Egypt Finds New Gold Mine in Eastern Desert
By: Noureldin Mohamed/Arab America Contributing Writer
On June 30, 2020, Egypt’s Ministry of Petroleum and Mineral Resources revealed the discovery of a gold deposit with estimated resources of 1 million ounces. The asset was found in the mineral-rich Eastern Desert, on a mining concession run by state-owned Shalateen Mining Company. The government did not provide details on the methodology used to determine the deposit’s size. If it were to produce 1 million ounces, it would be worth about $1.8 billion at today’s prices.
A Mining Concession Run By State-Owned ‘Shalateen Company’
However, the Egyptian government did note that it expects more than $1 billion in investments related to the development of the deposit over the next 10 years. It also said that Shalateen and the state regulator, the Egyptian Mineral Resources Authority, would form a new company to develop the deposit.
This discovery came at a time when the Ministry of Petroleum and Mineral Resources are looking for reforms to help modernize and develop the Egyptian mining sector, said Minister of Petroleum and Mineral Resources, Tarek El Molla. Egypt has been trying to lure foreign investors to its mining sector with new regulations introduced earlier this year as part of the country’s 2030 plan, a plan that emulates that of China’s belt-road initiative and UAE’s current 2030 plan as well.
In addition, the government regulations included the elimination for miners needing to form joint ventures with the Egyptian government and limited state royalties to a maximum of 20%. Before that announcement, the country had set a goal of attracting $375 million in the next two years. Direct investments, in turn, were expected to rise from $700 million to $1 billion by 2030.
Canada’s Aton Resources secured a gold mining license in the country in February. It was the second permit issued in Egypt since 2005, when, Centamin, the country’s main gold producer, was granted its license for the Sukari mine.
Once obtaining the license, Aton will be able to prospect for gold in the Hamama region of the Eastern Desert for 20 years, with an option to extend the period an additional 10 years. The Canadian company will also keep drilling rights in the Abu Marwat concession in the Nubian Arabian Shield region. A month later, Cairo began auctioning 56,000 square kilometers of exploration concessions in the Eastern Desert. The government recently extended the auction’s original July deadline to September 15 due to delays caused by the coronavirus pandemic and to extend the opportunity to more potential bidders.
The Chamber of Petroleum and Mining at the Federation of Egyptian Industries (FEI) showed investment opportunities through new bids for gold, which are the largest in Egyptian history.
“The desert is full of mineral resources that will motivate foreign investors to pump new investments,” said Osama Farouk, president of the Egyptian Mineral Resources Authority. He added, “The first bid offered by Egypt provides research and prospecting for gold to international companies in 320 sectors on an area of about 56 thousand square kilometers in the Eastern Desert and the Red Sea”.
Cairo led an initiative to amend the Mineral Resources Law 6 years ago, but it failed to attract investments, which required the law to be put again under review.
Furthermore, Egyptian businessman Naguib Sawiris, chairman of La Mancha Holding Company, confirmed that discussions are underway with the government to participate in the bid for gold mining. The lack of activity was due, in part, to Egypt’s past system of royalties and profit-sharing agreements. They made it difficult and unprofitable for miners to explore for and exploit minerals.
Overview On the Gold Industry in Egypt
Unlike Egypt’s natural gas sector, the country’s mineral wealth remains largely under-explored and undeveloped. Gold represents about 10% of the total foreign currency reserves at the Egyptian Central Bank, reaching $3.7 billion last May out of total reserves of $37 billion.
The last bid put in by Cairo 3 years ago did not win the approval of investors due to perceived unfavorable conditions, until Cairo amended the Mineral Resources Law and presented the first international bid, earlier this year. The first steps to promote the first gold bid in international investment destinations were made during the International Mining Conference in Toronto, Canada, the largest global forum on mining industry affairs.
The price of 21-karat gold in Egypt, the most popular grade in the local market, stands at about LE809.47, as of July 11. This follows a global increase in gold prices of about US $69 per ounce in trading to US $1,802.73 as of July 11.
Amir Rizq, a member of the Cairo Chamber of Commerce’s Gold Division, explained that gold prices have risen globally to see the highest increase since 2011, in light of fears of a second wave of coronavirus infections – thus leading to increased demand for gold as a safe investment.
He added that Egypt’s market movement suffered a complete halt, attributed to the coronavirus’ negative economic impact bringing on the current stagnation in buying and selling. This is also coupled with the loss of marriage ceremonies thanks to the outbreak.
Gold prices have been on the rise since February, a result of global fears over the economic fallout of the coronavirus pandemic, which has prompted investors to take refuge in safe havens like gold.
This is to note that the price of 21-karat gold in the local market has increased by more than LE100, since Egypt announced its first coronavirus case in February.
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