Mining to Egypt

Trends and opportunities

The market

Egypt is home to a wealth of mineral resources including gold, copper, silver, zinc, platinum and a number of other precious and base metals. These resources all lie beneath Egypt’s Eastern desert and the Sinai Peninsula, both part of a geological setting known as the Arabian-Nubian shield. With an estimated 6.7 million ounces of gold, 48 million tons of tantalite (fourth largest reserves in the world), and 50 million tons of coal, Egypt has the potential to be one of the top mining jurisdictions in the world.

While Egypt’s mineral wealth is world class, the country still lacks an internationally competitive mining policy that provides the right balance of economic returns to both the government and the investor. In a bid to address this and attract foreign investment, the government issued Law No. 198 of 2014 in December 2014, commonly referred to as the ‘Mining Law’ to replace the former law concerning Mines and Quarries issued in 1956 (‘the Old Law’).

Despite all the transformations introduced through the new mining law, it did not include needed reforms to the mining sector and its governing policy. For example, under the new law, the structure of bid rounds and production sharing via an operating company is cumbersome. The process is not seen as economically viable to potential investors despite the prospective mineral resource areas on offer.

Moving the tax, royalty and rent system away from the production-sharing system would attract greater investment in Egypt’s mineral resources. Although production-sharing arrangements work for oil and gas agreements, it is not preferred by mining companies. It is for this reason that, with the exception of Centamin Sukari Mine, Egypt’s mineral wealth remains undeveloped. Egypt’s mining industry has been almost entirely undeveloped, with only three main foreign players: CentaminAton Resources and Thani Stratex.

In January 2017, the Egyptian Mineral Resources Authority (EMRA) announced an international tender for exploring and extracting gold in five locations in the Eastern Desert and Sinai, including Umm el-Russ, Bokari, Umm Samra, Umm Ud and Hangaliya – under a production-sharing scheme. The UK’s Veritas Mining Limited, Ghassan Spain Investment, and Egypt’s East Gas Company each won a concession. Australian company Resolute was awarded two tenders.

Egypt is developing a major gold mining city in the Suez Canal with the hopes of boosting the mining industry and attracting billions of dollars in foreign investment. The first of its kind in the world, the ‘Gold City’ will be built on 130,000 square meters in the Suez Canal Economic Zone. The Zone was established in early 2017 to attract foreign mining investors.

Significant effort is underway by a number of parties to address the mining policy challenges. The Australian Government and the West Australian Government have been delivering workshops on leading practice principles for a sustainable resources sector.

Opportunities

Operational and environmental challenges in Egypt create opportunities for innovative solutions from Australian companies that operate in similar environments in Australia and globally. The Egyptian mining sector needs mineral processing technology, equipment and proven expertise to develop mineral-based manufacturing. There are also opportunities for equipment manufacturers and suppliers, and companies that provide engineering consulting, drilling and chemical testing services. The industry also requires training and upskilling to fill supply chain gaps across the mining lifecycle.

There is a particular requirement for companies in gold exploration, drilling technology, mineral processing technology and equipment, engineering, processing and construction turnkey, and consultancies to assist in establishing the significant infrastructure needed for the mining industry in Egypt. Building the new Gold City will generate major infrastructure projects to support mining activities, which should provide opportunities for Australian companies in the power, transport, communications and construction sectors.

The Egyptian Government’s effort to support investors, low-cost energy for output processing and highly skilled cheap labour all position Egypt as a new mining destination for businesses.

Competitive Environment

According to Euromonitor International, Egypt has a dynamic and young population, a large domestic market and a favorable location. The recent discovery of a major gas field is another encouraging development. Growth of real GDP will reach about 3.5% per year in the medium term. Egypt’s Planning Ministry has launched a series of labour-intensive infrastructure projects to reduce the jobless rate and accelerate productivity growth. These include constructing low-income housing, completing a new local airport, expanding the public bus system and increasing the number of households connected to the country’s national gas grid. The recent opening of the parallel Suez Canal could also offer benefits. However, any significant economic benefits will depend on the development of a large trade and industrial zone around the canal.

The government has also implemented a number of new measures. For example, it has introduced a value-added tax, capped public sector salary increases and allowed the Egyptian pound to float. In 2017, electricity prices were hiked by up to 42% and fuel prices were increased by up to 50%. Other reforms have been introduced as part of an IMF program, including tax rises and new investment and industrial licensing laws.

The Egyptian government has introduced a new investment law to improve the ease of doing business. Egypt’s first bankruptcy law has also been approved. Egyptian economists calculate that the informal sector - a part of the economy that is neither taxed nor monitored by any form of government and of which the activities of the informal economy are not included in a country's gross national product (GNP) or gross domestic product (GDP) - includes up to 18 million establishments – 40,000 of them which are factories. Altogether, the size of the informal sector could be equal to 65-70% of the formal sector.

Tariffs, regulations and customs

Please refer to the Egyptian Ministry Trade Agreements Sector (TAS) within the Ministry of Trade and Industry websites for a detailed breakdown of tariffs, import restrictions, and trade remedies.

Marketing your products and services

Market Entry

Australian products and services including consultancy, contracting, technology transfers and materials are used in the region. Providers of specialised services need to bid for projects, therefore a local presence is recommended. The bulk of materials in the region is imported through Dubai in the UAE. Major importers have significant warehousing facilities and well-developed distribution networks and branches in UAE, which is being used as a regional hub. Egypt has a strong manufacturing base and well-developed relationships with suppliers in Europe, India and China. Australian companies compete best when they have a value-added product with a distinct competitive advantage. In Egypt, there is a strong focus on forming relationships to carry out business. For this reason, companies need the commitment and resources to make a number of visits to maintain relationships with their partners or establish an office.

Links and industry contacts

Government Departments and Business

Mining Industry

Contact details

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Working in partnership with Australian state and territory governments, Austrade provides information and advice that can help Australian companies reduce the time, cost and risk of exporting. We also administer the Export Market Development Grant Scheme and offer a range of services to Australian exporters in growth and emerging markets.