Egyptian Gold Mining Eyes Rebound - Gainesville Coins News
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Egyptian Gold Mining Eyes Rebound

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Egyptian Gold Mining Eyes Rebound

For the most part, the world's most valuable gold deposits have all been tapped already. They are currently being exploited, or development on a new project has already begun. Yet one of the planet's traditional sources for gold mining, Egypt, has largely deterred large-scale gold mining due to burdensome government policies.

Now, however, the Egyptian mining industry is looking to make a rebound to its former days of glory.

Stifling Business

Since the 1960s, the Egyptian state has imposed a revenue sharing policy on its gold miners that make it nearly impossible for major mining firms to operate profitably in the country. The government takes half of everything that private gold mining companies make, which is far out of line with international standards. (Most governments simply collect royalty fees; Egypt also demands such royalties in addition to its 50% production sharing.) As a result, Egypt has mostly been spared the rapid expansion of gold mining projects seen throughout the rest of the world over the past two or three decades. Although Egyptian gold fields have been mined for literally thousands of years, these sites have never been worked with modern mining technology before.

Because of this lack of modern exploration, potential investors in Egypt's mining sector are stuck in the dark about the quality of the deposits that sit beneath the Egyptian sands. A number of sites have been mined around Egypt since ancient times, but obviously only the surface of these deposits has been scratched. Aside from one major mine, more advanced mining technology has never penetrated deep into the ground and rock formations to provide an idea of how gold-rich Egypt really is.

Opening the Doors

There is widespread speculation that the Egyptian government will ease its restrictive rules for sharing half of gold miners' production through constitutional amendments. Moreover, a generally more optimistic outlook for the country's finances is also helping to raise expectations for new mining projects. For the first time since 2009, foreign mining companies are being invited to bid on mining contracts.

According to Mining Weekly, gold mining in Egypt is expected to grow by about 6% annually over the next five years, topping out at 740,000 troy ounces of gold output by 2021. Another advantage for companies that want to mine gold in Egypt is the relatively weak value of the national currency, the Egyptian pound. This cuts down on the operating costs for mining companies and boosts profit margins. Greater gold production and a higher gold price could combine to solve much of the country's financial problems.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

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