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MARTIN HORGAN, CEO, commented: "These results reflect a good start to the year, with the Sukari team delivering another consistent performance in line with our operational plan, as well as making great progress on our key capital projects. Our mining operations continue to benefit from both increased flexibility in the open pit, as a result of the accelerated waste-mining strategy and operational productivity gains, as well as improved productivity and performance from the underground mine, following the transition to owner mining in 2022.
We reiterate our 2023 guidance and look forward to reporting later in the year on several additional projects which will deliver growth and underpin returns. These include connecting Sukari to the grid which will reduce carbon emissions and save costs, publishing an optimised Sukari life of mine plan, commencing drill testing on our Egyptian Eastern Desert blocks and completing the PFS at our advanced Doropo Project in Côte d'Ivoire."
Pleasantly surprised albeit a little disappointed with grades in the open pit but underground now pulling its weight even when still transitioning equipment.
Extremely pleased with the mention of the flexibility in the open pit with multiple areas opened up for mining, the pain from the waste contract easing a little but will be wonderful when the pain has gone completely.
Strip ratios reduced a tad but still too high.
Very grateful that the plant maintenance went without a hitch because this is a time when issues can occur, only takes something taking a few hours longer than expected to snowball and to seriously hurt production.
Overall as I say good first quarter and I like boring if targets are met and slightly exceeded.
Hi Dasut,
You are of the same opinion as Kees Dekker "Mining Analyst" these improvement in results are as forecast by him last year. and Kees is of the opinion that with Martin Horgan's present strategy this will continue going forward.
As you observed the stripping ratio is still very high as above 9, the cash margin is very low and possibly negative when considering capex associated with the open pit!
As Kees previously pointed out in his reports his reports of 2015 & 2018 it is the underground mining is the real source for cash flow at the moment, although as we are painfully aware at the time this was denied by Andrew Pardey CEO at that time!
Tibbs strip ratio is something that directly impacts the bottom line and without spending time on actual numbers from memory the cost of waste removal just on contract with capital was about $20 million for first quarter and believe they moved just over 10 million tonnes so about $2 a tonne which is about right give or take 20/30 cents.
However this is 10 million tonnes and no ounces contribution so a direct cost. When compared to ounces of 105,000 produced in 1st qtr we are looking at $190 per ounce purely for the waste contract and then add the cost of waste removal by Centamin's fleet from memory another 20 million tonnes and it is clear high stripping ratio hurts.
That said when the waste contract which in my opinion is a necessary evil finishes we can enjoy an overnight reduction in AISC and hopefully a flexible mine with a more realistic strip ratio closer to 6:1 supported by a more productive underground contribution.
So if Kees Decker is of the opinion that hurt today will hopefully give us golden flip flops in the future than I am with him but at the same time I wish we didn't have to go through the pain caused by management taking their eye off the ball.
Dasut, they capitalised $21M of the contract waste stripping & classified it as non-sustaining so I don’t think it will be hitting the AISC that heavily yet.
The fact that they are classifying the cost as non-sustaining capex is clear indication that this is not removal of built up waste from previous mining but really a pre-strip to improve future metrics. I continue to question the efficiency of this & the fact that current management have released no cost benefit analysis for such a significant & cash consuming program worries me - if they have not done such an analysis that would be negligent, if they have done such an analysis there is no reason not to release & let us know they are spending our money for good reason.
You seem to know a bit about getting gold out of dirt, do you think the lack of informational release about the projected costs & importantly anticipated benefits of the waste movement program is reasonable?
Hi Dasut,
Yes exactly as you say!
Tibbs
Spoonington I am not an accountant but whatever is said it is still a cost and it is a bit of both yes pre strip but pre strip after the fact.
Could it have been done differently maybe but to do it differently my thoughts are it needed to have started 2/3 years earlier so that when they got themselves in a tight hole and had nowhere to go when the west wall was unstable, they would then have other areas to mine and it would have had little or no impact.
Is this hindsight maybe but I would suggest management took their eye off the ball, because it is important that mines have flexibility?
Given that they didn't start 2/3 years earlier to open up the additional areas then yes I feel a contract to fast track waste removal is the way to go. What would be the alternative continue the way they were going and with the existing fleet this would mean a reduced number of trucks, loaders and support equipment available to mine ore and the need to mine ore at a lower grade with the reduced number of machines.
The other alternative is to buy a new fleet of equipment and undertake the waste movement in house and this wasn't deemed viable as writing down the full value of the fleet over four years wasn't cost effective.
In my opinion yes I think the anticipated benefits are reasonable and if the mine is going to achieve 500,000 ounces pa it is important to have the flexibility of a number of areas to mine and it sounds as though those benefits are now coming to fruition.
Do I wish the contract wasn't necessary most definitely.
Dasut ,couldnt agree more.
No other economical option, for the future.
From an accounting point of view when the expenditure is classified as non-sustaining capex it is not included in the calculation of AISC, it is definitely still a cost but if you are using AISC as a metric in your investment analysis you need to take into account that the waste movement expenditure is largely being excluded from AISC so you should not expect the finalisation of the program to have any significant immediate effect on AISC.
My problem with the waste movement program is not the program itself, shifting waste is a part of mining, it is the way it has been conducted. It is often more efficient to incorporate waste movement as part of ongoing mining operations rather than a separate stand alone project. Whilst this is not always the case, I would expect detailed analysis work to be done in order to arrive at the decision to instigate such a program, why have we not been made privy to at the very least a summary of this analysis.
The lack of information leads to the problem that we are all essentially guessing at the moment, whether it be your opinion, my opinion, Kees Decker’s or anyone else’s, none of us have sufficient information to make a properly informed analysis - with the waste movement program cost being measured in the 100’s of millions I find this level of disclosure to be unacceptable.
I reduced my CEY holding back to my core long term holding earlier this week, much as this pains me I am no longer prepared to take speculative risk on the current management team.
hi Dasut,
I was seriously considered considering going to the FCA concerning the Josef El Raghy sale of 20 million of his shares in 2017 which seems suspicious when considering he had privileged access to information regarding the future grade problems that Sukari would suffer in 2018.
Like many other share holders I feel that we have been deceived because it is not easy for ordinary people to understand the geological and analysts reports, that said though ordinary investors should able to rely on the company being honest about future production predictions, possible problems etc.
I did try to find out from Centamin at the time the reason why the CEO was disposing of so many shares, 20 million all at the same time, I was told that they weren’t sure, but likely he was probably just diversifying his portfolio, or that he wanted to use the money to set up a new mining venture, what a crock!
In the 2018 Q1 Andrew Pardey was still predicting that 580.000 oz were possible for that year, yet three weeks later Centamin issued an RNS warning that production guidance was going to around 505.000 due to poorer than expected transitional ore grades, difficult geological strata and problems with plant, which it is now apparent was the sole but inadequately maintained LHDR on which the understated, but so very essential underground contribution to overall production relied!
In 2015 the glossing over of inherent open pit grade problems was denied by Andrew Pardey who claimed Kees Dekker was wrong, but when Kees asked Andrew Pardey to provide the full production stats so as to avoid Kees having to make roundabout calculations, the correspondence ceased!
As you point out they should have tackled the problems far earlier, Kees Dekker mining analyst believed their forecast open pit grade could never materialise as they seemed to consistently overestimate it, or underestimate the dilution!
I am aware that I am nowhere near as knowledgeable on mining as you, or other former mining professionals on here, however I do resent being lied to and recognise "Bullsh(it' it is painfully apparent we were given plenty of that by the previous management!
Spoonington I understand your pain and you put your case very eloquently and I think you should ask Horgan to provide us with an executive summary with numbers covering the decision for the waste contract.
Personally I think the need for a concerted effort to open up the mine with a major cut back was being analyzed before the west wall instability. Like you I have never seen a dedicated waste contract but given the circumstances I struggle to see an alternative solution.
Dasut
I would think there must have been some robust investigation as to the commercial viability of a significant cutback, to look at the commercial and technical case for trying to increase the open pit production to meet forward projections. No back of the envelope thumb suck. Given the impact of the exercise, not to mention cost and time frame, I would have thought it good business practise to share this with the owners (shareholders) of the company. The counter argument could have been that the figures might have been of such concern to analysts and investors that they put the SP in a falling spiral situation...?
I think you touched on an issue for me in that the previous mine plan did not have eough optionality built into it, to cover for such a situation let alone the wall failure. Having options to cover such events is fundamental to a successful mine plan and successful mine project. So I come back to the previous Mine Management and their amateurism.
A Tier one orebody can forgive a lot of Mine Mangement mediocrity, and it look slike Sukari has allowed this.
I am always very circumspect when I see a Geologist running a Mining Operations, .. it nearly always end in tears, as they have different experiences, education and mindsets, some unsuited for runing a comlpex mining operation. The last CEO was a Geo, and all I can say is thank goodness he has done...
The endless looking back is not really getting us too far ahead, and I suggest people look at what the future holds rather getting bogged the past
best
the gnome
Hi Mr Gnome,
New investors are often puzzled why the share price seems to languish at lower than what might reasonably expected values and why the market seems unimpressed and lacking confidence in the company's, by comparison longer term investors are all too painfully aware of the reasons and how many times the guidance promises and promised updates on other projects have failed to rematerialise at the last minute!
As i have stated in the past we shareholders have been taken for granted and deceived by the previous management far too often , in fact deception and lies seems to have been the custom and practice of the previous management which is why we are where we are and that shouldn't be forgotten, I agree unforeseen occurrences can happen in mining, but the consequences bad mining practice at Sukari which has led to our present dilemma was warned about in 2015 and subsequently denied and ignored by the previous management!
So so now is not the time for sweeping under the carpet the years of deliberate bad mining practice and erratic performance until the promised results are delivered, until then people need to be on their guard!!
Here is some informed comment on another favourite subject of yours.
Enjoy :)
https://youtu.be/6Tz1MiX1p5I
gnome I thoroughly agree there would have been a very detailed study carried out and such studies are easy to compile with the number of software packages that have been developed. All of which would be able to play what if analysis comparisons.
I am certain you are correct about some eye watering numbers that would have impacted the SP and ??? the seriousness of an unstable wall at any other time than when you have nowhere else to mine of a half decent grade.
Horgan must have been sh---ing himself when the pit boss said all of your nightmares have come at once.
That is why I feel the studies had already been done and the news of an unstable wall brought forward the planned cut back.
I have to agree with geologists running a mine and to then be replaced by an accountant? Experience has to count for an awful lot when running a mine and when Josef had Harry Micheal and Trevor Shultz on the team both of whom had experience in bucket loads I felt comfortable.
Like you I again agree that history can't be changed and we must look forward, as I have said looking forward to the Doropo PFS but really looking forward to the end of the waste contract.
Don't care what anyone says a 30% reduction in the strip ratio will positively impact the bottom line.
Hi Dasut,
I agree with your appraisal about why things went so wrong and how to put things right and I feel pretty sure that Kees Dekker would feel the same , especially about the strip ratio!!