Centamin counts the cost of Egypt’s unrest

Marc Sidwell
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CENTAMIN shares roared back to life yesterday as the gold miner announced it had restarted exports of the yellow metal. But even a jump of 21 per cent did not restore the company’s share price to the level it was at before it was forced to announce the suspension of operations on 13 December. Shares are well down on their October highs and still around their lowest point for the year.

It is easy enough to see why. Centamin’s principal asset, the Sukari gold mine, is in Egypt. The firm’s share price climbed steadily from 2009 to the end of 2010. Then came 2011’s Egyptian revolution, since when, apart from a brief improvement this autumn, Centamin has fallen steadily.

It is not gold demand that is causing the problem. Since 2009, the price of gold has doubled. This is about Egyptian politics.

That is not to say Centamin’s investors are callous enthusiasts for Hosni Mubarak’s old regime, but it is a clear verdict on the pharaonic ambitions of President Mohamed Morsi, whose November power-grab brought fresh rebellion to the streets of Cairo. Now the country has been left in limbo again by the arguments over the new constitution, drafted by an Islamist-dominated assembly. As the Islamists claim victory in the national referendum and their opponents claim fraud, there is no sign of an easy resolution.

For all the initial hope of a liberal Arab Spring, Egypt is clearly at best facing a long, slow march out of disorder towards functioning democracy. That makes investment in the country in the short-term look anything but appealing.

Centamin suddenly found itself without reliable diesel fuel supplies and unable to get its gold past customs without approval from the minister of finance. It is not its fault, but not surprising that such unpredictability drives investors to get their money out of its shares.