Centamin upbeat on results of West Africa portfolio review

Centamin announced the results of its review of its West African exploration portfolio, following which it has approved the start of a pre-feasibility study at Doropo, a further exploration programme at ABC, and a review of the third-party development options at Batie West.

The FTSE 250 company said the review, which began in the second half of 2020, was designed to evaluate the potential development prospects of the portfolio, to rank each project, and to define the pathway to realising value.

It said the Doropo Project showed “strong” development potential, with the completion of a positive preliminary economic assessment showing a post-tax net present value of $234m (£165.65m), with a 21% internal rate of return at a gold price of $1,450 per ounce.

At a consensus gold price of $1,829 per ounce, the post-tax net present value was given as $487m, with a 33% internal rate of return.

Total development capital expenditure at Doropo was expected to be $275m, including a 15% contingency, while the life-of-mine was set at 13 years, based on the updated mineral resource estimate of 0.16 million measured and indicated ounces and 5.21 million inferred ounces of gold, with potential to further increase gold resources across the permits.

Average annual gold production was expected to be 207,800 ounces for the first five years, averaging 150,956 ounces over the life-of-mine, for a total of two million ounces produced at an average all-in sustaining cost of $904 per ounce.

Centamin’s board said it had approved a spend of $14m to advance the project to the pre-feasibility study stage by mid-2022.

At the ABC Project, Centamin found “strong” priority greenfield target generation along the 60 kilometre Lolosso Gold Corridor, approving a further $3m exploration programme for the Kona and FarakoNafana permits for the period to June 2022.

The preliminary economic assessment for the Batie West Project also delivered positive results, with a post-tax net present value of $63m with an 11% internal rate of return at a gold price of $1,450 per ounce.

At the consensus gold price, the post-tax net present value would be $282m, while the internal rate of return would rise to 26%.

Total development capital expenditure was set at $265m, including a 15% contingency, while the life-of-mine was expected to be 8.5 years based on the updated mineral resource estimate of 2.13 million measures and indicated ounces and 0.1 million inferred ounces of gold.

Average annual gold production would be 139,994 ounces over the life-of-mine, for a total production of 1.2 million ounces of gold at an average all-in sustaining cost of $998 per ounce.

The board said it had approved the assessment of third-party development options, as the project did not currently meet Centamin's investment criteria.

“Building a strong active growth pipeline is central to our strategy, while maintaining our capital allocation discipline,” said chief executive officer Martin Horgan.

“Today's announcement of a positive preliminary economic study at Doropo and the exploration potential at the earlier stage ABC, demonstrate the quality and potential of our portfolio.

“The Batie West Project has potential to deliver a profitable mine, but not one that would currently meet our strict investment criteria.”

Horgan said the company was now initiating a review of development options for that asset.

“The Doropo Project is very exciting and is our priority growth target outside of Egypt, showing excellent potential to become Centamin's second mine.

“Our highly experienced team has proven expertise at delivering successful gold projects in West Africa and will now commence the pre-feasibility study, the results of which we look forward to announcing in mid-2022.”

At 0856 BST, shares in Centamin were down 4.05% at 116.35p.