Special Report Contents
Since President Abdul Fattah al-Sisis administration announced ambitious plans for Egypts mining sector in March, the countrys development strategy has seen slow progress.
Under the mining strategy, Egypt is aiming to increase the sectors contribution to its economy from 0.4 per cent of gross domestic product (GDP) in the 2013/14 financial year to more than 5 per cent within a decade.
Key elements of the strategy included the announcement of new mining bid rounds for gold and other minerals in the first half of 2015 and the implementation of the countrys new mining law.
5 per cent Target mining sector contribution to GDP within a decade
6,000 sq km Area of pilot mineral resources project within the Golden Triangle region of Egypt
sq km=Square kilometres. Source: MEED
As things stand, the plan is a long way behind schedule. The mining bid rounds that were due to be held in the first half of this year are yet to materialise and the mining law, which was passed on 9 December 2014, is not being enforced.
Despite the significant delays, concrete progress is being made and industry insiders remain optimistic about progress in the second half of 2015, after a breakthrough in the development of industry regulations that came in early July.
The delays in the execution of the mining sector development plan have mainly stemmed from wrangling over the executive regulations for Egypts new mining law.
Early versions of the executive regulations were opposed by several mining companies and industrial groups, leading to the drafting process taking far longer than first anticipated. This has had a knock-on effect on other elements in the plan that were supposed to receive attention.
The eventual release of the regulations is positive. Things should pick up now over the second half of the year
Mining industry source
In early July, after months of delays, the Egyptian Mineral Resources Authority (EMRA), finally published the executive regulations, setting out a tax and royalty structure for the sector and moving one step closer to the implementation of the mining law that was passed in December last year.
The publication of the executive regulations has been welcomed by Egyptian mining companies and should allow EMRA to focus on aspects of the mining development strategy set out during the Egypt Economic Development Conference in March.
These include the implementation of the new law, as well as organising the mining bid rounds that were supposed to take place in the first half of the year.
The eventual release of the regulations is positive for the sector, says one industry source.
The general atmosphere for mining has been affected by the delays to the executive regulations, but the new developments are promising. Things should pick up now over the second half of the year.
Egypts mining strategy includes the preparation of a masterplan for the development of mineral processing zones, including the so-called Golden Triangle. Located on Egypts Red Sea coast, the area has been designated as the site of an integrated industrial complex.
In March, Egypt said the region, which has been declared a special economic zone, would see a 6,000-square-kilometre pilot project begin in 2016 with the identification of mineral resources and development of infrastructure.
The Golden Triangle scheme is slated to include several interrelated projects, including fertiliser factories, phosphate ore processing facilities and facilities to process shale and limestone as a precursor to cement.
According to current plans, it will also include facilities to process gold ore and shale oil.
As part of the masterplan, transport infrastructure projects will move ahead to support the industrial mining projects.
Although the plan is yet to be finalised, in March officials said they would include an overhaul of the Safaga-Qena railway, which will be extended by 223 kilometres, with 150km being reconstructed, increasing the transport capacity for one line to 7,000 tonnes a day.
Additionally, platforms will be built in Safaga Port for containers and public goods, with a total capacity of 30 million tonnes.
Studies are also being conducted to develop Abu-Tartor Mining Port to raise its capacity from 2.5 million tonnes of dry goods to 6.5 million tonnes of dry goods and 2 million tonnes of phosphoric acid.
The Golden Triangle scheme will also integrate agricultural, transport, industrial and tourist projects in the area.
To date, none of the projects associated with the Golden Triangle have been tendered and the masterplan is yet to be finalised, but developments over recent months have increased optimism about the scheme among Egypts mining sector.
[The] work to devise a new legal framework for mining operations in Egypt will help to attract new investors
Cristina Migliaro, DAppolonia
On 11 March, the Italian engineering services company DAppolonia announced that it had been chosen by Egypts Industrial Development Authority to lead the development of the master plan for the Golden Triangle project.
In July Cristina Migliaro, sector development manager at DAppolonia, told MEED the company is on course to deliver the finished Golden Triangle masterplan in February 2016.
Progress so far in the mining sector has been good, she says.
We believe the ongoing work to devise a new legal framework for mining operations in Egypt is a positive step forward for the country and will help to attract new investors.
Just how much potential Egypt has for mining is still unknown. Egypt remains little-explored for mineral resources and its mining sector is undeveloped to the point that it is not included on the Canada-based researcher Fraser Institutes annual Survey of Mining Companies, which covers 122 global jurisdictions.
In 2012, estimated expenditure on non-ferrous exploration was just $9m, according to US mining research company Metals Economic Group.
This compares to global non-ferrous exploration expenditure of $20.5bn. The top destination in 2012 was Canada, with $3.3bn in exploration spending, followed by Australia with $2.5bn in exploration spending.
From Egypts mineral resources, its gold deposits have generated the most interest.
Currently, there is only one working gold mine in the country, which is operated by Australia-headquartered Centamin. Its Sukari gold mine came online in 2009. It is located in Egypts eastern desert and Centamin estimates it has reserves of 15.7 million ounces of gold.
Two other foreign companies, South Africas AngloGold Ashanti and Canadian-listed Alexander Nubia International, have obtained concessions and are carrying out exploration work.
Iron and phosphates
Iron ore is mined in the El-Gedida area of El-Bahariya Oasis in the Western Desert, 300km southwest of Cairo. The mine is operated by state-owned Egyptian Iron & Steel and supplies Hadisolbs Helwan Iron and Steel Works near Cairo. Other deposits have been identified to the southeast of Aswan
The mining strategy sets out a clear plan to boost sector activity in Egypt, but it [is] unclear it will see success
Phosphates are mined near Bur Safaga and Quseir on the Red Sea Coast, in the Golden Triangle area that has been targeted for development by the Egyptian government. The main phosphate mining player is El-Nasr Phosphate Company, which merged with Red Sea Phosphate Company in 2001.
Amid the progress on developing a new regulatory framework for the mining sector Centamin, operator of the Sukari gold mine, has made optimistic predictions about future production.
In June, Joseph el-Raghy, the chairman of Pharaoh Gold Mines, which is a wholly owned subsidiary of Centamin, announced plans to increase gold production to 500,000 ounces a year by 2017, up from less than 400,000 ounces a year in 2014.
The mining strategy that was outlined at the economic development conference in March set out a clear plan for boosting activity in Egypts mining sector, but it remains unclear whether it will see success.
The strategy has been dogged by problems due to the wide range of challenges that the sector needs to overcome.
These challenges range from conflicts of interest between key stakeholders, to logistic problems and regional problems that Egypts government has limited control over.
If Egypt can overcome these challenges and successfully execute its strategy, the mining sector could well prove to be a much-needed sustainable long-term source of government revenues that will support the countrys post-revolutionary economic recovery.
Challenges facing Egypts mining sector
Although optimism within Egypts mining sector is increasing, significant challenges remain that could further delay progress.
Concerns remain over the implementation of the mining law. There has been resistance to the newly published executive regulations from Egypts governorates, which benefited from higher revenues under the previous system.
This has led to concerns that there could still be attempts from some quarters to block the implementation of the mining law.
Under the new system governorates will see reduced revenues, especially from quarrying, said one industry source. This gives them an incentive to delay the implementation of the new law.
Further delays to the implementation of the new law would create uncertainty that could reduce interest in investing in Egyptian mining projects.
Skills gap: Industry insiders also complain that the existing workforce in Egypt lacks the skills needed by the nascent mining sector and this could stunt further development.
The modern mining sector needs highly trained manpower, said Joseph el-Raghy, speaking to a local newspaper earlier this year. Egypts mining industry is not modern.
Security problems: While Egypt has seen a significant political stabilisation since the 2011 revolution and the removal of former President Mohamed Mursi in July 2013, security and reliable energy supplies remain problematic and could cause problems for future mining projects.
Though disruption from protests in Egypt has declined under President Abdul Fattah al-Sisi, the frequency of terrorist attacks has increased.
The number of attacks in Egypt stood at 353 in 2014, according to the Washington-based Tahrir Institute for Middle East Policy. This figure was almost equalled in the first three months of 2015, during which 331 attacks were recorded.
Although the al-Sisi administration has prioritised security issues, the rise of the ideology of the Islamic State in Iraq and Syria (Isis), as well as increasing security problems in the wider Middle East and North Africa (Mena) region, could make combatting terrorism an uphill struggle.
Energy crisis: At the same time, Egypt is enduring its worst energy crisis in decades, as demand for natural gas outstrips domestic production.
This has caused significant problems for many energy intensive industries, including cement factories and fertiliser plans, and could potentially disrupt Egypts planned increase in mining activities.