Editor’s Note: For updated information on the topic, be sure to check out our resource page on investing in gold.
Investing in Egyptian gold is starting to gain some serious attention. After a +50-year hiatus, the Arab Republic of Egypt reclaimed its status as a commercial gold producer just last summer. Total output for 2007 is estimated at approximately 14,000 ounces of gold. And because of strong support from the Egyptian government to attract foreign investment, the country is expecting to increase its gold production by nearly 2,000% this year.
Egyptians, Gold, and Ra the Sun God
The culture of the Ancient Egyptians revolved almost completely around the Sun. In fact, Ra, the god of the Sun, was the most powerful and revered of all Ancient Egyptian deities. Ra was considered the god of kings and king of the gods. And because the polished, shining surface of gold resembles the brilliance of the sun, the yellow metal was considered divine by the Ancient Egyptians. They even called gold “the flesh of the gods.” Gold was seen as a real-life manifestation of their religion and represented immortality in the afterlife.
Ancient Egyptian artisans lavishly used gold in decorating important temples and tombs that date back more than 5,000 years. Of particular note are the gold items discovered by Howard Carter and Lord Carnarvon in 1922 in the tomb of Tutankhamun (or, as he’s more popularly known, King Tut), the young pharaoh who ruled Egypt in the 14th century B.C.
Considering the Ancient Egyptians’ reverence for and use of gold, exploration and mining would have had to play a major role in day-to-day life of the people. Gold production in the region over the past few centuries, however, has been virtually nonexistent.
But now, in light of recent record gold prices, the Egypt government is pushing to revive the ancient deposits of the precious mineral that symbolized the glory of the old religion. Some of these deposits have not been worked for over 2,000 years and, of course, have not seen the likes of modern exploration, making them almost irresistible to eager speculators looking to make money in today’s gold market.
Egyptian Gold Production
In July 2007, Egypt once again became a commercial gold producer after more than 50 years of abandonment. For 2008 the Egyptian government is working with foreign investors to increase the country’s gold production to nearly 300,000 ounces, compared to the estimated 14,000 ounces produced in 2007. This ~8 ton production represents more than the country’s total production during the entire 20th century.
A little over a year ago, Egypt signed a memorandum of understanding (MoU) aimed at restructuring the gold mining sector, which officials forecast could bring in more than $10 billion and reshape the country’s economy. This would account for about 10% to 12% of the gross domestic product.
The MoU was signed to replace Egypt’s old mining laws. These antiquated mining laws, based on profit-sharing, made foreign investment in exploration and development virtually impossible. And because of a serious lack of investment over the past 50+ years, local expertise is currently insufficient to develop a home-grown industry.
Egypt’s gold reserves soared to 70 million ounces in 2006 (up from 3 million in 2005) as a result of exploration campaigns carried out by three international companies in the areas of Jabal Al-Sokary and Hemsh in the Eastern Desert.
Investing in Egyptian Gold
The largest of these companies, Australian-based Centamin Egyptian Ltd. (TSX: CEE; AIM: CEY; ASX: CNT), claims measured and indicated resources of 7.46 million ounces plus 3.7 million ounces of inferred gold resources at the company’s Sukari gold project. Centamin has increased the gold mineral resources at Sukari by over 700% since 2000 through exploratory drilling. The company is hoping to continue adding gold resources to the Sukari project and currently has nine rigs drilling the property.
Recent drill results (not included in the most recent resource estimate) show very high-grade gold mineralization including 48 meters of 2.47 g/t of gold and included 1 meter that assayed a mind-bending 5,420 g/t gold. Below you see the visible gold found in this 1-meter core sample.
A newly reformed gold sector in Egypt promises to generate significant revenue and create many jobs. So the government welcomes the industry with open arms. In a newspaper interview last summer, Mr. Sameh Fahmy, the Egyptian Petroleum and Mineral Resources Minister, stated, “We have huge reserves. We want international companies to join us.”
In 2006 the Egyptian government awarded eight exploration licenses to seven international companies. The government also awarded six new licenses in November 2007 to explore for gold in the Eastern Desert.
Gold prices have nearly tripled since 2001, buoyed by a falling US dollar, higher oil prices, declining production, and new demand from speculative investors. Egypt is the newest region to revive production after a six-year surge in prices. As prices continue northward, I expect to see more and more revivals of old deposits around the world. The restoration of these deposits will continue to offer the market new potential, and profitable, investment ideas. And we should always keep an eye out for these types of opportunities.
Until next time,