Egypt minerals mining oil and gas FDI

Egypt's mineral wealth: shifting away from oil and gas dependence

Egypt's mineral wealth: shifting away from oil and gas dependence
Sukari is the country’s biggest and first modern gold mine, as well as one of the world's largest producing gold mines. / centamin
By Jason Mitchell April 23, 2024

Egypt has a big opportunity to diversify its economy away from reliance on oil and gas by exploiting the country’s largely untapped mineral wealth. 

The country is home to a treasure trove of minerals resources, including gold, copper, uranium, silver, zinc, platinum, titanium, phosphate, iron ore, kaolin and coal. These are found in abundance in the Eastern Desert, the Western Sahara Desert and the Alaqa Valley. It also possesses construction materials including granite, marble, white sand and limestone. 

While the country's dry and rugged Eastern Desert has been well explored and mined, the much larger Western Desert remains largely untapped. Its sandstone and deep sand-covered terrain is ripe for extensive exploration by international mining companies.

At $358bn, Egypt is Africa’s third biggest economy after South Africa and Nigeria. It has a population of 108mn people and income per head of $3,200 a year. The IMF is forecasting that the economy will grow at 3.6% this year and 5% next year. 

Minerals have been mostly neglected since Gamal Abdel Nasser — president between 1956 and 1970 — nationalised much of the industry in 1961 and 1962, which prompted the bulk of the country’s geological talent to flee abroad. Since that time, Abdel Nasser and subsequent governments have focused on oil and gas at the expense of minerals. But analysts say that the country could be sitting on mineral deposits worth hundreds of billions of dollars, which could surpass oil as a source of income if they were fully exploited.

Today, Egypt’s oil and gas industry is a major backbone of the country’s economy and represents about one-quarter of GDP. The country has 3.1bn barrels of oil reserves and its production was running at around 559,000 barrels per day in December 2023. It also has gas reserves of 2.1 trillion cubic metres (cu m) and its gas production is 175m cu m per day. The hydrocarbons industry has attracted major investors including Chevron and ExxonMobil.

Meanwhile, the mining sector has been languishing and, in 2021, contributed only 0.5% to GDP. In January 2022, Tarek El-Molla, the minister of petroleum and mineral resources, set the target of raising its contribution to GDP to 5% by the year 2040. The government is aiming for it to become a $20bn industry by that year and would like to increase the sector’s exports from $1.6bn in 2020 to $10bn by 2040. It has an ambitious plan to attract $1bn a year in mining investments by 2030. 

The Eastern Desert and Sinai are scattered with more than one thousand ancient mining sites — mostly gold, silver and copper — stretching back more than 5,000 years to pre-pharaonic times. Gold has played an important role in Egypt’s history for millennia. Native gold was used for jewellery as early as Naqada II (3500 to 3300 BC). From at least the Old Kingdom, Egyptians exploited mines in the eastern deserts. From the Middle Kingdom (about 2025 to 1700 BC) the gold deposits of Lower Nubia were exploited.

Estimates put the amount of gold remaining in Egypt’s mines today at at least 25m ounces or 708 metric tonnes (mt). The country produces around 15.8 mt of gold every year, most of which comes from the Sukari mine close to Marsa Alam in the Eastern Desert close to the Red Sea. Sukari is the country’s biggest and first modern gold mine, as well as one of the world's largest producing gold mines. It is the only commercial gold mine in operation. It is run by Centamin, a mining company listed on the London Stock Exchange, which received its concession in 1998. Since production began in 2009, it has produced more than 5m oz. It expects to produce between 470,000 and 500,000 oz during 2024. 

Egypt’s total gold exports jumped by 45% to $1.63bn in 2022 from $1.12bn in 2021, according to the country’s General Organisation for Export and Import Control. In 2022, Egypt had 26 gold mines and mining projects, according to Statista

In early 2021, in a bid to revive the gold industry and attract investments, Abdel Fattah el-Sisi — the country’s president since June 2014 — directed the government to create a ‘gold city’. This city will house a gold refining factory and a school to train jewellers and craftspeople, and it will be the country’s first integrated city for the manufacture and trade of gold. 

Furthermore, coal can be found in the regions of Oyoun Musa and Jabal al-Maghara in North Sinai. In 2021, the country’s total reserves amounted to 16m mt, but it is not currently producing any coal. Uranium can be found in the rocks of the eastern desert in the Musikat region, Mount Kattar and Sinai. Its reserves are estimated at 1,900 mt. 

Moreover, iron ore is one of the country’s most important mineral resources, located east of Aswan. According to 2010 estimates, the country’s reserves stood at 3.1bn mt. In 2021, Egypt produced about 560,000 mt of the ore, according to Statista. The volume of iron ore produced in the country has been stable since 2018. Iron ore production peaked in 2012 at 3.93m mt. 

Additionally, manganese deposits are located in the Umm Bejama region in the Sinai, Ish Al-Malaha, Day Al-Ma’alik, Jabal Elba and Abu Ramad. Um Bogma’s reserves are estimated at is 1.7mn mt. Chromium is found in Bramiya, Ras Shaith, Abu Dahr, Wadi al-Ghadeer, Jabal al-Jarf and Umm Kabu but the country’s reserves are uncertain (between 2,000 and 5,000 mt). 

It is also estimated that the country enjoys 48mn mt of tantalite, the fourth biggest deposits in the world. El Nuweiba is a large tantalum mine located in the South Sinai Governorate. It contains one of the largest tantalum reserves in the country, with estimated reserves of 114.7mn mt of ore grading 0.016% tantalum.

The country’s non-ferrous ores include copper (found in Serabit el-Khadim, Ferran, and Samra in the Sinai Peninsula, Abu Sweil, Wadi Haymur and Akram in the Eastern Desert) and zinc and lead ores (found together in some areas, such as the Umm Dughij region on the Red Sea coast). The estimated copper reserves amount to about 1.6 million tons, including one million tons of confirmed ore, with a percentage of zinc of 14% and lead of 2%. An estimated 700,000 mt of tin can also be found in the Abu Dabab area.

Furthermore, Egypt has black sands at 11 sites stretching 400km along the northern coast from Rasheed to Rafah. It is estimated that the reserves surpass 1.3bn cu m. Black sand is rich in valuable minerals, including ilmenite, zircon, magnetite, rutile and garnet. These can be used in a number of industries, such as textiles and renewable energy.

Analysts say that raw materials for seven industries in Egypt hold the greatest potential: gold, mostly for jewellery making; iron ore, crucial for steel production; white glass sand, pivotal for high-tech applications; limestone, fundamental for cement manufacturing; phosphates, vital in fertiliser production; aluminium and titanium, critical for electric vehicle development; and kaolin and feldspar, significant in ceramics manufacturing.

The ancient miners — lacking modern mining equipment — rarely dug down more than 20-30 metres, following veins visible from the surface. They also lacked modern exploration technology. This means that vast quantities of gold, silver and other valuable minerals almost certainly still lie beneath the surface, including other minerals unknown to ancient miners such as platinum and palladium.

The Egyptian mining sector’s advantages include infrastructure lacking in other prospective countries, such as power lines, roads and ports. The infrastructure is already in place, not far from the concession areas. Furthermore, the desert areas have almost no topsoil to remove to gain access to the ore. A lack of underground water lessens the danger that chemicals will leach into the water table. 

Despite these opportunities, the country’s mining sector faces a number of challenges. Its mineral investment law of 1956, changed in 2014, has long restricted foreign investments in mineral exploration and utilisation. Reliance on bureaucratic, state-owned firms with outdated technologies and business practices has led to persistent underperformance. 

In the past, the country has lacked an internationally competitive mining policy that provides the right balance of economic returns to both the government and the investor. In a bid to tackle this issue and to attract investment to the sector, the government issued a new Mineral Resources Law No. 198 in December 2014 and its Executive Regulations No. 108 in January 2020. The new mining laws scrapped red tape and a profit-sharing rule unpopular in the industry. In 2020, during its initial tender under the new rules, the government awarded 82 exploration blocks to 11 companies.

The government aims to transition the industry away from a framework based on petroleum to one better suited to the investment requirements and production cycle of mining in relation to taxes, rents and royalties. In 2020, the government also offered tax incentives to mining companies and simplified the process of obtaining mining licences. 

Another challenge for investors has been limited geological information. The government is working on establishing a mining portal ─  along the lines of the Egyptian Upstream Gateway (EUG) portal in the field of oil and gas ─ which contains all the geological data and maps required by investors. The portal is expected to be launched during 2024 and will make it easier for investors to view potential opportunities.

In April 2023, the Egyptian Mineral Resources Authority announced a global bid round for exploration and exploitation of gold and associated minerals for the first time in five Eastern Desert regions, supervised by Shalateen Mineral Wealth Company, the state-owned mining company. It included blocs in five areas in the Egyptian Eastern Desert — Fatiri, Umm Ud and Hangaliya, Atud, Barramiya and Hamata. Four international firms — including Lotus Gold from Canada and Nubian Mines from the UK — are competing for the tender. 

Furthermore, in May 2023, President El Sisi issued a number of directives to further develop and exploit Egypt’s mineral resources, particularly tantalum ore.

The government is giving the mining industry renewed focus and it could become one of the country’s fastest-growing and economically strategic sectors during the next decade. Under the country’s overarching Vision 2030 plan, 40 initiatives have been put in place to attract greater investments, including in the mining sector. 

One of the Egyptian mining industry’s key advantages is its strategic location, with easy access to markets in the Middle East, Africa and Europe. But, in order to support mining activity, the sector has to build up local mining expertise and the government must invest in proper direct and indirect infrastructure, including laboratories, processing facilities and mine-to-port infrastructure. 

Analysts also say it would be a good idea to divide the Ministry of Petroleum and Mineral Resources into two separate ministries so that more focus could be placed on minerals. 

Egypt's mineral wealth has long been overshadowed by the appeal of oil and gas. But, with the right mining laws and infrastructure in place, the mining sector could attract many international players and become a significant alternative to oil and gas. It is time for Egypt to embrace its mining potential and pave the way for a more diversified and resilient economy.

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Egypt minerals mining oil and gas FDI