Centamin PLC (TSX:CEE, LSE:CEY, OTC:CELTF) said it will take over as operator of the underground mining operations at its flagship Sukari gold mine in Egypt.
The underground operations will transition from contractor-mining to owner-operator mining with immediate effect.
The company said the decision, following an independently managed contractor tender process, will deliver significant cost savings and improve operational control and mining flexibility as well as allowing it to upskill the local workforce.
The transition to owner-operator mining is expected to generate long-term annual cost savings of an average US$19mln (£14mln) from 2023 onwards, it said.
Centamin has executed its contractual right to purchase the current underground mining fleet from the incumbent contractor for US$10.5mln to be paid this quarter, lifting the miner’s 2022 annual capital expenditure guidance to US$225.5mln.
"The decision to transition the underground to owner mining reflects extensive planning and evaluation to determine the most effective operating model as we continue to grow and maximise the value of the Sukari orebody,” said chief executive Martin Horgan.
“Following a 200% increase in underground reserves with further identified growth opportunities and an underground expansion study underway, we believe this move best places us to extract the maximum value safely, efficiently and cost-effectively from the expanding underground operations.”
In addition, Centamin has awarded Geodrill (TSX:GEO) Ltd a five-year contract to provide underground drilling services, including a minimum of 90,000 metres of drilling per annum and introducing reverse circulation drilling to the underground which is faster and enables larger samples to be taken. The contract will start this quarter.
“We welcome Geodrill to Sukari and look forward to working with the team as a key partner and contractor as we continue to explore and develop the full potential of the underground operations," Horgan added.
The gold producer said there is no change to its 2022 annual production and cost guidance.