Mining companies that won blocks in the Eastern Desert of Egypt are set to start mining for gold under a legislative review that aims to eventually unlock vast untapped mineral resources.
Despite abundant reserves and a rich mining history that gave rise to elaborate Pharaonic gold jewelry, Egypt has only one commercial gold mine in operation. Foreign investment in oil and gas has grown, but mining has languished.
Now, the country is betting on high gold prices and amended mining laws that eliminate bureaucracy and a profit-sharing rule, unpopular in the industry, to attract interest.
A year after launching its first bidding round under the new rules, it has already won five gold exploration contracts in a first bidding round and has kept the bidding system in place while trying to gain momentum.
The government is trying to attract $ 1 billion in annual mining investments, a goal that industry sources say may be within reach.
“Success will be measured by how many mines will be discovered and advanced into production,” said Patrick Barnes, head of Metals and Mining Consultancy EMEARC at Wood Mackenzie, who advised the Egyptian government on its mining law reforms.
“The first indicators show us that this bidding round was much better than the ones previously carried out.”
In its initial bid, Egypt awarded 82 exploration blocks in November to what metal analysts say is a healthy mix of 11 companies, ranging from junior explorers to industry giants like Barrick Gold.
The blocks on offer are in the geological formation of the Arab-Nubian shield, which flanks the Red Sea and is considered one of the richest mineral areas in the world.
Egypt’s mining campaign is still at an early stage.
UK-based Altus Strategies told Reuters it was looking to increase its technical staff and conduct remote sensing and mapping operations on the 1,500 square kilometers of land it received before starting exploration.
It expects to invest several million dollars in the short term, but that could go from $ 100 to $ 200 million if an economic breakthrough is made.
A spokeswoman for Canada-based B2Gold, which also won concessions, said the company was eager to start exploration soon “due to relative underinvestment in modern exploration and therefore to the untapped potential in the historic Arab-Nubian Shield. “.
Miners welcomed the elimination of the requirement to form joint ventures with the Egyptian government and the limitation of state royalties by 20%.
However, maintaining a bidding process for exploration blocks limits the chances of any gold boom, said Sami El Raghy, president of Nordana Pty Ltd., based in Australia
“No other successful mining country uses this process. They all have clear and transparent mining laws that stipulate the qualifications, obligations and rights of investors. (They) work on the principle, first come, first served, “said El Raghy, who was also the founder of Egypt’s first and only commercial gold mine, Sukari.
The Ministry of Petroleum and Mineral Resources declined to comment.
On average, a mining project goes from discovery to production in 10-15 years. Although gold prices fell after reaching a record high in 2020, economists expect them to remain high by historical standards for years to come.
“If you get to the point where a lot of discoveries are made, Egypt could be one of Africa’s biggest gold producers … It had first-rate potential,” said Steven Poulton, CEO of Altus Strategies.
Environmental activists, however, say there is no justification for gold mining. It generates emissions, can increase water stress and, unlike copper and battery minerals, it is not sought after for technologies that can generate a low carbon economy.
The 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 is a known amount of it,” said Barnes of Wood Mackenzie.
“Egypt has immense potential for mining copper, gold and other commodities. The biggest concern of the sector is the lack of copper supply, places like Egypt, considered little explored and with high potential, will receive a lot of attention if they manage to maintain the investment conditions ”, he added.