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Egypt report casts doubt over mine appeal

10 May 2013, 16:01

Cairo - Shares of Egypt-focused gold miner Centamin Plc fell as much as 21% after the company said an advisory body had made unfavourable recommendations to the court that will decide the fate of its only operating mine.

Centamin is appealing to the Supreme Administrative Court of Egypt to overturn a decision by another court to revoke its lease for the Sukari gold mine in Egypt's Eastern Desert.

The mine, which produced 262 958 ounces of gold last year, is continuing to operate normally pending the final outcome of the court process, Centamin said in a statement.

Centamin, which has a market capitalization of about $780m, said the first appeal hearing would be on June 19. It added that the Egyptian State Commissioner's Office had produced a report containing non-binding recommendations for the court.

These recommendations were "not positive", Centamin said. The company's stock was the biggest percentage loser on the FTSE-350 index on Friday morning.

Speaking to Reuters by telephone, Centamin Chairman Josef El-Raghy said: "We see (the recommendations) as having no bearing on how we'll progress our appeal process."

He declined to reveal details of the recommendations in the report. The State Commissioner's Office was not available for comment on Friday, a holiday in Egypt.

"The office's recommendations are advisory only and non-binding, but the apparent negative undertone has potential to make the appeal more challenging," said Numis Securities analyst Cailey Barker.

Bureaucratic difficulties

Egypt has experienced more than two years of political and economic turmoil since the overthrow of President Hosni Mubarak, hammering foreign investment and prompting budget and currency crises.

Centamin has been hounded by a string of bureaucratic difficulties in Egypt in recent months. Customs officials have held up exports and the country's petroleum ministry has disrupted fuel supplies to the mine.

The company is appealing a decision by the Egyptian Administrative Court last October that declared its right to operate the Sukari mine invalid. The ruling was suspended in March pending the outcome of the appeal.

"The whole Egyptian situation with Centamin has been a rollercoaster ride," said Carole Ferguson, senior research analyst at SP Angel. "The fact that they can't have clarity at this stage ... will just make investors very nervous."

Centamin, also listed on the Toronto Stock Exchange , said in March that it expected the Sukari mine to produce 320 000 ounces of gold in 2013, 22% more than last year. The mine is located 700km from Cairo.

Centamin also holds exploration licences in Ethiopia.

The company's shares were down 14.5% at 39.00 pence at 10:40 GMT.

- Reuters


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