AngloGold Ashanti is now positioned to continue growing by acquiring high-value assets, Chief Executive Alberto Calderon said Tuesday, after the miner agreed to buy smaller rival Centamin, operator of Egypt’s Sukari gold mine, in a $2.5 billion cash-and-stock deal.
Under the deal to acquire Centamin, the joint owner of the Sukari mine with Egypt, AngloGold Ashanti will have the right to manage and operate the Egyptian mine, which is one of the largest gold mines in the world.
The announcement of the deal sparked controversy in Egypt, and some criticized it on the grounds that the mine generates huge profits and is considered one of Egypt’s most important assets that must be managed and operated locally, while others believe that it will benefit Sukari after the expected investment plans, which will naturally be added to Egypt’s gold reserves at the Central Bank.
Sugar deal raises questions
Karim Saad El-Din, professor of economics at the American University in Cairo, told Al-Hurra, “Currently, countries around the world are seeking to diversify their sources of reserves and income, specifically gold, as it is the most sustainable and valuable metal. Therefore, the Sukari deal raises questions about the extent of Egypt’s benefit from it.”
“Gold mining companies are currently seeking to secure supplies to take advantage of the high demand for the yellow metal, as prices have risen by 30% over the past 12 months, reaching an all-time high last month on the back of safe-haven demand and expectations of interest rate cuts, which boosted producers’ coffers,” he added.
“Centamin has made significant profits this year and announced an increase in the production of the Sukari mine itself, so the sale deal at this time has raised several questions, especially since the Egyptian government has announced the development of the mining sector to increase its contribution to the country’s GDP to 5% over the next two decades compared to 0.5% at present, as the country has recently offered many opportunities to explore for mineral materials, and gold has taken the largest share of them,” he added.
Last October, Centamin announced a new life-of-mine plan that aims to reclassify Sukari as one of the world’s top gold producing assets. The plan will deliver long-term gold production, lower costs, lower operational risks and significantly reduced carbon emissions.
The company explained that the new plan includes annual gold production expectations of an average of 506,000 ounces per year for the next nine years (2024-2032), and 475,000 ounces per year for the rest of the mine’s life. The plan also set total cost expectations of an average of $922 per ounce of gold sold, which places Sukari in the lower half of the global gold cost curve.
Saad El-Din pointed out that “given the great economic importance of the Sukari mine, it would have been more appropriate for the government to seek to acquire the deal through Shalateen Company, for example, as it works in gold exploration and is affiliated with the Ministry of Petroleum and Mineral Resources.”
The economics professor spoke about the huge profits that the company will reap from acquiring the right to manage and operate the star, explaining that “through this deal, Sukari will be transformed from Centamin Egypt to AngloGold, which will boost the company’s gold production by about 450 thousand ounces annually to more than 3 million ounces.” He stated that “the mine’s reserves amount to 6 million ounces, which are among the largest reserves in the world.”
Last July, Centamin CEO Martin Horgan said during the Egypt Mining Forum that since the company began operating the Sukari mine, the Egyptian government has received more than $1 billion, as the mine produced more than 5.7 million ounces of gold, noting that the company spent nearly $450 million last year.
In August, Eng. Karim Badawi, Minister of Petroleum and Mineral Resources, stressed the importance of the Sukari mine as an advanced model for mining investment and the full commitment to supporting its successes in light of the efforts to increase production and use modern exploration techniques that contribute to extending the life of the mine’s production, which has achieved a production of 5.7 million ounces since the start of production.
Saad Eldin pointed out that “AngloGold is one of the most important mining companies in the world, listed in the United States and Britain, and seeks to strengthen its portfolio by adding Sukari, which is one of the largest producing gold mines in the world, amid rising prices for the precious metal.”
He explained that “the crisis behind the deal, as many see it, is that AngloGold is a global company, of which BlackRock owns 10%, and it includes many shareholders of different nationalities, including Israel, for example, which is not in line with the Egyptian street at present, especially in light of the ongoing Gaza war.”
Saad El-Din spoke about Anglo Gold’s connection to the UAE, explaining that since 2009, the company announced the formation of an alliance with Thani Dubai Mining Company to prospect for gold and manage and develop mines in the Middle East and North Africa.
In 2017, the Emirati newspaper Al Ain reported that the Egyptian Minister of Investment at the time, Sahar Nasr, met with the Emirati investor Abdullah Saeed Al Thani, Chairman of Thani Dubai Emirates Mining Company, as the company seeks to increase its investments in the field of gold exploration in Egypt, according to an Egyptian government agreement.
Sugar Deal Details
andAfter the Sukari deal is completed, the Wall Street Journal reported that AngloGold shareholders will own 83.6% of the combined company, while Centamin holders will own the remaining 16.4%.
AngloGold Chairman, Jochen Tilke, said the deal was a great fit and provided geological potential that the company was well positioned to develop.
The Denver, Colorado-based company, which is listed on the New York Stock Exchange, expects the deal to increase free cash flow per share in the first full year after completion. It expects the addition of the Sukari mine to reduce unit cash and overall sustainment costs for the combined group.
It said it plans to use its exploration expertise to unlock additional growth opportunities and extend the mine life at the gold mine.
The newspaper pointed out that the gold reserve in Sukari amounts to 5.8 million ounces and the mine is 13 years old.
In a separate statement, London-listed Centamin reiterated its full-year outlook for production and costs. It said higher gold prices helped it generate $75.5 million in free cash flow in the first two months of the third quarter, compared with $43 million in the first six months.
Centamin was founded on the exploration success of its Egyptian founders with the discovery of the Sukari mine in the 1990s, the newspaper reported. It is one of the last pure gold producers on the London Stock Exchange, and its exit would leave Endeavour Mining, which tried to buy Centamin in 2019 for $1.9 billion, as the only major primary gold miner on the British stock market.
Centamin also operates an exploration programme called the Eastern Desert Exploration in Egypt near the Sukari mine, as well as two gold projects in Ivory Coast.
The company’s shares jumped 25% to 148.90 pence in morning trading on the London Stock Exchange, their highest level in four years.
The Sukari mine is one of the joint projects between the Mineral Resources Authority and the Australian company Centamin. The Egyptian government signed an agreement in 1994 with the Pharaonic Gold Mines Company of Australia (currently Centamin) to search for and exploit gold and minerals.
After the discovery of the Sukari mine, it was decided to establish the Sukari Gold Mines Company in May 2005, with a concession area of 160 square kilometers, to exploit the mine, as the Sukari Mountain is located in the Nubian Desert, which is considered part of the Eastern Desert, and is located 30 kilometers south of Marsa Alam, which is affiliated with the Red Sea Governorate in Egypt.
Sukari Company, a joint venture between the Egyptian Mineral Resources Authority, affiliated with the Ministry of Petroleum and Mineral Resources in Egypt, and Centamin, whose headquarters are located in Australia.
The Pharaonic Gold Mines Company was the primary operator of the Sukari mine before it was acquired by Centamin.
The deal will benefit Egypt.
Economist Saleh Al-Alfy does not believe that the Sukari deal will harm Egypt or its annual share of profits. He told Al-Hurra that “according to the agreement signed between Egypt and Centamin, the Egyptian government is entitled to 50% of the profits from the Sukari mine, and Egypt is entitled to a percentage of up to 3% of the net sales revenues from the Sukari mine, according to Annual Report For Centamin.
He added that “AngloGold is currently the largest gold producing company in the world, and therefore it will pump large investments into the Sukari mine, which will benefit Egypt by increasing its annual profits.”
The economic expert spoke about “suspicions of corruption” surrounding the operation and management of the Sukari mine over the past years, which naturally affected Egypt’s share.
He also said that “with the decline in the quantities of Sukari gold ounces, the revenues collected by Egypt from Centamin decreased during the first quarter of this year to $5.5 million, compared to $5.7 million during the same quarter last year.”
He added, “Egypt’s share of the profits achieved from the sales of Sukari gold mine during the first three months of this year decreased to $8.5 million, compared to $21.7 million during the same three months of last year.”
He added, “In 2021, Egypt’s share of the profits from Sukari gold sales decreased to $75.2 million, compared to $174.27 million in 2020.”
He said, “The royalties collected by Egypt from Centamin as a result of Sukari mine gold sales also decreased to $21.67 million, compared to $24 million in 2020.”
Regarding the controversy over the presence of different nationalities among the shareholders of AngloGold, Al-Alfi said that Centamin itself was considered Australian and was entitled to include members of different nationalities, and this is something that cannot be controlled as long as Egypt agreed to grant the right to operate and manage the mine to a foreign company.
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