The Australian mining company Centamin operates the Sukari Gold Mine in the Eastern Desert of Egypt, located approximately 700km from Cairo. The company announced its first gold pour in June 2009 followed by the commencement of commercial production in April 2010. With a regional office in Alexandria, Centamin operates the first modern gold mine in Egypt. Centamin’s shareholders have invested over $1bn in the exploration, development, construction, and expansion of the Sukari Gold Mine. The extent of Egypt’s gold holdings remains unknown but some at Centamins think that Egypt represents a resource rich economy ripe for foreign investment and extraction.
Daily News Egypt interviewed Chairman of Centamin Josef El-Raghy to talk about potential investments in the mining sector in Egypt, the modernisation of the Egyptian government’s policies governing the sector and impediments to the further growth of the industry.
What are the most important reforms to the mining sector and its governing policy that Centamin would like to see occur so that new investments can be injected into the Egyptian market?
The establishment of a modern mining operation at Sukari has required an investment by Centamin and its shareholders of over $1bn. Having now completed this substantial investment, the company is well placed to undertake its next stage of growth through the development of further mining operations.
While Egypt’s mineral wealth is undoubtedly world class, the country lacks an internationally competitive mining policy that provides the right balance of economic returns to the government and the investor. Egypt must move towards a tax, royalty, and rent system and away from the production sharing system.
Production sharing works for oil and gas. However, it does not work anywhere in the world for mining. It is for this reason that, with the exception of Sukari, Egypt’s mineral wealth remains un-developed. Egypt should look to the mining policies employed in countries with well-developed mining industries such as Australia, Canada, and to the various emerging markets in countries where new policy has been introduced and mining has kick-started economies.
The company said it paid $24m below the share of profits owed to the government. Did the company make a new payment to the government?
Centamin has paid a total of $101.75m to the Egyptian Government in royalties and prepayment of profit share.
What are the impediments and challenges to investment in the mining of metals in Egypt?
The current structure of bid rounds and production sharing via an operating company is a cumbersome and non-economic alternative from the perspective of the mining companies. As such, companies will not invest in Egypt despite the prospective mineral resource area. The bid rounds run by Egyptian Mineral Resources Authority (EMRA) in 2006 and 2008 failed to attract any significant investment and this was at a time when there was a world mining boom because of the structure and terms of those agreements.
What is your opinion regarding the new mineral resources law? What items do you wish to be added to facilitate your work in Al-Sukari mine?
The new mineral law (law 198 of 2014) does not affect Sukari operation since it operates as per the Concession Agreement (law 222 of 1994). With regard to potential future investments in new areas beyond Sukari, in our view the new law is inadequate since it does not create a tax, royalty, and rent system.
What is your opinion regarding the recent reforms in the Egyptian economy?
We are encouraged by the positive attitude of the government towards protecting existing investments and for taking steps to ensure that Egypt is regarded as an attractive destination for future foreign investment in many sectors. We hope that the government will turn its attention to the mining sector and adopt a new code that promotes investment.
EMRA said the settlement with Centamin ends in December and will begin sharing profits at the beginning of 2016. Has there been any progress on the settlement?
Discussions between ourselves and EMRA, our partners in the Sukari operation, are not undertaken in public. We continue to enjoy a strong working relationship with our partners and undertake all our obligations in accordance with the terms of the Sukari Concession Agreement.
What is the quantity of gold production from the Al-Sukari mine during the last quarter of 2015?
During the fourth quarter of 2015, the Sukari mine produced 117,644 ounces of gold.
What is the size of investments in Al-Sukari mine?
To date, Centamin’s shareholders have invested over $1bn in the exploration, development, construction, and expansion of the Sukari Gold Mine.
Centamin put Egypt back on the gold mining map, according to the Globe and Mail newspaper. It also said Centamin seized upon Goldman Sachs’ recommendation to buy shares of gold mining companies. Has the company broached the subject of a new contract with the government?
We are satisfied with the terms of the Concession Agreement that governs the Sukari operation. Our company has indicated on numerous times to the Egyptian Government that we wish to invest more in Egypt and would like to be awarded new areas to develop additional gold mines, which would provide investment and employment in areas where currently there is none.