Broker snap: Centamin's upside clouded by ongoing negative news, says Investec

13th Dec 2012 09:53

Investec has reiterated its 'hold' recommendation for Egypt-focused gold miner Centamin, saying that the ongoing bad news surrounding the company offsets the stock's upside potential.The company's shares plummeted on Thursday morning after it said that it has received an "illegal" $65m retrospective claim from a local fuel company, which is now refusing to supply more fuel to Sukari until the claim is paid.In addition, the company also announced that its process of gold exports has been hit by delays due to "an unforeseen and arbitrary request from customs officials" for the prior approval from authorities.The combination of fuel issues and its inability to sell gold has prompted the company to suspend its operations at its flagship Sukari gold mine.Investec said that these issues should be resolved like in the past, but the ongoing flow of negative news and political uncertainty "are more than offsetting the value upside that CEY offers".The broker said: "CEY ended the 3Q12 with a healthy balance sheet that included $125m in cash, amongst liquid assets totalling $182m. It therefore has the capacity to withstand a sustained period of care and maintenance. It appears to be suffering a run of very bad news, which highlights the difficulties of operating in Egypt, where the political environment remains volatile. "We do question, however, how well political issues are being managed by CEY and how long they fester before reaching a critical point."The broker has placed its target price and forecasts under review.Shares were down 43.06% at 30.01p by 10:02, having recovered from an intraday low of around 19p early on.BC