Egypt: Gold mining firms in talks with government over exploitation terms, says Centamin CEO

By Sherif Tarek
Posted on Monday, 14 February 2022 16:48

A digger works to collect core samples in the Eastern Desert near the southern province of Luxor, Egypt
An Alexander Nubia digger works to collect core samples in the Eastern Desert near the southern province of Luxor, Egypt May 20, 2016. REUTERS/Amr Abdallah Dalsh

The mining industry in Egypt has come a long way on the back of reforms, yet gold mining firms are still pushing for better exploitation terms, Centamin CEO Martin Horgan reveals to The Africa Report, saying that reaching an accord will “provide the basis for the mining industry moving forward”.

A new framework that attracted gold-exploration missions of late was a requisite step towards boosting the ailing mining industry in Egypt, but the North African nation still needs further amendments to be “sufficiently attractive” for big international investors, says the CEO of Centamin, the most significant gold mining company in Egypt.

“Today, Centamin and our peers are negotiating the exploitation terms with the Egyptian government and this agreement will provide the basis for the mining industry moving forward,” Martin Horgan tells The Africa Report, without disclosing the negotiated terms or other companies partaking in the talks.

This potential has not gone unnoticed, as has been highlighted by the interest of the likes of international gold companies…

“The main challenge remains making Egypt sufficiently attractive for the large international gold mining companies to take part in the building of Egypt’s nascent gold industry,” he says. “Discussions are constructively ongoing.”

The Africa Report could not immediately reach a government official for a comment, or verify the companies participating in the negotiations next to Centamin, which also operates in Burkina Faso and Ivory Coast, West Africa.

The Australian, UK-listed company is the operator of Egypt’s only commercial gold mine. Located in the Eastern Desert near the Red Sea, Sukari, a joint venture between Centamin and the Egyptian government, produces the overwhelming majority of the country’s annual production of the precious yellow metal, estimated at nearly 15.8tn.

More cooperation with government

Centamin is one of 11 local and international firms that penned 25 contracts with the Egyptian Mineral Resources Authority (EMRA) late last year for 75 gold exploration blocks in the gold-rich Eastern Desert, with total investments worth nearly $57m.

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 announced.

Apart from rising gold prices, with soaring inflation boosting safe-haven lustre, this flurry of activity came on the back of amended, more favourable mining legislation that came into effect in 2020, in addition to a globally-recognised fiscal regime.

Horgan says Centamin is “excited to continue working with our partners, the Egyptian government, in our shared vision of establishing a thriving gold sector”, even though under the new regulations, gold mining companies are no longer obliged to partner up with the government.

The mining code also stipulates that gold mining firms incur state royalties of no more than 5% of their yearly production, the lowest of royalties imposed on minerals, another condition that appeals to the private sector. Previous bylaws set hefty royalties of 50%.

In 2019, before the new regulations came into effect, Egyptian business tycoon Naguib Sawiris, an avid gold investor, voiced disgruntlement over the 50% royalties that he cited as a reason for refraining from investing in gold mining in Egypt. Sudan and Côte d’Ivoire, he lamented, impose royalties of 5% and nearly 4% respectively on gold mining companies.

‘Demonstration of success’

Under the new mining code, UK-based AKH – a subsidiary of Sawiris-owned Altus Strategies – was one of the 11 companies that have won exploration blocks.

Barrick, B2Gold, Lotus Gold and Red Sea Resources from Canada, UK’s SRK, and Egyptian companies MEDAF, Ebdaa Gold Mines, North Africa Mining and Petroleum Company (NAMC), and Al-Abadi Mining Company have also secured concessions through the latest tender.

Egypt, “with the support of independent consultants, have implemented a new mining code, which has begun to attract international interest from some of the largest global mining companies. The recent 2021 gold Eastern Desert exploration bid round is [a] demonstration of that success”, Horgan says.

“Globally, there are very few underexplored known gold belts and the Arabian Nubian Shield is one, but specifically within Egypt,” Horgan says. “This potential has not gone unnoticed, as has been highlighted by the interest of the likes of international gold companies such as [Canadian firms] Barrick and B2Gold.”

The Capital Drilling’s Rig 217 extracts core samples from the mineral rich Arabian Nubian Shield in the Eastern Desert near the southern province of Luxor
The Capital Drilling’s Rig 217 extracts core samples from the mineral rich Arabian Nubian Shield in the Eastern Desert near the southern province of Luxor, Egypt May 20, 2016. REUTERS/Amr Abdallah Dalsh

Centamin’s growth plans

Through the latest tender, Centamin has been awarded three new exploration licences covering 3,000 km2. “We have commenced desktop exploration as permitting is finalised and we hope to have geologists on the ground commencing the fieldwork programme next quarter,” Horgan says.

“The minimum licence spend[ing limit] in the first two years in $10m. We expect to spend approximately $3m in 2022 and $6m-$7m in 2023. This will form the platform for the company to take the next steps in identifying further potential gold targets and developing deposits in the region.”

Centamin plans to consistently produce greater than 500,000 ounces per annum from the Sukari, which kicked off production in 2009, in the next decade starting from 2024. The company generated a revenue of 733m in FY2021 from gold sales of 407,252 oz at an average realised gold price of $1,797/oz.

“We welcome any developments in the region to further establish the Egyptian Nubian Shield as a globally significant gold mining district, and we believe the success of the recent exploration bid round could see the Egyptian gold sector grow,” Horgan says.

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