Centamin
CEY has suspended its operations, following what the company believes is an illegal U$65m retrospective claim from the local fuel corporation, which is refusing to authorise fuel sales to Sukari until the claim is paid.

At the same time, it appears to be unable to sell its gold production due to customs issues.

We do expect that these issues will be resolved, as previous issues have, but the on-going flow of negative news and negative political overlay are more than offsetting the value upside that CEY offers. * CEY’s operations have been suspended due to a retrospective claim from Egyptian Petroleum Corporation (EGPC) for US$65m, for diesel fuel supplied between December 2009 and January 2012.

EGPC has also refused to authorise the sale of future diesel to Sukari until the US$65m is paid.

Discussions continue, but fuel supplies have now reached critical levels.

* Following earlier issues, CEY now has all necessary permissions to process gold.

However, prior to ministerial approval, it received an unforeseen request from customs officials that has halted the most recent gold shipment.

The combination of little fuel to mine, and working capital constraints due to an inability to sell gold, has prompted management to halt operations. * CEY ended the 3Q12 with a healthy balance sheet that included $125m in cash, amongst liquid assets totalling $182m.

It therefore has the capacity to withstand a sustained period of care and maintenance.

It appears to be suffering a run of very bad news, which highlights the difficulties of operating in Egypt, where the political environment remains volatile.

We do question, however, how well political issues are being managed by CEY and how long they fester before reaching a critical point. * We place our forecasts and target price under review, but retain our Hold recommendation.
To access the full note please click here Analysts: Europe: Hunter Hillcoat +44 (0)20 7597 5182 South Africa: Albert Minassian +27 21 416 1454 Australia: Tim Gerrard +61 2 9293 2168
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