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Centamin hopeful that Egypt's new investment law will end legal claims

New investment law might invalidate a case which annulled the contract between a gold producer and the Egyptian government in 2012

Waad Ahmed , Thursday 24 Apr 2014
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(Photo: Reuters)
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Egypt-centered gold producer Centamin group hopes that Egypt’s new investment law will dismiss a claim brought by a third party against its concession agreement with the Egyptian government over its Sukari mine. 

The new investment law, approved by Egypt’s cabinet earlier this month, includes a provision preventing third parties from challenging contracts made between the government and investors.

In 2012, a Cairo court annulled Centamin's concession agreement with Egypt's government and ordered it to stop operations in the Sukari mine, citing irregularities in the way the company had renewed its contract to exploit Egypt's largest gold mine.

The case was originally brought by lawyer Hamdy El-Fakharany, who has legally challenged other contracts between the government and investors, such as the sale of land to real estate giant Talaat Mustafa Group for its flagship Madinaty project. 

The Centamin verdict was suspended a few months later by the Egyptian Supreme Administrative Court on appeal and the mine resumed its operations.

In a press release issued on Thursday, the company said its legal advisors believe the new investment law will cover all pending lawsuits and challenges.

The Sukari Gold Mine (SGM) is fully responsible for the operations in the mine and is jointly owned by the Egyptian Mineral Resources Authority (EMRA) and Centamin's subsidiary in Egypt, Pharoahs Gold Mine (PGM), on an equal 50 percent basis.

The concession agreement entitles the government to a 3 percent royalty fee from the gold sales as well as a 50 percent share in net profits after PGM recovers all its operational expenses and exploration and exploitation capital costs.

However, over the past four years, while SGM had been commercially producing and selling gold, the Egyptian government has only received the royalty fees (around $42 million), along with $17 million of its profit share, which it claims falls short of what is due.

The company, on the other hand, claims that no profit share is due to the EMRA from the Sukari mine until 2015.

The dispute is mainly in the calculations of costs and expenses incurred by the company.

There are around $35 million in disputes between the EMRA and PGM, a former official in charge of the matter told Ahram Online. 

The company has offered to "make advanced payments against future profit shares during 2013 to the value of $18.95 million, in order to demonstrate goodwill towards the Egyptian government,” stated the company.

Centamin group revenues for 2013 were $503.8 million, representing an 18 percent rise from the previous year.

 

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