Egypt is looking to unlock its vast untapped mineral potential, as the country currently only has one commercial gold mine in operation, Centamin’s (LON:CEY) (TSX:CEE) Sukari. Egypt holds a rich mining history that ultimately led to Pharaonic gold jewellery, and one of the biggest gold markets in the world. However, mining has languished in the country as legislative blocks have been in place for years. 

The country opened up new tender rounds in a bid to bring in $1 billion of investment every year. While gold is the focus, copper also holds high potential, and would be a good catalyst for an economy that has been hit hard by COVID-19. Five firms signed gold exploration contracts in Egypt, one of them being Barrick Gold (TSX:ABX) (NYSE:GOLD).

Big Canadian Ambitions

The company signed four gold exploration deals in Egypt’s Eastern Desert, according to the ministry of petroleum and mineral resources. Barrick will explore in 19 new blocks in the Eastern Desert after it won the international tender launched last year. While far short of the $1 billion target, initial exploration investment will total $8.8 million. 

This is the first time Barrick will operate in Egypt, in a bid to tap under-explore and undeveloped reserves that have largely sat dormant. 

Untapped and Under-Developed

A long period of dormant mining activity was primarily due to Egypt’s past system of royalties and profit-sharing agreements. By increasing rates on miners, companies found it difficult and unprofitable to explore for and mine minerals in the country. In 2020, the country finally streamlined regulations and made it easier for mining companies to form joint ventures with the Egyptian government. To increase investment and interest in the country as a mining jurisdiction, the state also limited royalties to a maximum of 20%. 

While still high among many other industry standards, this improved outlook for the mining industry in the country has Barrick exploring in a region that is largely untapped.

A Line Forms to Get in the Door

Other companies that won concessions include B2Gold, Centamin, AKH Gold, Lotus Gold, and Red Sea Resources, and Aton Resources. Another Canadian company, Aton Resources (TSXV:AAN) secured a license in early 2020 and launched its exploration drilling and development program shortly after. 

The company aims to build Egypt’s second operating gold mine on the 600 square-kilometre Abu Marawat concession, located 200 km north of Centamin’s Sukari gold mine. The site has inferred resources of 2.9 million tonnes grading 1.75 grams gold per tonne, 29.3 grams silver per tonnes, 0.77% copper, and 1.15% zinc. 

While a small start, the first companies entering Egypt’s mining industry now are some of the biggest players from around the world. Canada is well-represented in the group, as Barrick and Aton begin their activities with ambitions to bring projects on line and into production as quickly as possible. 

Egypt’s New, Better, Mining Framework

The new framework for the sector with the elimination of a requirement to form joint ventures and the capping of state royalties at 20% is a welcome change for miners who aim to explore and mine in the country. One major barrier that remains is the tendering process itself. 

Sami El Raghy, Chairman of Australia-based Nordana Pty Ltd. said, “No other successful mining countries use this process. They all have a clear transparent mining laws stipulating the qualification, obligations and the right of investors. (They) work on the principle first come, first served.”

The $1 billion investment target is a big one, and the millions being poured into Egypt’s mining and energy industries now are a drop in the bucket. However, the government has set a target date of 2030 for this goal for this key geographical and trading partner that links Africa with the Middle East. To meet it, more open laws and structures may be necessary before the country begins to see the kind of investments that could feasibly get it to its target by 2030.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.