Centamin-Egypt, a joint venture between the Egyptian government and an Australian gold mining company, has denied recent accusations by Egypt's Central Auditing Authority (CAA) that it had squandered public money.
On Sunday, Centamin-Egypt Chairman Sami El-Raghy held a press conference at which he denied allegations that the company had wasted public funds or had links with figures associated with the ousted Mubarak regime.
El-Raghy's denials came one day after state daily Al-Ahram published a CAA report on the company accusing Centamin-Egypt of intentionally squandering $127 million in revenue "since it failed to meet its production targets during the period from September 2009 until March 2011."
El-Raghy attributed the production shortfalls to local restrictions on mining activities. "Centamin was subject to local restrictions on blasting, forcing the company to reduce production at the Sukari gold mine," he said.
Centamin-Egypt has been actively exploring for gold in Egypt since 1995. Its principal asset is the Sukari gold mine, located in Egypt's Eastern Desert.
Construction of the Sukari Gold Project began in 2007, with the first gold being produced in mid-2009. In 2011, gold production at the mine stood at 202,698 ounces worth $556 per ounce, representing a 35 per cent increase on 2010 production.
Total gold production this year is expected to reach 250,000 ounces, at an average value of roughly $550 per ounce.
Charges of wasting public funds, however, are not the only accusations facing the global gold producer's Egypt operations. Several recent media reports have also reported the company's close ties with ousted president Hosni Mubarak and former oil minister Sameh Fahmi.
Criticisms of the company have only grown louder since last year's popular uprising. Last December, Centamin-Egypt officially moved its headquarters to London, making it less vulnerable to legal action if indicted in Egypt. The company is traded on both the London and Toronto stock exchanges.
Egypt's recently-elected parliament is expected to examine documents indicating that the company illegally smuggled gold out of the country. A parliamentary fact-finding committee is scheduled to visit the production site – located 700 kilometres east of Cairo – on Tuesday as part of its investigations.
El-Raghy, for his part, dismissed the notion that the firm had relocated its headquarters to London due to the accusations. "I've never smuggled even one gram of gold abroad and I've never seen Mubarak before," he told reporters.
According to the CAA, the partnership contract between Centamin and the government allows the foreign partners to take half of the profits earned – but only after covering investment costs. This profit-sharing will begin next year, says El-Raghy, estimating the government's share of revenues at an annual $300 million starting next year.
According to documents distributed at the press conference, Centamin generated some $528 million in revenue from the sale of 13 tonnes of gold to countries worldwide, which also benefited its public-sector partner. Company officials say the firm has made some $450 million worth of investments in the Eastern Desert since 1995.
Workers on strike
In a related development, Sukari mine workers went on strike Saturday to demand better pay and higher hazard pay. Company management, however, has reportedly rejected their demands.
According to El-Raghy, the minimum monthly wage for company workers rose by 60 per cent in 2011 to reach LE2000. The company currently employs some 1500 Egyptian workers, he added, representing 97 per cent of its total workforce.
Centamin PLC, which holds a 50 per cent stake in Centamin-Egypt, is listed on the FTSE index. It has interests in four mineral licences in Ethiopia, where it is conducting further exploration activities.