Egypt has signed a memorandum of understanding aimed at restructuring the gold mining sector, which officials predicted could bring in more than 10 billion dollars and reshape the country’s economy.
The MoU was signed by Oil Minister Sameh Fahmy and the International Finance Corporation (IFC), the private arm of the
World Bank group, to replace old mining laws which had made foreign investment virtually impossible.
“This is a very important step in restructuring the sector, which has huge potential… and the current legislation could not sustain the restructuring efforts,” Fahmy said after the signing Wednesday.
The new policy framework is expected to be completed within a year. Once enforced, observers and officials expect to attract foreign companies to exploit Egypt’s huge gold reserves.
Two Australian companies already operate in Egypt’s eastern desert. The largest, Centamin, claims proven resources of more than 7.7 million ounces of gold, and further drilling is expected to further boost these figures.
“From our own activity in Egypt today, particularly through the company Centamin, it has become apparent that the gold sector has the potential for Egypt to become one of the largest gold exporters in Africa,” said Australian ambassador to Egypt Robert Bowker, who attended Wednesday’s signing.
“An improved policy framework will attract investors,” said IFC official Gulrez Hoda. “The industry could contribute 10 billion dollars to the economy. This is not a small number and represents 10 to 12 percent of
GDP,” he said.
Egypt’s antiquated mining laws, based on profit-sharing, were prohibitive for foreign mining majors wishing to exploit the country’s huge reserves, and local expertise is currently insufficient to develop a home-grown industry.
Centamin’s open-cut mine at Sukari in southern Egypt’s Red Sea hills area is already one of the largest in Africa, and the country’s first gold mining operation of note in 2,000 years.
Centamin has only been drilling so far, but company executives told AFP they hoped to start producing by early 2008.
Hussein Hammouda, the chairman of the Egyptian Mineral Resources Authority, told AFP that another company could start production in another area, the Hamash gold mine, as early as July.
Frank Sader, chief IFC strategist in the Middle East and North Africa, said that there were huge benefits to reap from a new gold mining industry.
“This is a sector that does not only generate revenue, it’s a huge job creator,” he told AFP. “What we’re trying to do now is develop another industry for the benefit of Egypt.”
The location of gold fields of southern Egypt is such that developing a mining industry would cause minimal damage to the environment and no population displacements.
Sader predicts the new policy framework will finally make Egypt attractive to foreign investors by removing regulatory and legal obstacles.
“Once it’s done, we want foreign investors to take a fresk look at Egypt and we hope to attract them,” he said.