An old abandoned mine is pictured in the eastern desert near the southern province of Luxor, Egypt. Picture: Amr Abdallah Dalsh/ReutersPhoto
Mining companies awarded blocks in Egypt’s Eastern Desert are set to start exploring for gold under a legislative overhaul that seeks to eventually unlock vast untapped mineral resources.
Despite plentiful reserves and a rich mining history that gave rise to elaborate Pharaonic gold jewellery, Egypt has just one commercial gold mine in operation. Foreign investment in oil and gas has grown, but mining has languished.
Now, the country is banking on high gold prices and amended mining laws that scrap red tape and a profit-sharing rule, unpopular in the industry, to lure interest.
One year after launching its first bid round under the new rules, it has clinched five gold exploration contracts and kept the tendering system rolling as it tries to build momentum.
The government is looking to attract $1 billion (R14.26 billion) in annual investments in mining, a target industry sources say could be within reach.
Patrick Barnes, head of Metals & Mining Consulting EMEARC at Wood Mackenzie, which advised Egypt’s government on its mining law reforms, said: “Success will ultimately be measured by how many mines are discovered and advanced to production. Early indicators show us that this bid round was much better than the ones held previously.”
In its initial tender in November, Egypt awarded 82 exploration blocks to what metals analysts say is a healthy mix of 11 companies, ranging from junior explorers to industry giants such as Barrick Gold Corporation.
The blocks on offer are in the Arabian-Nubian Shield geological formation, which flanks the Red Sea and is believed to be one of the most mineral-rich areas in the world.
Egypt’s mining drive is still at an early stage.
UK-based Altus Strategies said it was seeking to build up its technical team and conduct remote sensing and mapping operations on the 1 500km of land it had been awarded before starting exploration.
It expected to invest several million dollars in the short term, but that could increase to $200 million if an economic discovery is made.
If you get to a point where several discoveries are made, Egypt could be one of the largest gold producers in Africa … It has top-tier potential.
Steven Poulton, CEO of Altus Strategies
A spokesperson for Canada-based B2Gold, which also won concessions, said the company was looking forward to starting exploration soon, “given the relative under-investment in modern exploration and therefore untapped potential in the historically prospective Arabian-Nubian Shield”.
Companies welcomed the elimination of a requirement to form joint ventures with the Egyptian government, as well as the capping of state royalties at 20%.
However, the retention of a tendering process for exploration blocks limited the chances of any gold boom, said Sami El-Raghy, chairperson of Australia-based Nordana.
“No other successful mining countries use this process. They all have clear, transparent mining laws stipulating the qualifications, obligations and rights of investors. [They] work on the principle of first come, first served,” said El-Raghy, who was also a founder of Egypt’s first and only commercial gold mine, Sukari.
The country’s department of petroleum and mineral resources declined to comment.
On average, a mining project goes from discovery to production in 10 to 15 years.
While gold prices have eased after reaching a record last year, economists expect them to remain high by historical standards over the next few years.
Steven Poulton, CEO of Altus Strategies, said: “If you get to a point where several discoveries are made, Egypt could be one of the largest gold producers in Africa … It has top-tier potential.”
Places like Egypt, which are considered under-explored and high-potential, are going to get a lot of attention if they can maintain investment conditions.
Environmental campaigners, however, say there is no justification for gold mining.
It generates emissions, can add to water stress and – in contrast to copper and battery minerals – is not in demand from technologies that can bring about a low-carbon economy.
Egypt’s government has said it is open to other minerals, but gold is the focus for now.
“Gold is absolutely the best thing for them to start with, because there’s a known amount of it,” said Barnes.
“Egypt has immense potential for mining copper, gold and other commodities. The biggest concern in the industry is lack of supply for copper. Places like Egypt, which are considered under-explored and high-potential, are going to get a lot of attention if they can maintain investment conditions,” he added. – Reuters