On January 24, Egypt took a major stride towards revitalizing the country’s long dormant gold mining industry. In a memorandum of understanding signed by Petroleum Minister Sameh Fahmy on behalf of the Egyptian government and the International Finance Corporation (IFC), the private arm of the World Bank Group (WBG), Cairo committed itself to radically overhaul legislation governing gold mining.
The existing legislation had made it almost impossible for foreign interests to play a part in the mining industry, limiting gold mining activities for holdings. The laws as they presently stand require profit sharing by those involved, and were tailored more to limited private operations rather than large-scale excavation, in the modern sense.
Egypt is considered to have major untapped reserves of gold but lacks the expertise to extract the ore. Moreover, modern mining techniques require massive investment, something local miners are not in a position to provide.
This is expected to change when the new legislation is in place, bringing with it foreign investment that could see up to $10 billion worth of ore make its way into the international market annually, a figure that would represent 10% to 12% of Egypt’s present GDP.
Need to reinvent the industry
According to Fahmy, the decision to rewrite the existing laws was essential if Egypt was to reinvent its age-old gold mining industry.
This is a very important step in restructuring the sector, which has huge potential, he said following the signing ceremony. The current legislation could not sustain the restructuring efforts.
Under the terms of the agreement, the IFC will provide technical assistance to Cairo to jointly undertake a review and reform of Egypt’s mining laws, regulations, and taxation regime for the sector.
Records show that gold was extracted in Egypt at least 6,000 years ago, and the country is still littered with the debris of ancient mines, for long more of interest to archaeologists than miners. Most of the known mines were played out as much as 2,000 years ago. However, with Cairo planning to have its new laws in place before the end of the year, Egypt is looking to pave the way for a new golden era.
There are two foreign firms active in the sector at the moment, both of them Australian. Centamin Mining, founded by an Australian-Egyptian family, has reported proven finds in excess of 7.7 million ounces of gold. Exploration work being carried out is expected to further extend this. Currently, Centamin, which was granted licenses to excavate in 2002 through its wholly owned subsidiary Pharaoh Gold Mines NL, is active at three sites, Sukari, Barramiya and Abu Marawat/Hamama in the Eastern Desert, though it is mainly concentrating its efforts at Sukari.
The IFC is playing a lead role in re-establishing the Egyptian mining industry, having agreed in May 2006 to invest $2 million into the Australian mining firm Gippsland Limited, which has the rights to explore eight areas with potential gold deposits located in the Wadi Allaqi region of south-eastern Egypt.
The investment was in line with the WBG’s Country Assistance Strategy for Egypt covering the period 2006 to 2009 to support the twin objectives of the Egyptian government to achieve high and sustainable growth and alleviating poverty and income disparity. The government’s strategy to achieve these goals is through facilitating private sector development, boosting the provision of public services and promoting equity.
The IFC’s regional manager, Gulrez Hoda, said that Egypt’s opening up of its mining industry could have a major impact on the economy.
Egypt’s mining sector has outstanding potential, Hoda said. An improved policy framework, which clearly defines procedures for private investors, will help attract new investments and improve the country’s economy.
