More outstanding high grade results
Hot on the heels of the company's recent large resource upgrade at its Sukari gold project in Egypt that took the in-ground gold to in excess of 11 million ounces, Centamin has announced further outstanding results from ongoing drilling work that have generated bonanza-grade mineralisation. Centamin in our view represents the ideal gold exposure, with exciting ongoing results that complement a solid foundation of emerging gold production in late 2008.
| "The latest drilling results refocus attention on exactly how big the Sukari project might eventally be." |
Fat Prophets initially recommended buying Centamin Egypt at 41p in March 2007 (Fat Euro Mining 13). Our last review of this stock was in January (Fat Euro Mining 53).
Investor sentiment toward Centamin Egypt remains buoyant. As shown on the accompanying chart, prices have rallied more than 40% in the past month, lifting the stock to a new all time high of 75.75p.
Following such firm gains, the upward trend of any stock would be at risk of pausing for consolidation. However, given the significance of the recent break above the $70 to $71 barrier, we believe that any such interruption to the upward trend will be relatively short-lived.
Given the resilience of the three and a half year upward trend, we believe that downside risks are limited. In the weeks and months ahead, we anticipate an extension above 75.75p to new all-time highs.
Centamin Egypt has announced that it has intersected a further extremely high-grade zone of gold mineralization during its drilling program at the Sukari project in Egypt's Eastern Desert region. The intersection is a significant high-grade structure parallel to and below the existing Hapi Zone.
The high-grade gold assay results in hole D1280 intersected spectacular visible gold and galena in a massive quartz vein (558-559 metres depth) within highly mineralised porphyry, which was drilled as a step-out hole to test the down-dip extension of the porphyry in the Amun zone on northing 10550N.
The hole intersected a high-grade zone with an amazing intercept of 35 metres @ 164.09g/t Au from 550 metres depth, containing a higher-grade zone of 3 metres @ 1,842.57g/t Au from 557 metres depth (including 1 metre @ 5,420g/t Au from 558 metres depth with abundant visible gold).
This deeper structure correlates to 6 metres @ 15.21g/t Au in hole RCD521 from 542 metres depth and 22 metres @ 21.83g/t Au from 549 metres depth in hole RCD1221, 25 metres to the south.
This mineralized intersection sits outside the current optimized pit shell and also outside the upgraded 7.46 million ounce Measured and Indicated resource and 3.7 million ounce Inferred resource, which was announced during December 2007.
The current drilling programme has been very successful in targeting the down-dip extension of the Hapi zone, as well as deeper parallel high-grade structures within the main porphyry. Centamin intends to conduct further drilling on the Amun Deeps zone to add further significant ounces to the global gold resource.
As a reminder to Members, Sukari will be the first large-scale modern gold mine to be developed in Egypt.
The Sukari Project has been scheduled for open pit mining over an initial 15-year period. During that time 78 million tonnes of ore @ 1.5 g/t Au are expected to be mined, producing 3.7 million ounces of gold. Meanwhile, a further 374 million tonnes of waste material is also expected to be mined, resulting in a favourable waste-to-ore strip ratio of 4.8:1.
A definitive feasibility study on the project was completed twelve months ago and found the project to be robust, based on a 4 million tonne per annum plant producing an average 200,000 ounces of gold each year over a 15-year mine life.
Capital costs were estimated at US$216 million, with average cash operating costs of US$290 per ounce (inclusive of a 3% royalty) over the 15-year mining period. At current gold price of around US$900 per ounce, the operating margins should be extremely lucrative.
Accordingly, Centamin Egypt will remain held within the Fat Prophets European Mining & Resources portfolio. However, for Members with no current exposure we recommend the stock as a Buy around 75p.
DISCLAIMER
Fat Prophets has made every effort to ensure the reliability of the views and recommendations expressed in the reports published on its websites. Fat Prophets research is based upon information known to us or which was obtained from sources which we believed to be reliable and accurate at time of publication. However, like the markets, we are not perfect.
This report is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore discuss, with their financial planner or advisor, the merits of each recommendation for their own specific circumstances and realise that not all investments will be appropriate for all subscribers.
To the extent permitted by law, Fat Prophets and its employees, agents and authorised representatives exclude all liability for any loss or damage (including indirect, special or consequential loss or damage) arising from the use of, or reliance on, any information within the report whether or not caused by any negligent act or omission. If the law prohibits the exclusion of such liability, Fat Prophets hereby limits its liability, to the extent permitted by law, to the resupply of the said information or the cost of the said resupply.
As at the date at the top of this page, Directors and/or associates of the Fat Prophets Group of Companies currently hold positions in ABB Grain (ABB), Aurora Minerals (ARM), Austal (ASB), Australian Wealth Management (AUW), Avoca Resources (AVO), Avexa (AVX), Argo Exploration (AXT), BHP Billiton (BHP), Babcock & Brown Japan Property Trust (BJT), Boart Longyear (BLY), Biota Holdings (BTA), Catalpa Resources (CAH), Catalpa Resource Options (CAHO), Coeur D'Alene Mines (CXC), Fat Prophets (FAT), Fat Prophets Options (FATO), Fosters Group (FGL), Global Mining Investments (GMI), Lihir Gold (LGL), Lion Selection (LST), Macarthur Coal (MCC), Maryborough Sugar Factory (MSF), Mundo Minerals (MUN), Mineral Securities (MXX), Mineral Securities Options (MXXO), Newmont Mining (NEM), Oil Search (OSH), Oz Minerals (OZL), Progen Options (PGLO), Platinum Australia (PLA), QBE Insurance (QBE), Rio Tinto (RIO), Roc Oil (ROC), St Barbara (SBM), Sirtex Medical (SRX), Territory Iron Ord (TFE), Telstra Corporation (TLS), Tox Free Solutions (TOX), View Resources (VRE), View Resources Options (VREO), Walter Diversified (WDS), Woodside Petroleum (WPL), Merrill Lynch Gold Fund, Platinum Japan Fund, Gold Bullion. These may change without notice and should not be taken as recommendations.
The above disclaimer does not apply to investments held by the Fat Prophets Australia Fund Limited ACN 111 772 359 (FPAFL).