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Held back by bureaucracy and a mining law that hasn’t been updated since 1956, Egypt’s mines are expected to receive renewed attention under the Egyptian Mineral Resources Authority’s (EMRA) new chairman Fekry Youssef Mohamed, who has ambitious plans for the sector to grow.
Speaking to Al-Masry Al-Youm in his office at EMRA, five weeks into his post, Mohamed said he expects the mining sector to constitute 5 – 6 percent to Egypt’s gross domestic product (GDP) over the next two to three years, up from its current contribution of only 1 percent.
“Egypt, in terms of mineral resources, is still virgin territory. We have many kinds of mineral resources and huge reserves,” the chairman, who is the former undersecretary for mineral resources, said.
Egypt is rich in gold, silver, copper, phosphates and coal, among other minerals. Its mines date back to Pharaonic times when Egypt was a prolific gold producer. The industry has lagged in the 20th century, largely due to curbs on foreign investment set in place by former President Gamal Abdel Nasser.
Gold production came to a halt between 1958 and 2007, according to the Ministry of Petroleum’s website. But in January 2010, Centamin Egypt, an Australian company listed on the London and Toronto stock exchanges, began production at Sukari Hill in the Eastern Desert. Only a handful of concession agreements have been signed since.
Mohamed expects this to change with a new five-year master plan and an updated mining law that should come into force once a new government is elected.
With a more attractive institutional framework, he aims to sign 25 concession agreements by 2012.
He said the new mining law should create a win-win situation between the government and investors. “The old regime had a different mentality… now we facilitate everything for investors,” he said. This includes establishing an information centre, and catering to investors’ logistical needs.
Sukari has 14 million ounces of proven reserves; the goal is to increase this to 25 million ounces in the next five years.
Eight mineral concession agreements were awarded to four companies between 2007 and 2008. The companies, with two concessions each, are: Canada’s Alexander Nubia, the AngloGold Ashanti and Thani Dubai Mining joint venture, Cyprus’s Matz Holdings and Russia’s SMW Gold.
As part of the agreements, the exploration phase is to last till 2012, after which these companies can sign a production sharing agreement with the government for a mine, Mohamed said. Egypt has a total of 120 mines, all of which were used by the Pharoahs of ancient Egypt.
Mohamed also plans on new bidding rounds. In the fourth quarter of 2011, he will invite bids for exploring Egypt’s phosphate potential, and in the first quarter of 2012, a bidding round for gold concessions is due to take place.
Egypt’s phosphate belt is in the Western Desert. New exploration in this area is expected to reach the Libyan border, and will be limited to producing phosphates for domestic use, the chairman said.
Gold exports were banned for four months between February and June, a move which aimed at preventing corrupt businessmen from smuggling capital abroad in the form of gold. The ban has since been lifted.
In 2010, Egypt earned US$10 million from gold production, the result of a 3 percent royalty fee that the government gets from its production sharing agreement with Centamin, the largest gold producer in the country.
Mohamed was keen to point out that this money goes directly into a Commercial International Bank account in Alexandria for the Sukari Gold Company, a joint venture between Centamin and the government. Profits, he said, have not been smuggled abroad, as some have suggested.
Due to minimal production, Egypt’s gold is refined in Canada. “We would like to refine gold in Egypt, but to build a refinery we need at least two to three producing mines. This will come soon – after one or two concession agreements have an exploitation lease we can start to have this refinery,” Mohamed said.
Sukari’s production for 2011 is expected to be 200,000-210,000 ounces, though its target is to produce 250,000 ounces per year. Since 2010, it has produced more than 9 tons of gold in total.
The uprisings that began in January and toppled former president Hosni Mubarak’s regime did affect operations at Sukari.
According to press reports at the time, workers staged sit-ins to demand better pay, and called for the Australian company to be replaced by an Egyptian one. Blasting inspectors, who issue explosives and are required to be on site when Centamin blows up rocks at its mine, showed up late, or sometimes didn’t show up at all.
Youssef al-Raghy, general manager for Centamin’s Egypt operation, told Al-Masry Al-Youm that these issues had now been resolved.
Raghy is supportive of putting a new mining law in place, and would like to see more mining companies operating in the country. He believes that “income from mining in Egypt has the potential to earn more than the petroleum and tourism sectors and Suez Canal receipts.”
More mining companies also mean more jobs for Egyptians. Centamin has 1000 people working for it directly, and 3000-3500 people indirectly employed by its mining operations. – Source: Al Masry Al Youm