Updated on 30 April 2013
Who brought the original case?
The case was filed by Hamdy El Fakharany, an independent member with the previous parliament. He appears to have an independent political agenda and was in the courts in 2010 over property deals done under the Mubarak regime.
Why did he bring this case?
Since he has no direct economic interest in the Sukari mine we believe his motivations for bringing the case are political.
In what court was the original case held?
The case was heard in the administrative court, from which appeals are possible.
Why did you not expect an adverse decision from the court on 30th October?
On 4th September the State Commissioner’s Authority (an advisory sub-committee of the court) recommended that the administrative court had no power to entertain claims relating to the Concession Agreement. We were advised by our legal counsel that there was no reasonable cause to expect any other outcome to the case.
What is the background to the 2005 decision to convert the Sukari area from an “exploration” to “exploitation” lease?
Following commercial discovery” of the Sukari deposit PGM and EMRA were required, under the terms of the Concession Agreement, to agree an area to convert to an exploitation lease which would then be subject to the approval of the Minister of Industry based on the feasibility study. A period of lengthy discussion and arbitration with EMRA then led to an eventual settlement agreement in 2005, where it was agreed that the lease be granted over an area of 160km2, which is where it stands today. At all times Centamin and its subsidiaries followed the appropriate procedures as laid down by Egyptian law and the terms of our Concession Agreement. The 160km2 lease was signed by the Minister of Petroleum (who had superseded by the Minister of Industry by the time the agreement was made) and other interested parties and we have an executed original lease document in our possession. This lease has been provided to the Supreme Court and the Supreme Court referred to it in giving its decision on 20th March 2013 to suspend execution of the 30th October decision.
What was the 30th October decision?
The written transcript of the 30th October decision was obtained during the weekend of 3rd November, and clarified the previous sources of confusion. As we had expected previously, the Court rejected any request to terminate or treat as invalid the Concession Agreement. It also made it clear that due process had been followed, to the extent that evidence was presented, in order to apply for an “exploitation” lease under the terms of the Concession Agreement. However, the Court went on to say that sufficient evidence had not been submitted to it in order to demonstrate that the requisite ministerial approval had been obtained with regard to the grant of the 160km2 “exploitation” lease.
What is your response? Was the appropriate ministerial approval granted?
Yes. Centamin is in possession of the executed original lease documentation which clearly shows that the Minister of Petroleum (the successor to the Minister of Industry at the time when the 160km2 lease was signed) granted the necessary approval. The Company is therefore surprised that this document was neither listed in the documents supplied to the Court, nor requested by the Court itself. As noted above, this lease has been provided to the Supreme Court and the Supreme Court referred to it in giving its decision on 20th March 2013 to suspend execution of the 30th October decision. As such the Company is confident that this matter will be resolved during the appeal process.
On what basis does the Company believe that the Concession Agreement is still valid in spite of the court case?
The Concession Agreement is itself an article of law. It was passed through a 1994 Act of Parliament as Law 222 and was properly executed through the correct channels/procedures, and not by President Mubarak or any individual Minister. We have at all times acted in compliance with both Egyptian law and the terms of the Concession Agreement. We have not been made aware of any reasonable argument by reference to which the Concession Agreement could be deemed invalid, and the court on the 30th October reached the same conclusion.
How is law no.222 similar to, or different from, any other contracts awarded to international businesses in Egypt at that time?
The model agreement on which law 222 of 1994 is based was an Oil and Gas Concession Agreement and also the agreement used by BHP and Minex when they were exploring in Egypt. Some of the particulars regarding cost recovery and royalty rates differ slightly, but the agreement is in the main the same as the Oil and Gas agreements.
Will mining operations be halted at Sukari as a result of the court case?
On 31st October our operating subsidiary in Egypt lodged an “objection to enforcement” with the Civil Court. This had the effect of “staying” (postponing) the implementation of the initial court decision for an initial period. In addition, in conjunction with the formal appeal the Group applied to the Supreme Administrative Court to suspend the initial decision until such time as the Court is able to consider and rule on the merits of the appeal. On 20 March 2013, the Supreme Court reviewed the exploitation lease and other submissions and upheld this application, thus suspending the initial decision and providing assurance that normal operations will be able to continue whilst the appeal process is underway. This ruling therefore marked important progress in the appeal as well as, we believe, positive indication that the Supreme Court remains focussed on the key facts and arguments.
When was your appeal lodged?
We filed our appeal with the Supreme Administrative Court of Appeal on 26th November 2012.
What is the basis of the appeal? If you have the documentation that was missing, isn’t it easy (and quick) to get the decision reversed?
We have launched a fully comprehensive appeal on a number of grounds. The appeal process involves, in the first instance, the Supreme Court receiving advice from the State Commissioner’s Authority (see above) before the Supreme Court commences its own substantive hearings. A State Commissioner is appointed to review the case – he is effectively a single judge and there are likely to be a number of informal hearings before him before he prepares his non-binding advisory report. This process means that it is likely to take some time before the matter can be fully reviewed by the Supreme Court.
Does EMRA share your view regarding the merits (or lack of) of the case?
We have common purpose with, and the full support of, EMRA as highlighted in the Chairman’s statement in our Market Update of 31st October, and by the statement in the press on 4th November. EMRA has also lodged its own appeal against the decision the day after our appeal was lodged.
Have any other appeals been lodged with the court?
The Minister of Petroleum has lodged an appeal in support of our appeal. Also, in early 2013 the Minister publicly stated his belief that the terms of the Concession Agreement were fair, that the “exploitation” lease is valid and that he is sure the appeal ruling will be in our favour. In addition he stated his view that Egypt is not yet ready to do mining alone and needs the investment and expertise that Centamin brings to the country. We appreciate this strong show of support by the Minister.
As might be expected, the claimant, Mr El Fakharany, has lodged papers with the court objecting to our appeal, though nothing new of substance has been raised by him.
What is the likely timeline for the appeal process?
We do not yet know when the appeal will conclude, although we are aware of the potential for the process in Egypt to be lengthy. The appeal process will, we understand, from hereon be concerned with the merits of the appeal itself and we will continue to update the market with any material new information as it emerges. However, as noted above, the Supreme Court will only start its substantive review once it has received the report from the State Commissioner. Therefore, we anticipate a number of procedural hearings and adjournments in the coming months before a decision is reached.
Is the matter likely to be dealt with under international law?
We do not currently see the need to take the matter to courts outside Egypt as we strongly believe that the appeal in the Egyptian court will rule in our favour.