agree but not necessarily in the early years when learning the ore body and overall resource. It provides a valuable period to understand best fleet sizing and to develop personnel.
Sukari learned a lot during the underground years from a contractor which enables them now to go the owner route and I am sure they will also learn even more as they grow into the job, hopefully no costly errors.
Would Sukari have benefitted from going down the contractor route for the open pit, not sure? Difference here is that at start up there where no experienced mining contractors operating in Egypt, whereas in West Africa there are a few with the strength to do a very good job at Doropo.
Cote D'Ivoire is still West Africa but there are many risks in business particularly mining and I don't think there are many if any new mining areas anywhere in the world that doesn't come with political risk.
Including Egypt as we have experienced in the past.
When I lived and worked in Sierra Leone many years ago the senior guys would take long weekends to the then Ivory Coast capital Abidjan because it was likened to a French Provincial Town with excellent service and great food. Unfortunately at that time I was not senior so couldn't afford the luxury.
OK times have changed and Core D'Ivoire has gone through some seriously difficult times but I hear that currently is far more stable.
Doing business in West Africa requires considerable due diligence, employing the right indigenous senior management and people with local experience.
Horgan understands West Africa and I would suggest has the contacts and knows people who he can trust. I was very relieved and majorly buoyed by his appointment as CEO. He has the team to drive through Doropo and other West African resources such as ABC.
Unlike some on this board I am happy with the delay on bringing on a West African resource as it has to be done right and I am also happy with doing a detailed bankable study document that can be presented to a bank in return for a loan.
A loan from a bank reduces risk, helps with obtaining political risk insurance and gives the market confidence, as it is like getting your investment decision underwritten by a bank and a political risk insurer. This is how a company gets a strong credit rating so can only be a good thing.
I don't know any company that doesn't use other peoples money when developing a mine especially in what is a high risk area, including the majors and Horgan again has the necessary background to know what is required to dot the i's and cross the t's.
Also he can move into Doropo using knowledge and experience available from local Mining Contractors and grow into the mine before contemplating major investments in equipment and related people that is required by an owner operator.
Concentrating his efforts on the Processing Plant, ore body and mine layout.
The most successful start up mines that I have experienced in both West Africa and Tanzania has involved professional mining contractors and I have seen very strong figures that justify taking this course for the early years.
Again Horgan has experience using contractors in his previous life in West Africa, so like you I think Doropo is a solid go.
Hi Dasut,
What do you think of the political stability in Cote D'Ivoire? From an outsider's pov Doropo looks like a solid go - Horgan says he's comfortable working in 'Francophone West Africa', he has experience of building a gold mine from scratch in Senegal (and selling it for a stellar profit) and there are no corners being cut - PFS - DFS - only then start construction. Plus around 5m inferred ounces about to convert to indicated, in short it looks great to me, but must admit Mr Tibbs concerns have rattled my confidence in it a bit...
Tibbs picking up on your point relating to Africa being higher cost than elsewhere. Not sure that I agree with such a sweeping statement because there are a considerable number of countries on the continent of Africa and if it is an average cost then OK yes I agree. Cost of recovery in South Africa's deep mines will outweigh the relatively low costs of an open pit mine in West Africa or Tanzania. However when I met with the likes of Newmont, Barrick, Goldfields back in the early 2000's they were all looking at getting into East and West Africa both known as low cost regions. Interestingly I also met SRK in South Africa on a number of occasions and they were positive on West African growth and mining development opportunities.
Also average costs are very difficult to hang your hat on as the costs from one mine and another only 50 miles away can vary considerably depending on the ore body, lack of or availability of power, water, management and people.
As for being less efficient again this is questionable as a company together with a couple of major mining companies we had visits from our peers to understand the efficiencies that are possible.
I will however reiterate that I retired in 2008 so we are talking historic knowledge.
Jan 2022 Time frame before Centamin gets at that higher grade ore?
Liberum actually summed it up pretty well (although their accuracy leaves something to be desired!).
Re the underground operations they wrote:
"However, we feel reasonably confident that the UG Expansion Study will have a positive outcome that is similar to, or better than, that currently presented by Centamin. There is also the mouth-watering prospect of bonanza structures being brought into the mine plan: we see the Bast structure turbocharging 2023 production, followed by the 5105 structure a year or two later."
Re the open pit - from the LOA2 review, Centamin stated that the costs of the increased stripping will be more than offset by the improvement in grade from the open pit. However, and as per slide 16 from the presentation on 8.12.21, the head grade from the O/P will of course fall due to the fact of the stripping - which is over a 4 year period (there is a lot of waste rock being mined!) - however the feed into the processing plant remains constant for the next few years (see below).
This is NOT factoring in any production from the bonanza grades identified (and commented on by Liberum), but is a base case and part of the whole process of being consistent in producing 450-500koz per annum.
Important to note , this accelerated stripping is mainly to provide flexibility for future years (as you know, it was under stripped in previous years), which feeds into the strategy to be consistent in gold production!
So any assumption grades remain low for the next 4 years is not correct and will become apparent .
Opinion of Dasut one of this groups very experienced members
I am not sure that there is an African cost structure given the number of countries on the African continent having worked in 6 of the countries there are quite large differences and considerable political risk variations.
Quick difference Burkina more expensive than Ghana and Ivory Coast purely based on logistics of land locked and easy access to ports.
I would love to know why Batie is non core, is it political risk, physical risk is it cost prohibitive suggest a combination of all in addition to a difficult ore structure, not sure if I have seen a detailed justification relating to Batie being non core.
There are numerous mines in West Africa long standing that are profitable and if Doropo and ABC are anything like projects that I visited on numerous occasions in Ghana and have free dig start ups of oxide ores then I see both resources as benefiting Centamin 's bottom line.
Opinion to Centamin Jan 2022
He is spot on re the stripping and the ore : waste ratio – the higher the proportion of ore, the more ounces are produced.
Longer haulage distances are negligible to be frank – the upside currently remains in the existing open-pit shell and the deeper prospects in the underground. As to what happens post the stripping campaign with Capital’s fleet I do not know.
Centamin may want to buy these back off them – Centamin do a lot of their own stripping and haulage afterall, and having a younger fleet will reduce maintenance costs etc.
If there are discoveries within proximity to the Sukari plant (either in the Sukari license or in their new licenses) they will need to have a bigger mining fleet anyway.
Although any decision on this fleet is some way off as there is still another 3-4 years of high stripping to do.
From Kees Dekker mining analyst Jan 2022
In my experience here is an extra cost working in African countries.
The productivity there is lower than elsewhere. In discussions with a director of SRK I told him that I do not subscribe to many unit mining cost estimates used for African countries in the economic assessment in technical reports. He confirmed to me that a SRK study had come up with an average unit rate of US$3.5/t mined for Africa. This includes drilling and blasting. I estimate for free dig material this should be some US$1/t lower. About Batie, it is non-core in my mind because the very low grade makes it unattractive given the risks associated with a project in Africa and a political high-risk country at that. Doropo is better, but still not fantastic. No wonder they downgraded Batie.
Kees
My friend who is in regular contact with Centamin put Kees opinion to them
As Kees pointed out, Centamin is “getting there”, and that is shown by the confidence in guidance for this year being 430-460,000oz, though with higher costs because of inflation and the need for more investment (solar plant, paste plant, underground development, etc etc). Centamin has reduced significantly the volatility of production levels in the last 18 months in particular, whilst investing in Sukari’s ability to produce sustainable and low cost ounces for the next decade or so.
Hi Tibbs, I appreciate the longer-term shareholders here have been put through significant stress and financial loss as Pardey made a huge mess in the pit. About the only good thing I can see is that he left centamin with a quarter billion dollar cash pile but that's about what it's going to take to put things right. I've only been a shareholder for about 18 months so it's easy for me to look to the future rather than the past. Respect to you for hanging in through thick and thin. Re Doropo on the face of it it looks good - 5m oz inferred - lots of drilling about to convert many of those ozs to indicated which ought to give another boost to the SP. Cote D'Ivoire reasonably stable. Looks good but I'm not a miner and have no experience in Africa so am completely reliant on Centamin/Horgan's judgement on that call. The rewards are certainly worth going for but what are the risks?
Hi Clued,
Good to hear from you,
A friend of mine has expressed both verbally to IR and in writing to Martin Horgan and the Centamin BOD that it would be a demonstration of confidence in their new company strategy to ask Kees Dekker the mining analyst to accept a position in an advisory capacity to the BOD .
Both the Kees Dekker 2015 & 2018 Seeking Alpha articles raised serious concerns about the way Sukari mining operations were being managed and although denied at the time by Andrew Pardey subsequent events have proven Kees to have been remarkably accurate in his findings and predictions.
Were it possible an appointment of an advisor such as Kees must surely demonstrate great confidence on behalf of the company in its forward strategy and would likely be very well received by the market and existing and potential investors.
Hi Razor's,
I hope so too, Martin seems a decent chap, he certainly doesn't need to prove his professional ability.
What is really annoying, frustrating is that the concerns abut Sukari were flashed up in 2015 and these were denied by Pardey and like it or not Ross Jerrard chief finance officer, Darren Le Masurier company Secretary and other exec and non exec Jersey BOD and external auditors who were all responsible for financial risk management and could, and should have questioned if the custom and practice of the day to day operation of Sukari was likely to be a potential risk to the future viability the company, whatever actions they took, the bad practice continued until the concerns were again flagged up in 2018,
If you recall 2018 was the year 3 weeks after Pardey and the former Egyptian policeman, then mine general manager were flagging up 600,000 ozs that Pardey then issued an RNS that they had hit unexpected low grades in the open pit ( they were known about in 2015) and Oh yes the sole LHDR had self destructed and somebody forgot to order spares!
What did the Ross Jerrard and the rest of the Jerasey BOD do , bugger all really, the high grading carried on until the open pit narrowly avoided disappearing under a pile waste ore!
In the meantime whilst the Sukari "Pyramid scheme had been had been run to a stand still by unnecessary risk risk taking the BOD had allowed the squandering of hundreds of millions of company cash reserves on what has amounted to be hole drilling for no return!
So just what were the analyst's doing whilst this in some respects very clever Sukari sham and in other respects chaotically or ill managed West African portfolio of undelivered promises ?
Well the analyst certainly weren't asking the right questions as far as we share holders are concerned, but then they are rarely do, because they are in the main corporate analysts!
A friend of mine was so frustrated with being ignored by Pardey they contacted a couple of the corporate analysts and asked them why they hadn't raised certain questions, or noticed the past bad mining practice at Sukari, my friend got a call a few days later from Buchanan claiming that an RBC analyst had complained that they were being a nuisance !
So its results we share holders deserve now, certainly not more empty promises, reduced dividend and the taking on of debt for projects that may only be marginally profitable, if at all!
Possibly one the most annoying aspects of this isn't the wasted money, its the wasted time!
Very interesting mrtibbles. What a corrupt world. Reminds me of an investment, Vatakoula Goldmines, that I lost on many years ago, corruption involved. Personally, I couldn't live the life of a rich hypocritical sociopathic deceiving mining co director without constantly feeling dirty/evil and a fake to the core. These same 'scum' probably appear as great parents, loving partners, community stalwarts, etc...to their colleagues !! Sad b..tards. But yes it does go on and you say in many mining cos !! What I find most concerning is that the Analysts don't uncover most of these deceipts and they are tasked with safeguarding pension and investment funds for millions !! They obviously lack the required knowledge and there's also probably some engineered hiding by the co and even analyst corruption at play, a little like the Germans hiding the reality in 1936 olympics from the visiting countries !!
Thanks again Mrtibbles… the saying “ignorance is bliss” comes to mind when I consider the absolute mess Centamin was in when the news broke about underground movement and here I was blaming the market for over reacting. Seems now the reaction was accurate.
The up side is we’re two years away from the tsunami and well into the recovery cycle.
I have faith in Martin Horgan and even if other management have delivered dodgy performances in the past the fact that MH is now their leader will hopefully encourage them to up their game.
Good morning, Razor's,
I apologise for not replying sooner but I was committed to meeting with friends at the local several of whom are also long term Centamin holders, one of whom holds an executive position an international business operating in Egypt and other West African regions, I won't refer to the latter by their real name, but instead as Jim ( I made the mistake in the past of disclosing the real name of a senior member of staff of company in an industry related business, well, I will just say it caused problems for them!).
Jim said he doesn’t encounter many problems running accounts in Egypt/Middle East, but doing business in Western African regions, can be quite different matter.
You will have realised from Cowichan's and others work on behalf of us all that this board is monitored and is also inhabited at times by some who certainly aren't whom they claim to be and those aren't always acting in our best interests.
More years ago, than I care to remember a fellow share holder and Jersey resident had through their quite separate personal business dealings with a now former very senior Centamin executive expressed serious concerns to me that all wasn't quite as it seemed or was being presented at Sukari, well unfortunately the past four years are confirmation of those concerns!
My Jersey friend had become so concerned they sold out in 2018 just after the Kees Dekker report "Get out again whilst the going is good!”) once again flagging up concerns and invested elsewhere
Obviously I made the mistake of thinking surely my friend and Kees didn’t know all the facts, it couldn't be that bad, the analysts that visited the site would have surely picked up on things, the management wouldn't deliberately deceive us, but now we all know things were in fact far worse, not only did Sukari nearly implode, but many millions of company funds were in fact squandered pointlessly on now abandoned projects in West African jurisdictions because of a lack of due diligence or a clear understanding of company project criteria by senior company officers some of whom are still in post!.
Some will say then if you don't believe then sell out and walk away, but then that happens all too often, the directors of far too many mining companies fill their boots having sold pie in the sky promises to their ordinary shareholders whom are treated with disdain and expected to go away quietly.
So let’s see if this is just a hobby for Martin Horgan, (instead of a big train set) or a genuine passion to deliver on his stated aims for Sukari, although I remain very uneasy about what may be just another ill thought through West African money pit (Doropo)
Here is the eye watering cost for digging Sukari out of the crap!
https://www.capdrill.com/media/investors/Announcements/CAPD_Launch-Announcement-RNS_20201202_Final_Website.pdf
Whoops with the $100m figure, more like $260m
https://www.lse.co.uk/news/CAPD/centamin-awards-usd260-million-sukari-gold-mine-contract-to-capital-xy1q8evbe5l33ku.html
Good post Mrtibbles, you are obviously much more knowledgeable about Centamin’s past than me.
Although we both share the same faith for the future.
Am I correct in equating the demise of the cash pile to the $100m that Capital are charging for the striping contract?
Hi Razor's,
I recall that Q&A webinar too, although I remain uneasy that Ross Jerrard was chief financial director when all those millions that were once in the Centamin coffers were in effect flushed down the lavatory on Pardey's drilling projects in West Africa because it was decided that such projects no longer fit the company criteria , now the question remains why didn't Ross Jerrard question the feasibility or the "fit" of the projects sooner?
Also considering Ross Jarrards experience he must have been aware that the Sukari output was being achieved by high grading and using less than appropriate, unfit for purpose mining methods, we are all aware how much this "oversight" "approval" on his part has cost to put right over the past four year!
From the experience of building a very successful mining business and selling it at a very handsome profit Martin Horgan obviously knows how to run a gold mine and really he does'nt need to work any more, but at his own admission he didn't want retire and he saw Centamin as a challenge, no denying if all is as claimed in the presentations he seems to have made great progress in turning things around, although as yet all we really have is predictions of better times to come, we still need to see the proof in guidance delivered at reduced AISC.
As yet I remain very optimistic and hope that this time will be different!
The mining markets media is full of all manner of miners using slick marketing and presentations claiming to have hit marvellous reserves, they just want investors cash to exploit them , more often or not though its so they can carry on awarding themselves handsome packages whilst claiming to deliver exceptional returns sometime in the future!
Unfortunately its usually the ordinary investors who lose out!
So we have been patient long enough and after such a miserable three or four years it's time to start delivering proper guidance at reduced AISC.
Tibbs
Have a good relaxing weekend everyone.
I remember watching a Centamin conference call about a year ago and in Q&A Martin Horgan looked to Ross Jerrard for guidance/agreement when answering a question about future financing, I got a clear impression that the two have a serious game plan but didn’t want to revile it to the market/public.
I think they’re a sound management team playing serious and all to the good.
Interesting that he mentions a potential debt facility for future M&A. Not heard that one before.
Thank you Bobby,
Looking forward to hearing some more detail on how this is proposed to work.
From Proactive this morning.
https://youtu.be/7UIK6RO30f8
Cheers Razors!
To return the compliment one of yours made me cheer yesterday!
The only thing you can do wrong with Centamin in the near future is not have your line in the water.
I enjoyed the positivity and am of the same opinion as your August 2nd post.
“ I'm convinced he wants to grow this company into a beast…”
Cheers!