Egypt's gold output is increasing, paving the way to unlimited potentials in the mining industry, reports Sherine Nasr When Sami El-Raghi, once chairman of Australia-based Centamin Egypt Limited returned home in 1994 to investigate the possibility of bringing modern mining techniques to Egypt, he did not imagine that 16 years later, his company would be the first and so far largest gold-mining entity in the country. "At that time, Egypt's reserves were estimated at 3.5 million ounces," said Mustafa El-Bahr, chairman of the Egyptian Mineral Resources Authority (EMRA). One ounce is the equivalent of approximately 31 grammes of pure gold. "At present, proven gold reserves are estimated at 14.5 million ounces. This is definitely an enormous amount of gold with a market value of no less than $20 billion," El-Bahr added. According to Chairman of Centamin Egypt Limited Joseph El-Raghi, the company has invested some $450 million over the past 15 years. "Currently, we have directly and indirectly employ some 4,000 people, and have identified a massive amount of gold resources of 14.5 million ounces," he said. El-Raghi believes that a discovery is economically viable only when a company decides to proceed with capital investment after discovery operations are conducted. "This has obviously been the case with Sukari as we built it," he said. Following five years of exploration work, during which expenses were wholly covered by the foreign partner, a commercial quantity of gold could be traced. "In 2005, a joint venture was established between EMRA and Pharaoh Gold Mines NL (PGM), earlier acquired by Centamin, and then named Centamin Egypt Limited. PGM was then granted an exploitation lease over the massive Sukari hill gold project, and the terms of concession were wholly agreed on," said El-Bahr. The concession area extends over 160 square kilometres where the Sukari goldmine lies 25 kilometres southwest of Marsa Alam in the Eastern Desert. Fortunately, the concession terms were quite attractive to Egypt despite the fact that the country had not then developed the necessary experience to conclude such gold mining agreements. For instance, EMRA did not specify a certain amount of investment to be spent on developing the Sukari goldmine. "The foreign partner pledged to spend some $320 million in the development process and ended up spending around $450 million," said El-Bahr, who added that this volume represents capital investment, operating and exploration costs, in addition to the gold factory that has been established on site. According to the agreement, once production starts, Egypt is entitled to a three per cent royalty of total production. "After that, the foreign partner is to reimburse its operational costs, one third of exploration costs and one third of capital investment," El-Bahr said. "The remaining value is divided in half between the Egyptians and their foreign partners." El-Bahr added that, now that gold prices have hit a new edge, moving from $300 per ounce in 2005 when the agreement was first concluded to nearly $1,380 per ounce today, the foreign partner will be able to pay back the expenses in less than three years. "Once this is done, we will have full possession of the factory," said El-Bahr. It is worth noting that the company is listed in the London and Canadian stock markets. Once extracted, the gold is transported to Canada where certified refineries turn it into 99.99 per cent pure gold bars to be sold on the market. "One step further is to plan to establish our own gold refineries. But this can only be economically viable if gold production grows to a certain level," said El-Bahr. The prospects are good so far, for the discovery in Sukari has put Egypt among the top 10 countries in terms of proven gold reserves following China, South Africa and Latin America. During 2010, production reached an estimated 3.5 tonnes of gold and silver. "This is a significant amount and it is just the start. We are planning on producing some 13 tonnes of gold within the next two years," El-Bahr explained. According to El-Raghi, gold mining could be a huge industry in Egypt, and should be one of the top five contributors to the economy. "The key is to reform mining policy in order to attract big investors," he said. Indeed, this is exactly what the government is doing. Along with Sukari, another company named Hamsh is also mining for gold. Moreover, there are eight companies currently involved in exploration processes with very promising results. The companies come from Canada, Cyprus, United Arab Emirates to name but a few. In the meantime, three more agreements have been concluded and are waiting to be ratified by the People's Assembly during its next session. "The Sukari experience has encouraged many international companies to come and explore in Egypt," said El-Bahr. In addition to gold and silver, the Eastern Desert is home to a large array of valuable minerals including iron, copper, lead and manganese. "There are 120 sites that have been known since the Pharaonic era, in addition to some 50 newly discovered sites where gold can also be traced. The potential for the mining industry in Egypt is simply enormous," El-Bahr concluded.