UPDATE 1-Miner Centamin tumbles as flagship mine suspended

Thu Dec 13, 2012 4:09am EST

Related Topics

* Centamin hit by diesel block, export hitch

* Places Sukari on care and maintenance

* Shares tumble more than 60 percent (Writes through with background)

LONDON, Dec 13 (Reuters) - Egypt-focused Centamin has suspended operations at its flagship Sukari mine after a dispute over diesel supplies and an export hitch left it without fuel and short of cash, sending its shares to a seven-year low.

Centamin runs Egypt's first, large-scale modern gold mine, but its shares have fallen by more than three-quarters since late October, when an Egyptian court questioned the company's right to mine gold in the country.

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.

The miner said on Thursday that it had received what it said was an "illegal" retrospective claim from state-owned Egyptian General Petroleum Corporation (EGPC) for around $65 million for diesel supplied from December 2009 until January 2012. EGPC said it would not supply more fuel until the amount was paid.

Centamin said fuel supplies had reached critical levels.

It is also facing an "unforeseen and arbitrary" request from customs officials that has halted gold exports pending an approval from the country's finance ministry.

"It is with regret that, due to a resultant lack of diesel and a short-fall in working capital in Egypt for the local operations the decision has been taken to suspend operations at Sukari," Centamin said.

The mine will be on care and maintenance "until these issues are satisfactorily resolved", the company said, sending the stock down more than 60 percent in early trade to hit its lowest levels since late 2005. At 0906 GMT, shares were down 50 percent at 26.5 pence.

"Although Centamin appears to be in the right and should ultimately be able to defend these charges... with the disruption at the senior levels of government heading into this weekend's constitutional referendum it is difficult to see a resolution in the very short term," analysts at Nomura said.

Egypt is facing a deepening political crisis and street protests, with the country due to vote this weekend in a referendum on a new constitution shaped by President Mohamed Mursi's Islamist allies.

"This is the first time that operations have been disrupted by the crisis, suggesting that we will see more downside from here," the analysts said.

Egypt, facing a crushing budget deficit, has been seeking to cut back on spending on fuel subsidies to industry and the general public. Fuel shortages, affecting the availability of diesel and gasoline, have in recent months on occasion led to long queues of vehicles at filling stations. (Reporting by Brenton Cordeiro in Bangalore, Clara Ferreira-Marques in London and Edmund Blair in Cairo; Editing by Paul Sandle)

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