Egypt: Planned gold refinery inches industry closer to revival

By Sherif Tarek
Posted on Thursday, 3 February 2022 12:29

Liquid gold is poured to form grains at Swiss refinery Metalor in Marin
Liquid gold is poured to form grains at Swiss refinery Metalor in Marin near Neuchatel, Switzerland July 5, 2019. REUTERS/Denis Balibouse

Amended legislation has attracted gold exploration investments in Egypt, which is also working on building its first refinery. Speculation abounds on a brighter future for the Egyptian gold industry, whose deterioration was brought on by different issues that have lingered for decades.

In recent years, Egyptian authorities have been seeking to resuscitate the mining industry, with the aim of increasing its GDP contribution to 5% within the next two decades – a ten-fold rise that is almost equivalent to one-fifth of the current input from oil and gas.

During a recent consultative meeting on mining and mineral resources in Saudi Arabia’s capital Riyadh, the Egyptian minister of petroleum and mineral resources, Tarek el-Molla, revealed that Egypt has already taken steps towards building its first-ever gold refinery.

During an interview with Bloomberg Asharq on January 12, the minister said the project – whose overall cost is estimated to be $100m – is yet to get underway. The company that will be managing the refinery is still being established.

When pressed for a deadline, petroleum ministry spokesperson Hamdy Abdel Aziz tells The Africa Report that no timeframe is available for either setting up the company or the accredited refinery.

Nosedive of the industry

One might assume that the abundance of golden artefacts and jewellery throughout the history of ancient Egypt means the North African nation is now making the most of the precious yellow metal.

However, the Pharaohs’ gold extraction glory was not passed on to subsequent generations. The industry nosedived and the pivotal mineral now contributes no more than a measly 0.5% to the country’s GDP.

Egypt has been famous for its gold since the Pharaohs, but not much work has been done over the past years…

Egypt’s annual gold production is estimated at 15.8tn, mostly coming from a single commercial mine. Its southern neighbour, Sudan – Africa’s third largest gold producer behind Ghana and South Africa – mined nearly double this amount in the first half of 2021.

“Egypt has been famous for its gold since the Pharaohs, but not much work has been done over the past years” to keep the industry from being upended, the minister told Bloomberg Asharq.

What would it bring to the table?

The planned refinery would not only enable Egypt to certify its own gold, rather than doing so either in Canada or Switzerland, but also open doors to more business from other countries, such as Sudan and Saudi Arabia, according to Molla.

If an agreement with a world-renowned gold-certifying lab is reached, the refinery could be up and running within two to three years, says Osama Kamal, the former minister of petroleum and mineral resources. Egypt “needs someone with credibility to certify their gold at its refinery,” he tells The Africa Report.

The refinery will be situated in Marsa Alam in the Eastern Desert, where according to mining companies’ estimates of untapped gold wealth amounts to 300tn. The gold-rich area, near the Red Sea, is also poised to see a bevy of investments spring up in the near future.

Much as it might prove to be the icing on the cake following fundamental steps made towards rejuvenating the floundering gold industry, Egypt’s refinery is unlikely to draw extra foreign investments, says John Reade, the chief market strategist at the World Gold Council.

“There is ample refining capacity globally and refining costs for gold producers are extremely low, so the opening of a refinery in Egypt will not change any decisions about investment in the Eastern Desert,” he tells The Africa Report.

Better law, more investments

Egypt’s mining law was amended in 2018 and new executive regulations were issued two years later, wiping out longstanding private sector concerns, including forcing mining companies to form joint ventures with the government.

The new legislation has dug out a considerable appetite for gold mining in Egypt. Late last year, the Egyptian Mineral Resources Authority (EMRA) inked 25 contracts with 11 companies for 75 gold exploration blocks in the Eastern Desert, with total investments worth nearly $57m.

  • From Canada: Barrick Gold, Lotus Gold, Red Sea Resources, and B2Gold
  • From Britain: Altus Strategies (majority owned by Egyptian business tycoon Naguib Sawiris, an avid gold investor), and SRK
  • From Australia: Centamin (the operator of Sukari, Egypt’s sole commercial gold mine)
  • From Egypt: MEDAF, Ebdaa Gold Mines, North Africa Mining and Petroleum Company (NAMC), and Al-Abadi Mining Company
    Bearing fruit in 5-10 years

The concessions were initially awarded to the companies in late 2020 through a tender. Spurred by the success, the ministry of petroleum and mineral resources has launched a second round, whose results are yet to be disclosed.

“There is a lot of potential for new gold mines in Egypt as a large portion of the eastern side of [the] country lies on the Nubian Shield, part of a geological feature that is present in Eastern Egypt and Western Saudi Arabia,” Reade says.

“The Sukari mine in Egypt and the Maaden mine in Saudi Arabia are examples of large gold mines in this geological feature and there are […] probably more discoveries to be made.”

Should coming exploration missions pay dividends, Reade expects Egypt to see the inauguration of new gold mines in five to 10 years. Companies that secured exploration blocks in the Eastern Desert were not immediately available for comment.

No more smuggling

With gold extraction activities channelled through legal avenues, the recovery of the sector will be discernible within a few years, according to ex-minister Kamal.

“A large portion of mineral wealth in Egypt was controlled by random and illegitimate mining, especially in gold,” Kamal says. “This is because the law of mineral wealth was old, since 1956”, which precluded investments, he adds.

[…] obtaining an approval from the investment authority on establishing a company could take three months at the earliest…

“Random gold mining … in Egypt caused gold to be smuggled abroad annually and sold for $2bn to 3bn, while its actual value is not less than $10bn. If you’re looking at the state’s cut in such an amount, assuming it will only tax it, that would be around $2bn.”

Sluggish bureaucracy lingers

On the other hand, rusty, underqualified and occasionally uncooperative governmental junior staff, as well as the extra red tape they bring about remain a big stumbling block, Kamal explains.

“The legislation is very good, the high-level officials are very supportive … it all goes well until the matter reaches lower managerial levels, where the process [is] halted,” he says. “The junior staff need to be well oriented and well educated, and those who won’t respond [should] be replaced.

“I was in the middle of this process, and I saw, for example,[how] obtaining an approval from the investment authority on establishing a company could take three months at the earliest” due to unnecessary steps, Kamal says, citing employees’ fear to bear responsibility as a reason for prolonged paperwork and delays.

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