Gold Mine in Upper Egypt

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Hafiz
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Gold Mine in Upper Egypt

Post by Hafiz »

Centamin Gold Mine.

About 30 k’s SW inland from Marsa Alam, going for 9 years, has waved off unreasonable and greedy government financial demands. Its Egypt so after they had dug a very big hole the courts cancelled their mining license in 2012 (everything lost) they got it back then in 2013 a 400 kg gold shipment from Sukari was prevented from leaving Egypt as authorities claimed Centamin needed a permit from the national petroleum ministry to do so. In 2014 they got stuffed around on digging a bigger hole inside their license then got stuffed again on power. In 2014 the court still hadn’t reversed its 2102 decision but there was the huge hole and tons of gold being produced and taxes paid and the government then publically threatening to increase the land rent – by 20,000%. It’s the new business friendly Egypt.

One way or another problems seem solved and it now makes a good profit and pays 60% of that profit in taxes and royalties, smelts and processes the ore on the spot, no Egyptian management but they were finally foisted with an Egyptian 80 year old insider as a director – with no experience relevant to mining and little or nothing outside government but I’m sure with a lot of ‘relevant experience’.

Here is the location of the mine – sort of Upper Egypt on the Volga/Vulga.

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Its a company that has grown from little to be worth about $US3 billion on the UK and Toronto exchanges in a 15 year period (about the same capitalization as the largest company on the Egyptian ‘Shock’ Exchange). They claim no/very low debt and lots of cash on hand – my god they can’t be an Egyptian company. We know they are not Egyptian because they have a woman on the Board, have audited accounts from a world leading auditor and publish a full annual report. http://www.centamin.com/. They also have to meet the listing and reporting requirements of a major stock exchange that isn’t based on Islamic commercial morality.

The founder and probably majority owner is Joseph El Raghy, Australian educated and widely liked and trusted in a very tough, successful and direct talking gold industry in Australia. That he has not listed in Egypt may have something to do with its corruption and the scarcity of capital for anything useful, complicated, worthwhile and which doesn’t deliver overnight.

Here is the mine:

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Other photos give you a sense of scale, capital and necessary management skills:

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Notice the immense water storage/used water reservoirs in the second above. The trucks in the first above are approximately as high as a two story house and the wheels about 12 foot high - i think, on the conservative side. The skills to maintain and service them would require strong and prolonged training.

They have done well in a period of uninspiring gold prices and a considerable drop in real terms since the peaks after 2008 as well as the problems of political instability. At the moment they produce about 500,000 ounces a year (16-20 years of reserves and about gross exports of $US600 million pa for a country that exports little beyond gas/oil) which is the upper end of the middle market for a gold miner and their production costs aren’t cheap – about half the current market price for gold.

So they are smart managers in a difficult political and commercial environment building something from scratch in a country with no mining and no previous gold mining and a bureaucracy that hasn’t a clue. A big risk has paid of.

About 2,000 employees including about 500 contractors (97% of total staff are local) and about 4,000 further jobs in Egypt which partly benefit. They are precise about their various obligations and have built and paid for 2 power stations at Marsa, a playground, education programs and other things. Most importantly they do direct consultation with the community on needs not just a military top down command or talking to some geriatric army governor. http://www.centamin.com/sustainability/ ... nd-society

I quite like their playground – its simple, uses wood not just steel and concrete, provides lots of shade and has plants. Presumably its for ordinary, including poor, kids.

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Here is some climbing equipment for kids but its well covered by a sun awning/tent – simple, necessary and not expensive – very un-Egyptian. Maybe they should try and establish a mixed sex cricket team or surf life-saving programs for both.

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Wages are good and they offer bonuses which are unlike government bonuses – loyalty, patronage or just to everyone but in their case are based on objective tests. The average basic wage is almost 5 times the national minimum. In addition, employees can earn up to 60% over the annual salaries with a quarterly bonus scheme. Bonuses are awarded based on productivity and cost targets not boot licking, family associations or groping.

Unlike others that pollute and foul, Centamin has had a published environmental strategy from day 1 including a rehab program for the site when they finish together with a sinking fund for this that they contribute and formally report on each year. http://www.centamin.com/sustainability/ ... l-strategy

I have no direct or indirect contacts, involvement or financial interest in Centamin.

Last year and after 5 decades of no or little exploration the government did a first by giving exploration licenses to 4 companies including Centamin to look in other areas in the Eastern Desert and Sinai for Gold.

For the usual Egyptian reason they gave it to mainly insiders with no skills relevant to mining or gold. One was a London registered ‘miner’ Veritas which has done no mining, has no cash flow but is owned by the El Nagy family who have major interests in Egyptian food. Its Board is dominated by geriatrics with no relevant experience. The second was Ghassan Spain Investments a firm of less that 49 employees that has never done any exploration or mining and has a turnover of less that E2 million a year. Third the Egypt East Gas Company that couldn’t even find gas and left that to Western firms. It seems to either do gas pipes or subcontract this to someone who knows what they are doing – I think its the second and it makes no claims that it has ever done any ‘dirty work’ out in deserts looking for anything.

Its almost as if they want the industry to fail or give windfall, parasitic and speculative profits to no-skill insider companies that just want to find and have no capacity to develop.

This and other state owned gas and oil companies are in multiple international arbitrations for bad behavior and breaking the law. At this stage Egypt is liable for $US1.3-4 billion in damages which cannot be appealed. There is another gas one pending for $US500 million. http://investmentpolicyhub.unctad.org/ISDS/Details/469 and this is a partial list of all the arbitrations pending and resolved http://investmentpolicyhub.unctad.org/I ... .Therefore their commercial reputations are probably ‘don’t touch them’.

Mining has big potential in Egypt because its largely unsurveyed/unexplored. How much exploration you can do from existing geology surveys (few in Egypt) or remote sensing I don’t know but I do know that there has been nearly 70 years of near prohibition on mining except for oil and gas and then done until recently by the government owned cripples. There are even problems with maps because the last time there was a full highly detailed map of Egypt was during WW2 by the allies which raises the question of what 10,000 engineers in the Military Construction Corps have been doing – probably nothing.

Geology requires unique skills and preparedness to spend months in harsh climates as Maureen Muggeridge at 31 years found in 1979 when she discovered the largest diamond mine in the world which produced 1/3 of the yearly world diamond consumption – Argyle in Northern Western Australia. A whole generation of female geologists followed her. Australia’s richest person and at one stage the richest woman in the world - $US20 billion - is a female miner – and horrible person.

In typical Egyptian fashion Naguib Sawiris has become ‘the world’s greatest gold miner’ or so it says in his press releases about his Australian and West African (putrid) interests and other press releases over 4 years that gold prices are going to boom. They haven’t and he is crawling away given his Egyptian huckster, narcissist techniques don’t work and he succeeds better in speculation in crooked markets.

Thank god mining requires careful people with 10-20 year views and this lot at Centamin seem to play it pretty fair and honest – a very small Egyptian category. This is a good story about Egypt of outside skills Egypt doesn't much like, sole overseas ownership it hates, risk taking which it hates, attention to staff, the community and the environment, persistent management who got no local help but lots of hindrance followed by a new age of exploration licenses most of which have been given to the familiar parasites with no skills or experience.

That no international specialist miner applied for or got a new gold exploration license continues decades when all the big ones including the dirty ones like Glencore, wouldn't touch Egypt. BP seems on the way out with oil, the dirty Russians coming in and the Italian barely has time to look for more gas given the dozens of corruption and worse court cases it faces.


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Re: Gold Mine in Upper Egypt

Post by Winged Isis »

It makes me weep to hear about the thousands of lost opportunities to bolster Egypt's economy now and into the future. especially when living there and seeing the daily suffering of it's people desperate for jobs.
Carpe diem! :le:
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Re: Gold Mine in Upper Egypt

Post by Major Thom »

Well said WI....
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