Analysis Development The Golden Triangle: treasures of the Eastern Desert By Digby Lidstone October 17, 2022 Centamin Gold from the Sukari mine in Egypt's Eastern Desert. Gold contributes $900m a year to the country's economy Egypt has huge untapped mineral resourcesThese include 6.7 million ounces of recoverable goldBut red tape and the costs of mining have put off some prospectors In Ancient Egypt, real wealth was measured in grain. Temple granaries were the reserve banks of their day, with gold and silver seen as lesser commodities. “In my brother’s country, gold is as plentiful as dirt,” marvelled one foreign king in a begging letter to Pharaoh Amenhotep III. Even so, mining was a serious business. The prospectors who drew the Turin papyrus map in about 1150 BC depicted an area called Wadi Hammamat in the Eastern Desert so accurately that modern geologists have confirmed details of some rock formations down to the square metre. “Pharaoh’s people knew what they were after and where to find it,” said Mark Campbell, chairman of Akh Gold, which holds six exploration concessions covering more than 1,900sq km in the same part of the country. 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Preliminary exploration in the nearby Sinai peninsula has also indicated the presence of zinc, tin, lead and copper deposits. Now all you have to do is get it out Getting this wealth out of the ground is not easy. Since the nationalist reforms of the 1950s, Egypt has guarded its mineral resources closely. While the likes of BP and Shell have been admitted into the oil and gas sector, the metal mining industry has been more heavily ringfenced by red tape and stringent profit-sharing rules. Centamin’s Sukari project is currently the only active gold mine in the country, contributing about $900m a year to the economy. Centamin workers. The company says its Sukari mine employs 3,795 people, 95% of whom are Egyptian Hopes of a revival were rekindled in 2020, when the mining sector was given a legislative overhaul designed to lure private investors. State levies were lowered to 20 percent and a proviso that companies form joint ventures with the government was scrapped. Mining rights were granted to foreign companies for the first time since Centamin picked up its licence more than a decade earlier. By the following year, Tarek el-Molla, the petroleum and mineral resources minister, could state with some confidence that the sector would attract $1 billion in direct investment by 2030. Some of that initial glow has begun to fade, however. A recent mining auction proved lacklustre, with industry analysts saying reaction to the international tender was lukewarm. After a series of postponements, barely a dozen or so companies submitted bids in June 2021. Only four companies picked up exploration licenses a year later. On paper, Egypt might seem to be a prospector’s paradise. Despite the limited exploration activity of recent decades, new finds are frequent. In May, Akh Gold announced “multiple high-grade gold prospects” from reconnaissance of its territory. Two years ago, state-owned Shalateen Mining Company announced the discovery of a deposit containing an estimated 1 million ounces of gold in the Iqat area of the Eastern Desert. This woxuld be worth more than $1.7bn at current market prices. Mining is notoriously costly, however, and highly risky, given the volatility of the commodity price. Even in 2020, the most profitable year ever for gold producers, the average all-in sustaining cost (AISC) margin, which is the gold price minus the cost to produce the metal, was $828 per ounce, according to consultancy Metals Focus. That more than halves the potential value of Shalateen’s find, even before taking into account any initial outlay on exploration and the capital costs of setting up a mine. Pouring molten gold. Phosphates or iron ore might be easier to extract “At current levels gold might seem like a no-brainer, but if prices take a dive, smaller outfits can quickly find themselves quickly squeezed at the margins,” says a Cairo-based industry consultant, who points out that the AISC for gold was about $300 an ounce only seven years ago. Integrating different parts of the industry may help to provide some stability. At a mining conference in Riyadh in January, the government said it was reviving plans for a $100m gold refinery in Marsa Alam, on the Red Sea coast, though detailed proposals and a timeline have yet to emerge. The project would sit within the country’s “Golden Triangle”, a special economic zone established in 2017 where work is under way on new infrastructure including power and desalination plants and the $190m Safaga industrial port. For all the glister of gold, Egypt’s mining fortunes may lie with minerals such as phosphates, limestone and iron ore, which also occur in abundance in the Golden Triangle. In pursuing these more mundane prizes, the country’s rulers might reflect on the fact that the prospectors who drew the Turin map more than 3,000 years ago were looking not for gold, but sandstone.