Centamin surges after Sukari labelled 'valid'

5th Nov 2012 07:49

Investors in Egypt-focused gold miner Centamin will be relieved: the company announced on Monday that the Egyptian administrative court has decided that its Sukari mining licence is valid, eliminating the risk of losing its primary source of revenue.Centamin lost nearly 40% of its market capitalisation last week after media reports claimed on Tuesday that it could lose its concession agreement to mine Sukari. "As expected by the company, the official written judgement makes it clear that it rejects any request to terminate or treat as invalid the Concession Agreement entered into between the Arab Republic of Egypt, the Egyptian Mineral Resources Authority (EMRA) and Centamin's wholly owned subsidiary Pharaoh Gold Mines (PGM), and approved by the People's Assembly as law 222 of 1994," Centamin said.The court also said that PGM had made the necessary notifications to be entitled to be granted an "exploitation lease" in accordance with the concession agreement.Shares surged higher in early trade this morning, up 15% at 69.45p.However, this exploitation lease has one sticking point: Centamin failed to disclose the written approval from a government minister (Minister of Petroleum and Mineral Resources) to the court, as was required by the terms of the concession agreement. Therefore, the court deemed that the process of the conversion to an exploitation lease was invalid.Nevertheless, Centamin assured that it does have the original lease documentation and is "confident that this matter can be resolved during the appeals process".The firm said that pending the outcome of the final court hearing, it believes that it will still be able to maintain normal operations at Sukari whilst the appeal case is heard.Centamin said: "The company continues to work in close co-operation with EMRA and both parties are currently in the process of initiating the necessary vigorous action to defend our rights to continue to extract gold from the Sukari mine and to appeal this decision."Centamin, which owns a 50% interest in Sukari through its subsidiary Pharaoh Gold Mines, said in early October that it was on target to produce 250,000 ounces of gold after having ramped up production in the third quarter. EMRA owns the remaining 50% stake. For analysts at Westhouse Securities: "This gives us confidence that Centamin is in a strong position to fight its case and helps to lower the risk of operations being halted during the process. We maintain our 90p target price and Buy recommendation."