By Tamim Elyan and Sarah Young
CAIRO/LONDON Oct 30 Gold producer Centamin
saw more than a third of its stockmarket value wiped out
on Tuesday before trading was suspended, after an Egyptian court
said its right to operate the Sukari mine, its main asset, was
Centamin later said that operations were continuing and that
the Egyptian administrative court did not have jurisidiction
over its mining rights. British drilling company Capital
Drilling also said in a statement that operations at
Sukari were continuing as normal.
The company's London-listed shares plunged to their lowest
level for three years earlier in the day, dropping almost 60
percent before recovering some ground to last trade down 35
percent at 64 pence when trading was suspended at 1000 GMT.
Courts in Egypt have challenged a number of contracts
reached during the rule of Hosni Mubarak who was ousted last
year, adding to investor worries at a time when the government
is trying to revive confidence in the economy.
"The court rules as invalid the contract to exploit the
Sukari mine," Judge Said al-Qusair said, adding the court also
ruled that a decision by the authorities to offer a 30-year
contract and to allow it to be renewed was also void.
Centamin said in its statement that to date the
administrative court had only made "comments" and as yet there
no final decision or written judgment was available.
The lawyer who challenged Centamin's contract said the
government should now order mining at Sukari to be stopped.
The administrative court ruling can be appealed against in a
higher court. Based on cases involving other Mubarak-era
contracts, this court decision may herald a tortuous legal
wrangle that could take many months or longer to resolve.
"The issue is that there's so much uncertainty around it,"
said Investec analyst Hunter Hillcoat, calling the market
reaction "hugely severe" and "a huge over-reaction" given the
lack of clarity on the situation.
On Monday Centamin had hosted a visit by analysts to Sukari,
some 25 km from the Red Sea coast and the first modern gold mine
in Egypt, a country which has a history of mining bullion dating
back to ancient times.
"It is likely to take some time to get to the bottom of this
and in the meantime the shares are likely to continue to be
weak," said Cailey Baker, an analyst at Numis.
Lawyer Hamdy Fakharany, behind other cases that have
challenged contracts selling state land to real estate companies
during Mubarak's era, filed the case against Centamin.
"The ruling brings Egypt's gold back (home)," he told
Reuters by telephone, adding that Egypt's returns from the mine
were not high enough.
Centamin said it will inform the market when further
information is available.