Going for Gold: Egypt Revives an Ancient Industry, as Maria Golia Reports from Cairo
Golia, Maria, The Middle East
AGAINST A BACKGROUND OF GLOBAL FINANCIAL crisis and domestic uncertainty following the ousting of the ruling regime in February, Egypt's market demand for gold has reached record highs. As people worldwide seek to secure their savings, Egypt is uniquely positioned to benefit, thanks to large untapped reserves of the precious metal and the current revival of an ancient industry.
Egyptians started mining gold in the pre-dynastic era (c 3100 BC) and its mineral wealth upheld the country's preeminence in antiquity. The location of over 100 mines was carefully noted on a papyrus document dating from around 1160 BC, the world's oldest map, and some of these sites are today again under scrutiny. Although ancient miners prospected with considerable ability, modern techniques can exploit their finds to a far greater degree.
"In terms of mineral resources, Egypt is still virgin territory," the Egyptian Mineral Resources Authority's (EMRA) new chairman Fekry Youssef Mohamed confirmed. "We have many kinds of mineral resources and huge reserves." Aside from gold, Egypt is rich in silver, copper, phosphates, coal, and other minerals. According to EMRA projections, the mining sector will constitute as much as 6% of Egypt's GDP in the coming three years, whereas it currently contributes 1%.
Egypt stopped most mining activities in 1958 following the Officers' Revolution and the subsequent nationalisation of big foreign companies. Updated mining legislation is set for passage pending the selection of a new government in elections scheduled to begin November 21. But Centamin Egypt, an Australia-based mineral exploration development and mining company in a joint venture with the Egyptian government, has the jump on the action.
Egypt's first modern gold mine is located on Sukari Hill in the Eastern Desert, about 23 km southwest of the Red Sea resort town of Marsa Alam. In 2007, Centamin's exploration of their 160 sq km exploitation licence area indicated the presence of at least 11 million ounces of gold. 'Sukari' means sweet in Arabic, which probably gave the hill its name because of the quartz outcroppings that resemble sugar.
Production at Sukari began in June 2009 and Centamin's flagship project has so far yielded nine tons of gold, more than Egypt's cumulative output for the years 1902 to 1958 (seven tons), a period largely corresponding to the British occupation. The state receives 3% of Centamin's net sale revenue, payable in cash half-yearly. With gold prices soaring and large reserves in the offing, it's a sweet deal, and timely, given current economic challenges.
While long-term outlooks are optimistic, Egypt's political transition has disrupted many businesses. Several high-profile investors are in jail on charges of corruption and workers in a variety of sectors are demanding an increase in minimum wage. At 474 EGP ($80) monthly, average salaries cannot meet the costs of a single person's modest lifestyle, much less that of a family. Workers want 1200 EGP ($200) monthly and strikes are now daily occurrences.
Centamin has had its share of post-uprising problems, including strikes. Mine production suffered during the first quarter of the year but is now recovering and Sukari's production for 2011 is expected to be 200,000210,000 ounces, somewhat short of its annual target of 250,000 ounces.
Although life in Egypt has returned to normal (indeed, too much so for activists desiring deep reform) tourism is down due to perceived instability. Between April and June 2011, Egypt received 2.2 million visitors as compared to 3.5 million in same period last year. But the sector is recovering quickly as it tends to return to normality following catastrophes. Suez Canal revenues have remained steady, showing 10.6% year on year growth in July 2011. The growth rate for fiscal year 2010/2011 stands at 1. …