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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.
For the rest of this article, please go to the National Post website: http://business.financialpost.com/2012/10/30/centamins-licence-for-flagship-sukari-mine-revoked-by-egyptian-court/