* Miner says still on track to hit 2014 production target
* Hopes for dismissal of legal case over Sukari licence
* Cash costs surprisingly low - analyst
By Silvia Antonioli
LONDON, May 15 Egypt-focused gold miner Centamin
Plc posted a 58-percent fall in core earnings on
Thursday, hurt by a fall in output at its flagship Sukari mine,
but said it could still hit its 2014 production target after
fixing mechanical problems.
Centamin, which also has exploration prospects in Ethiopia,
said earnings before interest, tax, depreciation and
amortisation (EBITDA) fell to $34.3 million for the quarter
ended March 31 from $81.7 million a year earlier.
The earnings were hit by a 15 percent fall in output to
74,241 ounces in the quarter due to mechanical problems which
caused a temporary reduction in the average grade at Sukari,
Centamin's only operating mine.
However, the mining company said the issues had been
resolved and its 2014 production target of 420,000 ounces at a
cash cost of $700 per ounce remained intact as it expects output
to increase while it expands capacity at its processing plant.
"We are in the process of ramping up production and
smoothing out those early teething issues that you always get
with commissioning," head of business development Andy Davidson
said. "But we are progressively increasing production through
the remainder of the year so you'll see an increase in output
Sukari is located in the Eastern Desert, 700 kilometres from
Cairo and is Egypt's first large-scale modern gold mine. It is
expected to reach a maximum annual production capacity of
450,000-500,000 ounces. It has been largely unscathed by
political turmoil in the country.
Cash costs for the first quarter at $744 per ounce were up
five percent on the previous quarter but the company said they
would fall as production increases.
"The first quarter financials we not stellar, but were not
expected to be given the underground production issues and the
early stage ramp-up that the operations are currently at," said
Investec analysts in a note. "The cash costs were surprisingly
low, highlighting a focus on cost discipline."
Gold prices have gained 8 percent so far this year
after plunging 28 percent in 2013. Bullion was trading at around
$1,300 an ounce on Thursday.
Centamin hopes that a law approved last month in Egypt will
result in the dismissal of a legal case which has put its Sukari
mine licence in jeopardy.
In 2012, an Egyptian court ruled that Centamin's right to
operate its Sukari mine was invalid, the latest in a string of
difficulties the company has faced in the country.
The new law prevents third parties from challenging
contracts made with the government and could include Centamin,
as the challenge against it was brought by a third party.
The law, long-awaited by businesses and investors, is meant
to revive investment hit by political instability over the last
"Our legal advisors confirm our reading that the new law
should apply to us and we should benefit from that," Davidson
The mining company, which earlier this year completed its
acquisition of Burkina Faso-focused gold explorer Ampella
Mining, said it planned to continue to diversify through
acquisitions in the Middle East and Africa.
Shares in Centamin were down 0.9 percent by 0801 GMT against
a 0.1 percent fall in the UK-listed mining sector.
(Reporting by Silvia Antonioli and Karen Rebelo; Editing by
Jason Neely and Mark Potter)