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Citi cuts target price for Centamin Egypt amid political unrest

Citi has decided to reduce its target price for gold mining company Centamin Egypt (LON:CEY) due to political instability in Egypt.
Citi has decided to reduce its target price for gold mining company Centamin Egypt (LON:CEY) due to political instability in Egypt, but said it still remains a “buy” despite these risks.

Centamin’s main asset is the Sukari gold project in eastern Egypt, which is expected to add underground production to open pit operations to increase the mining grades.

The company is targeting a production of 500,000 ounces of gold per annum at Sukari, which Citi analyst Jon Bergtheil said is backed up by the current reserves and resources totalling 14.5 million ounces.

The note from Bergtheil followed a report in the Guardian, which said that another four people died in another raid on the Tahrir Square this morning.

Egyptian political figures and newly elected MPs including members of the Muslim Brotherhood-led Democratic Alliance are planning to stage a sit-in at Cairo's supreme judiciary court to demand immediate halt of violence against protesters.

The sit-in is expected to last until the Supreme Council of the Armed Forces, which is currently in power in the country, will meet these demands.

Bergtheil said that Egypt may eventually turn into a business-friendly democracy, now, however, Centamin’s value has to reflect the ongoing unrest.

The bank noted that its new target of 123 pence, down from 167 pence, still represents a hefty percent premium to yesterday’s closing price of 86.45 pence, reflecting the fact that Centamin has “top quality assets with good growth prospects”.

Citi has also decided to cut its near-term earnings per share forecasts due to rising costs, particularly the “stubbornly high oil price”.