Centamin drops on fuel subsidy fears

Gold miner, Centamin Egypt, has begun construction on an extension of its main asset, the Sukari mine in Egypt's Eastern Desert.

The company says one of the crucial factors in the future efficiency of the "stage 4" extension will be the the mix between surface and underground ore delivered to the processing plant.

Current surveys appear to indicate a reduction in the "grade" or quality of material being recovered from the open pit during 2014 and 2015.

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The company says by 2016 production of 500,000 ounces will be achieved, although with some upside potential from optimisation work.

Sukari also reiterates the benefit is gets from a government subsidy for diesel.

Given the economic challenges facing Egypt at the moment (not least because of the removal of the Mubarak regime) the company has been forced to get half of its fuel on the international market but negotiations are ongoing with the government over future subsidies.

Centamin says it has the support of the Mineral Resource Authority and adds it "does not accept an instant move to international fuel prices as a reasonable outcome."

If negotiations are successful the group hopes to recover the money it has so far spent on the open market.

Investors aren't happy. Centamin has already suffered from worker unrest recently and the bad news on recovery grades and fuel saw the shares down 6.4% at 10:37. Since the beginning of 2012 Centamin's stock has dropped 10%.

BS