Egypt Risks No Interest in Gold Tender as Centamin Won’t Bidby
Thani Stratex, Aton Resources also say they won’t participate
Companies have until April 20 to submit bids for rights
Egypt is at risk of getting no participation in its first exploration tender in gold since 2009 after Centamin Plc, which operates the nation’s only active gold mine, Sukari, and two other companies in the country said they won’t bid.
Terms being offered “result in an effective tax rate that is by far one of the highest for mining globally,” Centamin Chairman Josef El-Raghy said Monday by e-mail after a request for comment on the proposed tender. “With the exception of Sukari, Egypt’s mineral wealth remains under-explored and undeveloped and this will continue to be an unfortunate lost opportunity for the people of Egypt until there is reform to the mining law.”
Egypt on Jan. 15 invited gold miners to bid for exploration rights in five areas of the Sinai and Eastern Desert by April 20. The government had all but abandoned mining after its British rulers left in 1952. More investment would help the nation generate foreign reserves.
“I would be very surprised if anyone participated in this bid round with the current terms,” David Hall, chief executive officer of Virgin Islands-based Thani Stratex Resources Ltd., which is exploring for gold in Egypt’s Eastern Desert area. Aton Resources Inc., based in Vancouver, would rather focus on existing projects it has in Egypt, Chief Executive Officer Mark Campbell said.
Some companies have expressed an interest in participating in the tender, Omar Taima, chairman of the Egyptian Mineral Resources Authority, said in an interview, declining to identify them. “What I need are productive companies generating revenues in the country,” he said.
Thani won’t be bidding for the new tender because terms call for production sharing with the government, while the company has to carry the full expense of exploration, Hall said. “Egypt has an excellent geological potential, and this potential could create a very serious mining industry which could benefit the country and generate jobs and foreign currency. But a change is needed.’’
Centamin would consider investing more in Egypt if it moved toward a tax, royalty and rent mining law which currently exists in countries such as Australia and Canada, El-Raghy said.
Unlike a royalty and tax system applied in most countries, Egypt offers investors a production-sharing agreement similar to its oil and gas deals.
“This can only work for oil investors, because they can recover their costs in a much shorter timeframe,” Hall said. "In the case of gold, this doesn’t simply work: high operational cost combined with a high mineral exploration risk."