Egypt's Centamin mine license revoked by courtPublished by MAC on 2012-11-05
Source: Financial Post, Mining.com, Whistleblogger (2012-11-06)
Assiut Cement acquisition also ruled "illegal"
Last month, London and Toronto-listed Egyptian gold mining company, Centamin, was ordered by the state's Administrative Court to relinquish its Sukari concession on the Red Sea.
A month before, the Court ruled illegal the acquisition by Mexico's CEMEX of cement producer Assiut, ordering it be "returned to the people of Egypt".
In both cases the companies were found to have "robbed" the country of its legally-entitled revenues.
Where then does this leave the "Arab Spring" which sprung the revolutionary movements of early 2011?
A little background
During 2010, Centamin started exploiting gold deposits near the Red Sea, and ostensibly suffered no damage from the short-lived revolution.
As we commented at the time, "its operations do not appear yet to be a focus of major criticism by labour activists". Indeed, "[w]hile Centamin's share price inevitably dipped for a short while during the turmoil, its fortunes improved almost as soon as Mubarak was toppled from power".
During 2010, Mubarak's ruling council announced the promulgation of a new state mining law, aimed at promoting more foreign investment in the sector and compounding the privatisation of resources that were a major characteristic of his iron rule. Our comment:
"The law hasn't yet been implemented; it's not too late to stop the legislation in its tracks". See: More revolutions must come!
Second phase of the revolution?
In February 2011, according to US professor Horace Campbell: "The stepping down of Mubarak has now paved the way for the second phase of the revolution...that of reconstruction [where] the challenge is how to deepen the victory of the people".
Campbell urged that "what was won politically [should] not taken away by a transition that is built on the ideals of ‘liberal democracy,' where there are no fundamental changes in the economic edifice that was built by Sadat and consolidated by the clique around Mubarak".
But Egyptian blogger, Hossam el-Hamalawy, doubted such a transformation would occur in the near term, saying:
"We still have not seen workers independently organize themselves en masse. If that comes, all the equation of the struggle will change... the real fight is now in the factories".
And "why not at the mines and along the oil pipelines as well?" we asked - adding:
"It may take some time before Egyptians at large expunge deeply-embedded capitalist modes of production, the consequent ruthless exploitation of their labour, and having been locked for so long into the vicarious vagaries of global commodities' trade."
Despite the recent welcome Administrate Court decisions, this prospect still seems a far way off.
On 5 November, Egypt's Mineral Resources Authority said it would appeal the court's ruling in regard to Centamin
[Comment by Nostromo Research, 5 November 2012]
Centamin's licence for flagship Sukari mine revoked by Egyptian court
30 October 2012
TORONTO - More than 18 months after the revolution, political risk remains a serious concern for companies doing business in Egypt.
Investors in Toronto-listed gold miner Centamin PLC learned this fact first-hand Tuesday, after an administrative court in Egypt ruled the company's concession on its flagship Sukari mine should be revoked. There was no written judgment to go with the decision and Centamin was unable to get details.
The stock traded briefly in London, and was down 35% Tuesday morning before being suspended. It was halted in Toronto and never opened for trading.
The ruling was made as part of an ongoing case that originates with an Egyptian lawyer named Hamdy El Fakharany. He argues that the licence for Sukari should be revoked because of irregularities with the contract, which dates back to 1994, and because it does not generate enough revenue for Egyptians.
Centamin claims the Sukari concession agreement is valid and that this court has no jurisdiction to overturn it. The company is continuing operations at Sukari as if nothing happened, and analysts believe this issue can be settled at Egypt's Supreme Court.
But the ruling is still a blow to investor confidence in Egypt, and shows that Mubarak-era investment agreements are under pressure. Eight different companies are pursuing international arbitration cases against Egypt after their local units were seized, according to Bloomberg.
"It would appear an extremely retrograde step for Egypt, particularly with regards [to] future foreign investment into the country, if the Supreme Court were to rule against [Centamin]," Mirabaud Securities analyst Keith Watson wrote in a note.
The contractual disputes in Egypt come amid reports the government is strapped for cash and that its foreign reserves are depleted. Tourism is one of the most important sectors of the Egyptian economy, and it has dropped sharply since the revolution.
Sukari is a 50-50 joint venture between Centamin and a state-owned entity called the Egyptian Mineral Resources Authority. The mine does not pay tax until the capital is recovered, but after that it becomes a big revenue generator for the government. Nomura Securities analyst Tyler Broda expects payments to begin next year, with estimated payments of US$150-million in 2014 and US$200-million in 2015.
Cailey Barker, an analyst at Numis Securities, wrote that the ruling against Centamin is unlikely to hold up, but it will likely take some time to resolve the issue and the stock could be weak in the meantime.
Investors flee Centamin after Egyptian court annuls gold concession
30 October 2012
Shares in London and Toronto-listed Centamin fell by as much as 65% on Tuesday after media reports that the concession for its Sukari gold mine in Egypt has been annulled.
More than 20 million shares in Centamin - worth more than ₤1 billion before today - changed hands, almost four times usual volumes, as investors headed for the exits. By the time trade was halted the counter had recovered, but still down 35% on the day.
The Alexandria-based company tried to pour cold water on the reports and said operations at the mine - the first modern gold mine to operate in the North African country - were continuing as normal.
Comments reportedly made by an Egyptian administrative court this morning have given rise to speculation that parts of the Concession Agreement may have, in fact, been suspended. However at this time, no details of a final decision are available and no written judgement has been given.
Centamin confirms that it is not a party to this case, repeats its view that the concession as law 222 of 1994 remains valid and that the court does not have jurisdiction to cancel it.
Since the fall of the Mubarak regime in Egypt, foreign investor uncertainty has increased greatly and many fear that contracts signed before the transition to democracy would now not always be honoured.
Centamin in August reported record output up 40% over last year at Sukari and the company said it is on track to produce 250,000 ounces this year at a cost of $565 an ounce. Sukari commenced production in 2009.
Egypt's eastern desert and Marsa Alam regions in the south bordering Sudan where mining dates back to the ancient times have gained more investor interest recently.
In July Naguib Sawiris, an Egyptian mobile phone entrepreneur, paid $492 million for gold miner La Mancha Resources. In June La Mancha released "significant" results from its Hassaï property in Sudan.
La Mancha shares were little changed on Tuesday, but Alexander Nubia, an explorer active in Egypt fell 15% in Toronto in sympathy with Centamin.
Gold in Egypt is most associated with Nubia a region which straddles the border of Northern Sudan and Egypt. The Egyptian word for gold was "nbu," derived from gold-rich Nubia - shown on the Turin Papyrus as a major gold producer in antiquity.
In ancient Egypt, gold was considered the flesh of the gods, especially that of the sun god Ra.
Another Corrupt Privatization Deal in Egypt Annulled: Court Orders Assiut Cement Renationalized
by Michael Termini
GAP (Government Accountability Project, USA)
20 September 2012
On September 13, 2012, Egypt's Administrative Court ruled that the selling of nearly 96% of the stake of Assiut Cement to a foreign investor (CEMEX, a global building materials firm based in Mexico accused of violating environmental laws in the United States) was illegal, and therefore invalid. The Court order that Assiut be returned to the people of Egypt.
In November 1999, the Mubarak regime sold Assiut Cement to CEMEX for 1.38 billion Egyptian Pounds (LE). At the time however, the book value of Assiut was LE 2.3 billion and its market value was nearly ten times as much: a staggering LE 13 billion.
The court found that the procedures followed in this transaction were unlawful and resulted in the gross depletion of Egypt's national wealth. Two former employees of Assiut filed the case; they had been forced, along with others, to apply for early retirement. In protest, workers staged multiple strikes at the factory during 2012.
The court has now instructed Assiut to rehire all of the 2,545 workers (out of 3,777) whose employment contracts were terminated as a result of the fraudulent deal.
So, the Mubarak regime sold a valuable state-owned asset to a foreign investor for a fraction of its true value, costing Egypt billions and leaving thousands of its citizens without jobs.
Does this pattern sound familiar? If not, it should - we have seen the same pattern in questionable privatization transactions executed not long after Assiut Cement was privatized.
This all too familiar development is indicative of a longstanding practice in the country which was accelerated in part by the subject of GAP's own investigation into privatization fraud in Egypt: the former Minister of Investment, Mahmoud Mohieldin.
We began this investigation with the sale of the state-owned department chain in the country, Omar Effendi (OE). The Bank Information Center produced an in-depth report on that transaction.
The sale of Omar Effendi was also annulled in May 2011 by the Administrative Court ... Mohieldin himself remains free from scrutiny; he is a Managing Director at the World Bank, which refuses to release his financial disclosures - despite our repeated attempts to secure them.
This lack of accountability, exemplified by the failure of the Egyptian government or the World Bank to investigate the former Minister of Investment, is itself indicative of a far larger and more pressing issue: the inability of the Egyptian people to find a remedy for the devastating economic consequences of serious financial crimes.
Despite the court rulings annulling the sale of Assuit Cement, and Omar Effendi for that matter, the central questions surrounding so many of these privatization deals remain: who exactly was involved in executing these larcenous transactions, and are there now criminal investigations of these suspects underway?
Ask these questions and you too will encounter a deafening silence. Further, as these questions go unanswered, the privatization process apparently continues without scrutiny.
For example, the sale of Assuit Cement has been annulled, but, according to Foreign Trade Minister Hatem Saleh, instead of criminally investigating those responsible for executing the illegal deal, the Egyptian government now plans to appeal the ruling.
So much for accountability. And, although the Egyptian Center for Economic and Social Rights won its case seeking the annulment of the OE privatization, and although labor lawyer and presidential candidate Khalid Ali filed suit challenging the privatization at Assiut and won that case, this doesn't necessarily mean anything will happen.
Last September, three other Egyptian companies were ordered renationalized, just as Assiut Cement now has been: Shebin El-Kom Textile Company, Tanta Company for Linen and Derivatives, and the Steam Boilers Company. These companies have yet to be returned to the people of Egypt. So, even when the Court rules, little (if anything) may actually change.
GAP continues to investigate these illegal privatization deals. We invite any organizations or individuals directly affected or concerned by the effects of these corrupt deals to help us. Having just returned from Cairo, I believe that the true story about the corrupt privatization policies that deprived the Egyptian people of billions in national wealth remains to be told.
Michael Termini is International Officer for the Government Accountability Project, the nation's leading whistleblower protection and advocacy organization.
Centamin surges after Egyptian agency backs mine appeal
6 November 2012
Centamin Plc, a gold producer in Egypt, surged the most on record after saying it's confident a dispute over the Sukari mine would be resolved after receiving the backing of the country's mineral resources authority.
Centamin jumped 23 percent, the most since it first sold shares in 2001, to 74.55 pence as of the close of trading in London.
"The company is confident that this matter can be resolved during the appeal process," it said today in a statement.
Egypt's administrative court issued a preliminary ruling last week to annul a government contract allowing Centamin to extract gold from the Sukari mine. The court ruled that the mineral authority didn't exercise enough oversight on gold- extraction operations, and that Egypt's share of the profits is too low. Centamin's shares slumped 38 percent last week.
The Egyptian Mineral Resources Authority said yesterday that it will appeal the court's decision and that it doesn't plan to make any changes to the agreement with Centamin. The company and EMRA will submit documents to clarify the decision, the agency said.
The case was filed by Hamdy El Fakharany, a lawmaker in the now-dissolved parliament, on the grounds that the concession granted to Centamin had not been submitted for parliamentary approval. The deal was signed in 1994 under the rule of former President Hosni Mubarak who was ousted in a popular uprising last year.
Centamin said it's confident that mining operations at Sukari will continue as normal while the appeal is being heard.
--Editors: Stephen Cunningham, John Viljoen