Shares in FTSE 250 gold miner Centamin (CEY) have plunged over 19% to 162p after ground movement forced it to close off an area of its Sukari mine, hurting its production output.
The movement was in a localised area of waste material in the Sukari open-pit Stage 4 West wall, with open-pit mining operations in the zone halted as a preventative safety measure, Centamin said in a statement.
GOLD PRODUCTION TO TAKE BIG HIT
It means Centamin’s production in the final quarter of this year will be reduced to around 70,000 ounces of gold as a result of the disruption, the company said. Gold production for the three months ended 30 September at Sukari was around 120,000 ounces, making 375,000 ounces for the year so far.
The mine’s stage-four west wall, where the problem was located, was scheduled to be mined during the fourth quarter of this year and 2021.
The area contained about 90,000 ounces of gold in situ at grades of up to two grams per tonne of gold. ‘Mining of the impacted high-grade material will be rescheduled,’ Centamin explained.
‘RAISES QUESTIONS ABOUT DESIGN’
Analysts at Berenberg said the changes would reduce production for 2020 to 444,000 ounces of gold versus 516,000 ounces previously, a 14% reduction, and would push Centamin’s all-in sustaining costs from $903 per ounce of gold to $1,039 per ounce, a 15% increase.
The broker said, ‘We view this as a material negative and is the first significant operational issue faced by the new CEO.
‘While the downgrade to 2020 is significant, the bigger concern is that this raises questions about the design of the Sukari pit moving forward.
‘This could necessitate a redesign based on shallower pit angles with higher resultant strip, which would have a negative impact on costs and free cash flow generation.’
