It is with deep regret and frustration that we announce the suspension of operations at the Sukari gold mine due to two factors that are beyond our control.
Firstly, the Egyptian General Petroleum Corporation (EGPC) demanded from us in the last week of November an illegal retrospective payment of LE403m for fuel delivered between December 2009 and January 2012 and stated if we did not pay such amount then fuel supply to Sukari would be halted. The Sukari project currently pays the full international price for its diesel consumption and has done so since Jan 2012, when EGPC demanded that Sukari Gold Mines (SGM) begin to pay the full international price (an increase of 500%). Despite being the only international company to be asked to pay this increase, which constitutes unfair practice, and despite there being no evidence of a Cabinet decision on the matter, SGM committed to pay this from Jan 2012 to ensure that operations could continue,. For EGPC to now demand retrospective payments for fuel already contracted, delivered and consumed is highly unfair, illegal and an act that no investor, consumer or government should tolerate. We have refused to accept such an illegal claim and have not made the payments but have also provided EGPC with written assurances that we will abide by any court decision on the matter. Unfortunately, this offer to resolve our dispute in a transparent and fair manner has not been accepted by EGPC, who have instead arbitrarily cut off diesel fuel supply to the mine. As such, the project has now run fuel down to levels where we are unable to continue to operate, as diesel is used for power generation and for all mining equipment.
Secondly, having obtained all necessary permissions from the Mineral Resources Authority (EMRA) in line with normal procedures for gold exports, our latest shipment has been halted by customs officials with an arbitrary demand for prior approval by the Minister of Finance. There is no legal reason why gold exports should be halted and in no way does this relate to the previously announced court action which is under appeal by both EMRA and Centamin’s subsidiary Pharaoh Gold Mines (PGM). The Sukari Gold Project has over 6000 Egyptian based suppliers and the blocking of gold sales leaves many Egyptian businesses awaiting payment. All proceeds from gold sales from the commencement of production have returned to Egypt to be reinvested in operating and development of the Sukari Project, as will all proceeds from this current export. No business can operate without revenue and to block gold exports is to block investment in Egypt.
At Sukari there are a total of almost 2000 employees and contractors that are affected by these actions and we estimate a further 3000 people in support industries will be directly impacted by this suspension.
Pharaoh Gold Mines and its parent company, Centamin, is completely committed to its investment in Egypt and the people it employs. During the last two years, a period when many investors have left Egypt, Centamin has increased its investment by a further $300 million and increased its workforce by 50%. The Sukari project is a vital project for Egypt and, after many years of construction and investment, profit share to Egypt is due to commence early in 2013. Based on current gold prices, annual revenue for Egypt will rapidly build to around US$150-200m per annum, with Egypt earning US$4bn of profit share and $450m in royalty payments over the next 20 years.
Centamin wishes to continue with its operation and investment in Egypt however unfortunately it may be in a position where it has to initiate international arbitration and bilateral treaty procedures to protect its position and that of its stakeholders. EGPC may well find itself accountable for the losses due to this suspension. Centamin sincerely hopes that this matter will be resolved quickly for the sake of its Egyptian employees and wider support industry and to ensure that the company can continue operations in.
