Record output at Centamin's Sukari mine

Egypt may not have been the most restful place in which to operate in 2012 but Egyptian gold miner Centamin is sticking with its production guidance after second quarter output hit record levels.

In the second quarter of 2012 gold production rose to 67,422 ounces at the Sukari Gold Mine, located in the Eastern Desert of Egypt, a 40% increase on production in the second quarter of 2011. Production was also up sharply from the first quarter 2012 level of 49,071 ounces.

Cash costs of $565 per ounce in the second quarter were up from $498 the year before but better than the $609 an ounce level in the preceding quarter. However, management warned that because of the political situation in Egypt it has been paying full whack for fuel in advance this year in order to maintain supplies, and there seems to be some doubt whether the company will get the fuel subsidies from the Egyptian government it has been used to receiving.

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The cash cost for the half year would increase by $141 per ounce to $725 per ounce should negotiations with the Egyptian government over continued fuel subsidies go awry.

"The full year cash cost forecast remains at $550 per ounce at subsidised fuel prices and in the event that international fuel prices are levied, would increase to approximately $700 per ounce. Even with these higher costs, Centamin is still projected to be able to fund its 2012 capex [capital expenditure] projects from Sukari cash flow and we remain a relatively low cost operation," Josef El-Raghy, Chairman of Centamin, said.

With production and the average sale price both up, revenue surged to $96.8m from $77.9m in the second quarter of last year, but earnings before interest, tax, depreciation and amortisation (EBITDA) declined to $54.9m from $59.6m last year.

"Whilst there was a moderate decrease in the unit cash cost of production there was not a significant corresponding increase in EBITDA due to a build-up of gold inventory during the period (gold sales of 60,673 ounces versus production of 67,422 ounces)," the company said.

Profit before tax tumbled by 24% to $42.14m from $55.69m in the second quarter of 2011. Profit before tax for the first six months of 2012 was $92.94m, down 16% on $110.86m in the first half of 2011.

The company does not pay dividends.

"At Sukari, we are committed to delivering on our full year production guidance of 250,000 ounces, a 25% increase in production from 2011," Josef El-Raghy revealed, adding that the group is on track to become a significant mid-tier gold producer from the large scale Sukari gold deposit.

"The regional exploration efforts within the 160 square kilometres Sukari tenement continue to look promising and with the commencement of drilling at Una Deriam in Ethiopia our diversification within the highly prospective and under-explored Arabian Nubian Shield is underway," he added.

JH