In February, Egypt’s Ministry of Petroleum and Mineral Resources announced that it will launch an international bid round this year for exploration of gold and associated minerals in a number of concessions in the country’s Eastern Desert.
According to the announcement, the Egyptian Mineral Resources Authority (EMRA) has invited international companies to participate in the bidding.
The announcement did not clarify the terms and conditions of the tender, and did not pinpoint the specific areas that will be offered.
Moreover, the announcement of the new bid took place without resolving the fate of the previous international bidding round in 2017, when four companies were selected as winners of the five concessions that had been offered in the Eastern Desert.
The bidding round was launched after the amendment of the mineral resources law.
According to EMRA data, Egypt has 125 known locations that contain massive gold ore reserves, estimated at approximately 7 million ounces.
These huge reserves are being looted by groups who plunder the gold ore illegally and deprive the national economy of the revenues that could be yielded by attracting investments to it.
The winners of the 2017 bid declared that they would suspend their work in the Egyptian market due to the bid terms and condition, which they considered to be prohibitive and a contravention of international standards.
The conditions set eight years as a maximum period for the first phase of each project in each concession.
Moreover, it set the production share mechanism at up to 50 percent of the project’s production.
The winning companies also would have had to prepare a feasibility study once the investor reached gold ore capable of being traded. According to this study, a contract would be signed by the investor and the ministry for 15 years, extendable to another 15 years, and a joint company would be established to implement bidding operations.
The conditions also provided that all exploration, development, exploitation, and related operational expenses would be recovered by the investor from the gold production of the concession.
To deal with this situation, the petroleum ministry said in 2018 that it would amend the mineral resources law, including the terms and condition of gold ore exploration.
It assigned English company Wood Mackenzie to prepare these amendments, and it completed its work by the end of 2019.
A new mineral resources law and its implementing regulations were drafted in light of the recommendations of Wood Mackenzie’s report.
Ahram Online tried to reach ministry officials to identify the terms and conditions of the upcoming bid round and the fate of the 2017 bid, but ministry spokesman Hamdy Abdelaziz told Ahram Online that no details or information on the terms and conditions of the new bidding round or on the fate of the 2017 bid would be disclosed at present.
Meanwhile, an official source, who asked to be anonymous, revealed to Ahram Online that the 2017 bid round was cancelled amicably and all sums that had been paid in accordance with the MoUs that had been signed by the winning companies had been refunded, except that of the English company Veritas Mining Limited, who refused the refund.
The source added that this is the first time that the ministry has opened the door to a gold bid without announcing its terms and conditions, which are necessary for investors to make up their minds.
“The terms will be announced on 15 March, simultaneously with the beginning of the bid, which will close on 15 July,” the source said.
The new exploration terms are based on a royalty, rent and tax system, cancelling the production share system.
Based on that, the investor will pay 6 percent of the total value of their agreement as royalties, in addition to the rent of for the block, and a tax. The rent and tax percentage have not been decided yet, the source clarified.
According to EMRA data seen by Ahram Online, three of the winning companies have committed to investing $1.233 billion, and they paid 10 percent of this amount, according to the exploration agreements.
Ahram Online contacted Lord Nabil El Nagy, the owner of Veritas Mining Limited, who asserted that he had refused to receive a refurn of the sum he had paid in 2017, which was estimated at $320,000 plus $50,000 as primary insurance.
He added that the EMRA had asked the winning companies to pay such sums within 15 days of announcing the winners, or the companies would be crossed off.
“We fulfilled our commitments, and the government should hand the concessions to the winning companies, as there are no legal causes to prevent that, and we already signed reports on receiving our concessions,” El Nagy added.
The terms for the 2019 bid round are completely different from 2017, as are aligned with the international bidding systems that are applied in all countries that have a gold mining industry, El Nagy said, adding that he is willing to participate in the new tender, but the government must announce clearly the fate of the 2017 round.
On the other hand, Yossef El Raghi, the general director of Pharaoh Gold Mines NL, which is under the management of Centamin, told Ahram Online the new terms will attract real investments to the gold mining industry in Egypt, unlike the terms of the 2017 round.
Centamin is the owner of the only gold ore productive mine in Egypt, the Sukari mine.
El Raghi added that the royalty, rent, and tax system is followed globally, and it is a promising action taken by the government to enhance the gold mining industry in Egypt, but the bidding system will not attract serious investors.
“Bidding will be based on price competitiveness, thus concessions could be endowed to companies that will not reach the production that qualify them to establish productive mines like Sukari,” El Raghi noted.
According to Centamin’s data for the 2018/2019 fiscal year, it paid royalties worth $140,323,648, profit shares to the government of $322,348,363, and taxes estimated at EGP 19,761,985.32.
El Raghi said the winning companies in 2017 lacked experience and had no background in the mining industry, especially in the Egyptian market, and he therefore supported the cancellation of the bid, especially as its terms had not managed to attract weighty companies and investors.
Speaking about the new tender, El Raghi said that he is willing to apply, but it would depend on the nature of the exact terms and conditions.