Market Report: Centamin at three-year low as it digs up more trouble

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The Independent Online

After sit-ins, political unrest and missed output targets made 2011 a year to forget for Centamin, the gold digger's problems returned yesterday. With disgruntled workers at its Sukari mine in Egypt once again downing tools, the mid-tier miner touched its lowest share price for almost three years after calling a halt to production at its flagship asset.

News of the temporary stoppage saw Centamin drop as low as 73p before a partial recovery meant it closed 7.3p – or 8.44 per cent – worse off at 79.2p. Traders were particularly worried by the fact it is not the first time it has faced such rebellion, with the "illegal labour unrest" – as the company described it – coming little more than a year after a number of workers at the same mine staged a sit-in.

The strike sparked fears its production targets could be at risk again, after supply issues as well as limits on the amount of explosives it could use meant Centamin only produced a little over 200,000 ounces of gold last year despite originally aiming for between 250,000 and 290,000 ounces.

The analysts at Bank of America Merrill Lynch warned a 10 per cent drop in output would translate to a 7 per cent fall in their earnings-per-share forecast, although they added that previous strikes "have passed without any material impact on... production". Meanwhile, Guardian Stockbrokers' Atif Latif said the move was "overdone", claiming that "situations like this [are expected] to arise from time to time".

Centamin was by no means the only stock in the City to finish significantly weaker last night. Trading screens were dominated by red as concerns over Greece's debt-swap offer and the general state of the global economy sparked the FTSE 100's worst fall this year, with the benchmark index slumping 109.02 points to 5,765.8 – its lowest since January.

Unsurprisingly, it was the defensives that managed to avoid the worst of the losses, with utility National Grid staying steady at 649p after Nomura reiterated its "buy" rating. The cigarette groups are traditionally also seen as safe havens, and British American Tobacco (BAT) only edged down 13.5p to 3,191.5p.

However, Imperial Tobacco found less support. It shifted down 28p to 2,506p after Investec's Martin Deboo played down hopes the Lambert & Butler maker could be the subject of an approach involving its top-tier rival, with the analyst saying BAT's recent decision to increase its share buyback showed it was "unlikely to be a party to any take out... anytime soon."

The commodity stocks were still suffering in the wake of China cutting its growth target earlier in the week and Polymetal International was the worst of the bunch. The miner dipped 64.5p to 951.5p as UBS's analysts removed their "buy" rating, warning it would be unable to avoid a significant increase in costs.

There were just two blue-chip risers, with Hargreaves Lansdown top of the pile. The fund manager had been one of the favourites to be relegated in the latest indices reshuffle, yet with the decision – which is announced after the close of trading today – based on last night's closing prices, its move of 13.8p to 459.1p seems to have been enough for it to avoid the drop.

There was no such luck for Cairn Energy and Essar Energy, however, which dropped 5.5p to 101.6p and 11p to 321p respectively and remain on course to move down to the FTSE 250. They are set to be replaced by Aberdeen Asset Management (5p worse off at 239.8p) and Croda International (18p worse off at 2,107p).

Down on the mid-tier index, Misys managed to tick up 3.5p to 338.5p. After the bell the software firm announced it was extending the deadline until 2 April for Temenos to make an offer following the recent emergence of two rival approaches.

Meanwhile, Cable & Wireless Worldwide was pegged back 2.25p to 31.21p amid fears Vodafone (down 1.05p to 170p) may decide not to make an offer, with the mobile phone giant having until next Monday to decide.

Punters were hoping Chariot Oil & Gas will strike it lucky after the explorer announced it had signed a drilling contract for its Tapir South well off the shore of Namibia. Although the AIM-listed group was unable to keep hold of all its early gains, it still finished 5.5p better off at 171.5p with broker Fox Davies claiming the well "could be a game changer".

Meanwhile, fellow driller Gulf Keystone Petroleum (GKP) – whose recent meteoric rise has partly been the result of hopes it could become a target for Exxon Mobil – slumped 23.82 per cent to 258.25p on the news that the US giant has just a few days to decide whether to cancel its deals with the semi-autonomous region of Kurdistan, where GKP operates. The Iraqi government, which set the deadline, claims the agreements are illegal.

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