Gold producer Centamin has been ordered to halt local operations after an Egyptian court ruled its right to operate the Sukari mine, its main asset, was invalid.
Cairo's Administrative Court on Tuesday said it was cancelling the contract between the government and the gold-mining firm, citing irregularities in the way Centamin had renewed its contract to exploit the country's largest gold mine.
The firm was granted a 30-year renewal of its mining contract without it passing through Egypt's lower house of Parliament as is customary, the Council said.
The 2004 contract gave Centamin Egypt the right to exploit around 160 square kilometres in Sukari, a gold mine in the Egypt's southeastern desert. Under the deal, net revenues from the gold mine were split 50-50 between Centamin and the government.
Contacted by Ahram Online, the lawyer who prosecuted the case against Centium said the court's decision was binding.
Hamdi El-Fakharany, who also served in Egypt's dissolved parliament, said that the exploitation contract was granted to Centamin Egypt in 2005 by the head of the Egyptian Mineral Resources Authority, a man not qualified to issue such decisions,
"It's parliament's role [to do so]," he said.
El-Fakharany complained that since Sukari mine produced its first ounce of gold in 2009, the government had seen just $19 million of a total of $875 million in revenues.
"This is not fair. The government has pumped about 200,000 litres of diesel each day to help the company's operations over the last 10 years, that alone is worth $800 million," he said.
Centamin, for its part, said its contract to mine gold at Sukari remained valid, dismissing news emerging from an administrative court as "comments."
Centamin Egypt’s head of exploration, Ismail Abdel Khaleq, told Ahram Online that the court had made "a huge mistake," and that the cancelled contract was not for exploration.
Abdel Khaleq added at the exploitation agreement was signed in 1995 and had been passed through the parliament.
"The contract signed in 2004 involved an additional 160 square kilometre offered by the government to the company to explore," he said.
Centamin and its Egyptian branch have been exploring for gold in Egypt since 1995.
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.