Centamin To Appeal Against Egyptian Goldmine Ruling
London-listed goldminer Centamin will appeal against an Egyptian court decision to declare invalid its rights to operate the Sukari mine, the firm’s only production asset, a senior executive said on Wednesday.
Centamin said after Tuesday’s ruling that work continued at Sukari and the administrative court which issued the decision did not have jurisdiction over its mining rights.
But its shares fell 35 percent to 64 pence before trading was suspended. The ruling also rattled investors on Egypt’s stock exchange.
Courts in Egypt have challenged a number of commercial deals reached during the rule of Hosni Mubarak, who was ousted as leader last year, adding to investor worries at a time when the government is trying to revive confidence in the economy.
“Of course we are appealing this ruling,” Youssef El-Raghy, general manager of Centamin’s Egyptian operations, told the Arabic satellite channel Al-Arabiya when asked whether the company would appeal.
Investment bank Beltone Financial said it believed Centamin could win an appeal but, failing that, could seek arbitration.
“We believe that, due to the firm’s foreign ownership structure and, given the right to appeal the ruling, Centamin would ultimately be able to successfully appeal and retain its mining rights,” the bank said in a research note.
It said international arbitration was an option if the ruling was upheld by a higher court.
Egypt’s government has previously said it wants to resolve legal disputes with other foreign investors over state land and other deals to avoid international arbitration.
Traders on the Cairo bourse said the benchmark index had been knocked back for two straight sessions mainly because of concerns about the impact of the ruling on investor confidence in Egypt.
Speaking after a cabinet meeting on Wednesday, Agriculture Minister Salah Abdel Momen told reporters the government had formed a committee to examine the court ruling and that the members would then report back to ministers.
Centamin said it believe the court had no jurisdiction to cancel the concession that was outlined in a law. It also said it would mount a “substantive legal challenge”, describing the terms of the deal as reasonable and fair to all parties.
Centamin said it was working with the Egyptian Mineral Resource Authority (EMRA) and the Petroleum Ministry to defend its rights.
In its statement, Centamin quoted EMRA Chairman Fekry Youssef saying: “We enjoy a positive and constructive relationship with (Centamin subsidiary Pharoah Gold Mines) that will see not only very substantial cash flows to the Egyptian economy, but also the development of a world class gold mining industry in Egypt.”
The lawyer who challenged Centamin’s mining deal in the administrative court, Hamdy Fakharany, had told Reuters the government should now order mining at Sukari to be stopped.
Egyptian presidential spokesman Yasser Ali said that the presidency “respected” judicial rulings but did not indicate what specific action the government would take.
“The government will deal with this issue according to the public interest,” he said in a statement published by a website run by the Muslim Brotherhood, the group that propelled President Mohamed Mursi to power.
Mursi resigned from the group on taking office, saying he would represent all Egyptians, but remains a member of the Brotherhood’s political party.
Fakharany had argued in his case against Centamin that Egypt’s return from the mine had been insufficient.
Beltone said the firm had paid just $19 million to Egypt since starting production despite revenues of more than $800 million because it had the right to recoup capital costs before paying out to the state.
Reuters
