CAIRO: Egypt’s ancient Pharaoh’s dug deep into the earth’s surface in search of minerals and gems that could buttress their massive economic prowess at the time. Since the end of the Ptolemaic rule in Egypt 2,000 years ago, mining had been nothing but an afterthought, but that appears to be changing in light of rich and vast deposits of minerals, most notably gold, in the Eastern desert near the Red Sea. Although media have long boasted of Egypt’s massive gold deposits in the Eastern desert in recent years, things could be heating up in the country, as the leading company charged with unearthing the valuable resource, says with the rising global gold prices, the overall net worth of the hills could be more than previously thought. Centamin, a junior level mining corporation based in Australia, says that some of the hills in the Eastern desert could be home to enough mineral deposits that mining operations could soon pass tourism as the nation’s leading source of economy. According to Sami El Raghy, Centamin founder and chairman, mining could take over as number one in Egypt’s economy with up to LE 60 billion ($10.5 billion) per year in income. In fact, at the end of June, the company’s Egypt office said in a statement that the first gold pour from the company’s $200 million facility at Sukkari Hills that “the 4 million tons per annum capacity will attain production rates of around 200,000 oz per annum by [the] year’s end.†The statement added that due to the rising gold prices, the company is “stockpiling ore in anticipation of a ramp up in production later this year.†And this is not the only good news. “We know there is even more gold down there than we have already reported. It is a matter of getting in there and starting the process,†he said. The company has already confirmed at least LE 21 billion ($3.7 billion) in proven gold reserves in only one area of the six hills in the desert. The World Bank estimates that if the current assessments are correct, mining could increase Egypt’s GDP by at least 2 percent and possibly as much as 5 percent. Although a great deal of optimism surrounds the lucrative estimates from Centamin for mining operations not seen since the time of the Pharaoh’s – 95 percent of Egypt’s gold mining occurred during the time of the ancient kings – the major gold mining corporations have yet to enter the exploration stages. According to Frank Sader, Chief Strategist and Senior Operations Manager at the International Finance Corporation (IFC) current regulations in Egypt are archaic and do not allow an amiable environment for larger corporations to invest millions of dollars into a project that could turn out not to be as optimistic as the predictions say. “The existing legal framework is relatively old and in fact the framework has never been designed for mining so we are helping to create a policy for Egypt and mining companies,†Sader, who is leading the project to create a new framework for mining in Egypt, says. Current policy in Egypt is based on revenue sharing and joint ventures, which are not common within the mining industry across the globe. Thus, the laws presently on the books has limited interest to engage in exploration to see if Centamin’s optimism is warranted, Sader argues. According to Egyptian government stipulations, they receive 50 percent of all net profits from mining operations in the country, which have been extremely worrisome to foreign multinationals, who have long been used to a royalty or flat rate fee when dealing with local governments. “Their [international corporations] current thinking is ‘why bother with the current framework.’ Through the establishment of a new framework it will allow companies to move in and establish their own exploration of the area.†That is where the IFC comes in, or at least hopes. In 2007, Sader and his team were reassessing the present mining code and the national mining strategy in order to help deliver a new framework and strategy for mining projects that is Egyptian in essence as well as in line with standard norms within the mining community worldwide. The IFC hoped to have the new code and strategy completed by the end of the year with the goal of presenting it to Parliament for approval in early 2008. This has not happened, but Sader remains hopeful. “New laws create uncertainty,†Sader continues, “so we have to educate members of Parliament on what a new code would give Egypt, such as royalty issues, taxes and revenue sharing as well as other fiscal issues. MPs are going to want to make sure that Egypt is getting a proper percentage of money from mining companies, which is understandable, so it is a major challenge to educate them on worldwide norms.†In Canada, Sader points out that mining is approximately 5-10 percent of the nation’s GDP. The difference, however, is to have a system comparable to a nation such as Canada – where mining is vital to the economy – in Egypt that will help foster an environment that brings in the major corporations. Despite the current hurdles that must be overcome, the overall atmosphere is optimistic that the end of 2007 will see a new code and mining companies should begin to enter the market sometime in 2008. The economic prospects of the future mining activities in Egypt are very exciting, but extracting the minerals is not the only aspect that will benefit Egypt. In all mining operations, towns, even cities, spawn up around the sites. Egypt will be no different. Centamin is currently building an entire city in the desert that will house the workers at the mines. Roads are being built and it is expected that thousands of Egyptians will flock to the new areas in search of jobs. Sader and other analysts in Egypt are excited about the possibility that creation of jobs will be outside Cairo. According to a BBC report in 2006, massive migration from rural areas to Egypt’s capital has ended. The IFC is hopeful that with a massive mining operation in the Eastern Desert, it could provide the catalyst for a reversal, however small, of people moving away from Cairo’s overpopulated streets. Centamin agrees and has already begun establishing small “towns†near the mining operations. “We will be directly employing around 4,000 people during the construction phase,†says Esmat El Raghy, field director at one of Centamin’s sights in the desert. “For every person we directly employ there will be three more indirectly in terms of logistics and support operations.†“It is exciting to see that this whole project could create numerous jobs outside the capital,†Sader says. Mining operations will create thousands of jobs and skills that Egypt currently does not have, such as new engineers. “It is simply too expensive to bring in foreigners for all jobs necessary for everything, so Egyptians will need to be trained. That will bring new skills to many Egyptians,†Sader adds. The mining industry in Egypt could become the nation’s top source of Gross Domestic Product (GDP), but it depends on whether the IFC, led by Sader, can work with the Egyptian government to create a framework that allows larger corporations to enter the Egyptian mining market. ** This article was originally published on October 31, 2009. BM
