One year ago, the mining sector vouched for a fundamental change from within its core practices. That change came in the form of new legislative reforms and new opportunities that were sound enough to power through a pandemic. Throughout 2020, the sector retained its bold moves only to prove that Egypt’s mining potential is above any crisis. This one-year journey was full of exciting news that spearheaded the development of the sector.
New Legislative Reforms
The year 2020 began with the Prime Minister’s Decree No. 108 of 2020 promulgating executive regulations of the mineral resources law, promulgating Law No. 198 of 2014.
The Head of Central Administration for Mining and Quarries at the Egyptian Mineral Resources Authority (EMRA), Geologist Ayman Ibrahim, told Egypt Oil & Gas (EOG) “Although 2020 was a rough year for the rest of the world, it was a good one for the mining sector in Egypt as the year was rolled out with the issuance of the new executive regulations of the Mineral Resources Law.”
The new provisions were to be applied for exploration and exploitation licenses of ore mines, quarries, and saltworks, issued by EMRA, where the proceeds of companies’ rents and royalty fees would be transferred to the State treasury.
Commenting on the new regulations, Dr. Heba Anwar Raslan, Managing Associate at Sharkawy & Sarhan Law Firm, told Egypt Oil & Gas, “Egypt has an ambitious plan to turn the mining sector into a significant source of gross domestic product (GDP), eyeing $7 billion by 2030. The legislative amendments as well as the brand-new executive regulation that Egypt introduced to the mining regulatory regime back in 2019 and early 2020, were certainly a positive step.”
Raslan indicated that this “showed political will to revamp the sector and an openness to deal with issues raised by market players and investors. It is vital that this is complemented with further efforts on the ground to bring awarded licenses to fruition, and send a positive signal to potentially interested mining investors.”
The new law was said to rectify the errors of the previous laws, thus increasing foreign investments and exploiting Egypt’s rich mineral wealth. The amended provisions include terms and conditions that are sector and investment-friendly, tackling several economic and regulatory issues raised previously by investors in the sector.
Golden Opportunities
From here, the Ministry of Petroleum and Mineral Resources announced during a press conference, held on February 25, the launch of its first international bid round for gold mining in 2020. The International Bid-round No (1)/2020 for exploration of gold and associated minerals round covered a total area of around 56,000 kilometers square (km2) in the Eastern Desert and the Red Sea.
According to a press release at that time, the Minister of Petroleum and Mineral Resources, Tarek El Molla, stated that the bid was held by the royalty and taxes system, adding that the new modifications in the Mineral Resources Law in addition to the Investment Law are making bid rounds more attractive to investors. Moreover, the ministry will launch new gold exploration tenders every four months, the minister said in the press conference.
Raslan remarked that “The Ministry of Petroleum and Mineral Resources along with EMRA ought to be applauded for managing the bid round (1) 2020 for gold in the Eastern Desert, in such an extraordinary year. The process of finalizing and issuing the exploration licenses is as important, following which exploration licenses based on the new royalty, rent, tax licensing regime will be launched for the first time.”
In addition, EMRA’s Ibrahim noted to EOG that “the number of international companies submitting for bids and purchasing their informational packages exceeded any expectations.”
However, due to COVID-19, the results were postponed four months and were rather announced on November 19. El Molla announced the results of Egypt’s gold bid round, where 11 national and international mining companies won the rights for exploring 82 concession areas for gold in Egypt.
The winning companies included; Centamin, Barrick Gold, Lotus Gold Corporation, B2Gold, Red Sea Resources, AKH Gold, and SRK Consulting. The Egyptian companies include; MEDAF, Al-Abadi, North Africa Mining and Petroleum Company (NAMC), and Ebdaa for Gold Mining. The companies will cover 82 concession areas on an area of 14,000 km2 in the Eastern Desert with an initial investment of $60 million minimum.
The minister added that the exploration and exploitation operations will be carried out in line with the recent legislative amendments.
Speaking in more details on the legislative amendments, Dr. Raslan said, “we note that both the Mining Exploration License and the Exploitation License Models are largely based on internationally recognized mining licensing models, so they should make for a very good start. The Models also include a free carry participating interest. This was a commercial point in the bid round, with the required free carry percentage ranging between 15 to 50 % of net profit.”
Raslan added that “EMRA has also made the Exploitation License Model available during the bidding process, albeit this will be issued, at a later stage, as and when commercial discoveries are made in the newly awarded areas. However, it was important to make the Exploitation License model available at the bidding stage so that the bidding investors are able to have a comprehensive and informed view of the legal, financial and technical obligations of the entire project, so as to inform investors’ decisions on participating in the bid round.”
Winners and Investors
Commenting on the bid round win, Mining Engineer at Centamin, Mohammad Salah, told EOG “it [Centamin] won in the last bidding and is increasing its investments in Egypt leading significantly to increase and raise the efficiency of the mining sector and encourage investment in Egypt. It will also contribute effectively to increasing the gold reserves of Egypt and contribute in the future to Egypt becoming an internationally accredited center for extracting gold bars with purity of 99.99%.”
From their side, Barrick Gold refused to comment on market speculations, but rather stated that “we are always reviewing opportunities that might deliver Tier 1 gold discoveries.”
B2Gold, on the other hand, told EOG when asked what propelled the company to participate in Egypt’s gold bid round that it is the “potentially positive adjustments to mining legislation and simplification of the fiscal regime governing the exploration and exploitation of mineral deposits,” in addition to “the relative under-investment in modern exploration in the historically prospective Arabian-Nubian Shield.”
The same company also shared their target from exploring and exploiting Egypt’s Eastern Desert concessions, which are: “discovering a world-class gold deposit with our highly experienced exploration team. Continuing on to construct, develop and operate a new mine with our proven in-house expertise and financial capacity. Contribute positively to the Egyptian economy, local communities, workforce and environment – as we currently do at all of our global operations.”
Rolling Out Bid #2
“After its huge success, the second bid round was immediately disclosed with the first bid winners’ announcement,” EMRA’s Ibrahim told EOG. In the same sequence, the minister announced the launch of a second mining round that includes 208 concessions on an area of 38,000 kilometers in the Eastern Desert, indicating that the bid will continue throughout the year.
El Molla also announced the International Bid-round No (2)/2020 for exploration of some ores and associated minerals starting November 19, until mid-March 2021, covering areas of about 16 km2. The ores mentioned include; iron, phosphates, copper, white sand, feldspar, potassium salts, lead, zinc, kaolin, and for the very first time, Lake Nasser deposits.
The minister emphasized that the reformation of the mining sector, training cadres, and promoting mining investment opportunities are essential. He further indicated that Egypt’s economic reform, political and security stability, in addition to the mining legislative framework create an attractive climate for investors.
“This is a great success in the mining sector, as the winning companies are pumping millions of dollars into the veins of the Egyptian economy, forcing many Egyptian workers in all different disciplines to gain experience and add new skills that are needed by the Egyptian labor market,” Ibrahim further denoted.
Mark Campbell, CEO of Aton Resources, told EOG that “it is very exciting to have world-class companies such as Barrick, Centamin, La Mancha and B2Gold bidding, it is a huge win for EMRA, the MoP and the country. Their presence in Egypt will give a real boost to the mineral exploration and mining sector and will, I believe, lead to more companies coming in future bid rounds. It is also a credit to the vision of His Excellency El Molla, to have taken the bold step to reform the mining law.”
Other Key Investors
Not all companies had been part of the first bid, however. When asked why world-class Aton Resources did not participate, the CEO of the company told EOG, “We did not bid this time, though we would have liked to and had identified areas that we would have bid on, but our decision not to bid was operational and not linked to the bid round itself.”
Like many, COVID 19 impacted Aton’s operations, especially in Q1 2020. “As the only foreign exploration company working in Egypt up until now, we have current exploration and development projects that we need to get on with. So, we are currently working on restarting our exploration drilling program before the year end, as well as moving to develop a gold mine at Hamama,” Campbell stated.
Nonetheless, Aton Resources might be a participant in future bid rounds, especially that its operations began to pick up quickly by Q3 and Q4 2020. “There is a copper, zinc and lead bid round coming up that could be interesting, as well as the next gold bid round, so it is an exciting time to be in the exploration business in Egypt,” Campbell told EOG back in September 2020.
As of October 25, Aton Resources announced plans to drill Abu Gaharish concession by January 2021. Per the company’s statement, the Abu Gaharish is believed to be of similar quality of the world-class Sukari deposit. The company has also announced several operational updates on the Rodruin area and Hamama West area.
According to a statement, Aton’s new investor, Mining and Manufacturing Company (MEDAF), has made an investment of $7 million. Through the new funding, Aton will be able to expand its exploration activities at the Abu Marawat Concession as well as funding Aton’s working capital requirements.
Campbell noted that “the future looks very bright for Aton Resources and Egypt. Aton never doubted that Egypt would one day be recognized as a world-class exploration destination, which is why we have stuck to working here for the past 11 years.”
Exploiting New Discoveries
On June 30, the Minister of Petroleum and Mineral Resources announced a commercial gold discovery in the Eastern Desert, with estimated reserves exceeding 1 million ounces of gold and an extraction rate of 95%. The discovery was achieved in the concession area of Shalateen Mining Company and the total investments of the discovery over the next ten years are estimated to reach more than $1 billion.
This achievement was a cooperation between EMRA, National Service Product Organization, National Investment Bank and the Egyptian Mineral Resources Company. Furthermore, a joint company will be established between Shalateen and EMRA to operate in the discovery site which will be the third company exploring gold and associated minerals in Egypt.
Later, on August 19, Al-Ahram newspaper reported that the House of Representatives approved a bill that allows the Ministry of Petroleum and Mineral Resources (MoP) to exploit quarries and salines that fall within the jurisdiction of the New Urban Communities Authority and in all governorates.
The bill was aimed at granting the Egyptian Company for Mining, Management and Exploitation of Quarries and Salines an obligation to manage and exploit ores, according to the appendix (A), and for any future projects that maximize its added value.
Additionally, the company would be able to utilize the manufacturing of ores in its various stages and to meet the market needs on a national and international level to support the national economy. Mohamed Abou El Enein, a member of the House, commented saying that the bill is an added value for preserving the national wealth and managing the quarrying and salines in Egypt.
Mining Sector Development
After the prominent discovery, Egyptian President Abd El Fattah Al-Sisi met with Prime Minister Mostafa Madbouly and El Molla to discuss plans and efforts of the petroleum ministry in developing different sectors especially the mineral resources.
During the meeting, Al-Sisi gave directives to form a comprehensive strategic vision in the aim of updating the mineral sector in Egypt to exploit the nation’s significant mineral deposits. Additionally, El Molla presented the latest gold discovery in the Eastern Desert which, according to him, will open new horizons in mineral resources discoveries in Egypt.
The Ministry of Petroleum and Mineral Resources, in cooperation with EMRA, launched afterward in mid-July a second-phase program to train the mining sector’s workers. According to a press release published at that time, El Molla stressed that investment in human resources comes as a cornerstone of the ministry’s strategy to develop the mining sector and increase its contribution to the national economy.
El Molla added that the program of developing the mining sector was an asset to reforming the legislative and investment aspects of the sector, adding that its results will polarize during the coming period, especially after amending the mining law and issuing its new executive regulations. He also confirmed that the next period will witness more flexibility and professionalism in dealing with the mining investments through training programs as such, mentioning that in the first phase the ministry has trained a group of 60 miners which was followed by two other groups.
Later in August, the president once again called for modernizing the mining sector, while the Minister of Planning and Economic Development (MPED), Hala El-Said, reviewed Egypt’s Vision 2030 for the mining sector’s development plan. She discussed the conversion of mineral ores and utilizing them in manufacturing industries. El-Said denoted that the plan also includes maximizing spending on exploration while reducing mineral ores imports, taking into account the environmental aspect of exploration, extraction, and manufacturing.
The Minister of Local Development, Mahmoud Youssry Shaarawy, simultaneously reviewed the current situation of quarries and salinas, and his ministry’s plans for development regarding exploitation licenses and operation obligations.
Future Investments
Speaking on the future prospects, Raslan stated that “a few issues may still need further attention, perhaps during discussions to finalize the terms of the exploration license with EMRA, such as stability issues in relation to for example taxes and rental fees. It would be also helpful to clarify the process of transitioning to the exploitation license upon commercial discovery, especially since for gold, exploitation licenses will be enacted in the form of a special law.”
She also said: “the interplay between the licenses, the law and its executive regulation may need to be developed, for a few issues such as the royalty percentage and the term of the exploitation license. The amendments also allow mining companies to establish under the investment area regime regulated by the Investment Law. This is an important point for investors looking for competitive tax and customs terms, and the relevant authorities are encouraged to offer more clarity on the process of setting up mining companies under this regime.”
Mining Engineer, Salah, on the other hand, concluded to EOG that “Undoubtedly, increasing investments in the mining sector is one of the things that a lot has sought in previous periods and the effective role of the Minister of Petroleum in addition to that of the EMRA have contributed to the important role that the mining sector occupies and will contribute significantly to raising the economic and financial level.”
On a final note, the mining engineer further stated that “attracting investors to the mining sector will contribute significantly to creating employment opportunities and opening the horizon for competition between international companies, so that Egypt will become a new arena for foreign mining investments. Egypt also has large and great mining cadres that can be used in the coming days with the spread of the field and mining opportunities.”
