Investors flee Centamin after Egyptian court annuls gold concession
Shares in London and Toronto-listed Centamin (TSX:CEE) fell by as much as 65% on Tuesday after media reports that the concession for its Sukari gold mine in Egypt has been annulled.
More than 20 million shares in Centamin – worth more than ₤1 billion before today – changed hands, almost four times usual volumes, as investors headed for the exits. By the time trade was halted the counter had recovered, but still down 35% on the day.
The Alexandria-based company tried to pour cold water on the reports and said operations at the mine – the first modern gold mine to operate in the North African country – were continuing as normal:
Comments reportedly made by an Egyptian administrative court this morning have given rise to speculation that parts of the Concession Agreement may have, in fact, been suspended. However at this time, no details of a final decision are availableand no written judgement has been given.
Centamin confirms that it is not a party to this case, repeats its view that the concession as law 222 of 1994 remains valid and that the court does not have jurisdiction to cancel it.
Since the fall of the Mubarak regime in Egypt, foreign investor uncertainty has increased greatly and many fear that contracts signed before the transition to democracy would now not always be honoured.
Centamin in August reported record output up 40% over last year at Sukari and the company said it is on track to produce 250,000 ounces this year at a cost of $565 an ounce. Sukari commenced production in 2009.
Egypt's eastern desert and Marsa Alam regions in the south bordering Sudan where mining dates back to the ancient times have gained more investor interest recently.
In July Naguib Sawiris, an Egyptian mobile phone entrepreneur, paid $492 million for gold miner La Mancha Resources (TSE:LMA). In June La Mancha released "significant" results from its Hassaï property in Sudan.
La Mancha shares were little changed on Tuesday, but Alexander Nubia (TSX-V:AAN), an explorer active in Egypt fell 15% in Toronto in sympathy with Centamin.
Gold in Egypt is most associated with Nubia a region which straddles the border of Northern Sudan and Egypt. The Egyptian word for gold was “nbu,” derived from gold-rich Nubia – shown on the Turin Papyrus as a major gold producer in antiquity.
In ancient Egypt, gold was considered the flesh of the gods, especially that of the sun god Ra.