Mubarak’s fall could trigger Egypt gold boom in Sinai

Egypt could be on the verge of a gold mining boom

 

Originally published in The Independent, 18 October 2011

The fall of Hosni Mubarak could trigger an Egyptian gold boom as the government looks to carve up precious reserves in the Sinai desert which have remained untapped for decades. Officials have known about the potential for finding gold in Egypt’s mountain wilderness for years, yet a combination of security concerns and the complicated mining process have so far hampered serious progress.

Egyptian mining chiefs now plan to invite investors to carry out gold exploration in the Sinai – an area which was once occupied by the Israelis during the 1970s and which has been plagued by security problems since the uprising which toppled Mr Mubarak.

According to Dr Hassan Bakheit, the head of geological surveys in the Egyptian Mineral Resources Authority, the government wants to start receiving contract bids next year.

“We’re trying to develop the Sinai desert,” he said. “I think in the future there will be more explorations. I hope that if the revolution goes the right way and is not stopped by any further problems, Egypt will become known as a big gold producer in the region.”

Egypt is no stranger to the gold mining industry. As long ago as the third century BC, workers living under the realm of the Old Kingdom were unearthing the precious mineral from the volcanic rocks that line the country’s Red Sea coast.

Yet since the 1950s there has been virtually no serious investment in the industry. Only one company is currently producing Egyptian gold, the Australian firm Centamin, which is listed in London and Toronto and which started commercial production last year.

With an estimated 6.7 million ounces of the metal lying under more than 100 possible mining sites around the country, analysts say the potential value of Egypt’s untapped reserves runs into billions of pounds – a literal gold mine in a nation which could sorely use the receipts of its own mineral wealth.

Louise Collinge, a mining analyst for Evolution Securities, said there was “a lot of interest” about investing in Egypt. She said its location in the Arabian- Nubian Shield – a band of rocks that stretches down from north of Cairo as far as the Horn of Africa – meant it was ripe for gold prospecting.

But she added that with the current political insecurity it would be difficult for the gold boom to really take off. “It’s a big worry for any investor,” she said. “In theory there should be no problems at all. But the market is a bit worried as to what might happen.”

Centamin lost millions of dollars during the Egyptian uprising and saw its stock plummet by more than 25 per cent following the toppling of former President Hosni Mubarak in February.

“The worst case scenario for potential investors is whether they will still own their assets at the end of events like those in Egypt,” said Ms Collinge.

There are now six companies carrying out gold exploration at various locations along the Red Sea coast, though none have yet started producing commercially.

According to Centamin’s chief executive, Harry Michael, one of the main reasons Egypt did not open up to investors until only relatively recently is because previous governments simply did not think the industry was viable. When company bosses tried to tell Mr Mubarak’s officials that they were sitting on a fortune, the response was incredulous. “They said, ‘you guys are crazy’,” claimed Mr Michael.

“There is not much rainfall in Egypt,” he added. “A lot of the country is desert. Nobody goes there, and there was an opportunity for us to get something from that land for the nation and our investors. It was crying out for some kind of use.”

Yet according to Dr Bakheit, the reason that the Sinai desert’s reserves have so far remained off-limits is more political than economical.

He blamed the hidden “agenda” of Hosni Mubarak’s relations with Israel, saying he believed the government had a deal with Tel Aviv under the 1979 peace treaty not to develop large scale mining operations in the area.

It is a view not taken seriously by Bruce Maddy-Weitzman, an expert on Egyptian-Israeli relations from Tel Aviv University. “It makes no sense,” he said. “After 1979, Israel was interested in Egypt developing economically.”

Nonetheless it is clear the precarious security situation in the Sinai has hamstrung economic development. Centamin’s Mr Michael said it had “definitely been an issue” when it came to the government failing to pursue mining projects in the region.

And there are other political ramifications of a future gold boom in Egypt. Under Centamin’s deal with the government, it is obliged to pump half of its profits back into the state treasury.

Given that geologists believe the nation’s gold reserves could be worth many billions of pounds, the next few years could be critical in determining how well Egypt’s first post-Mubarak government can exploit the nation’s substantial mineral resources.

In a nation where 40 per cent of the population live on less than a dollar a day, a profitable gold mining industry – and the thousands of jobs needed to sustain it – could be a significant boon.

“I’m optimistic,” said Ibrahim Shalaby, the former deputy minister of the Egyptian Mineral Resources Authority. “We just need someone with some money who is not afraid to come here, invest their cash and see the benefits.”

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Egypt’s generals ‘fighting al-Qaida in the Sinai Desert’

Military vehicles guard a police station in North Sinai

 

Originally published in the Independent, 22 August 2011

Perched high on a sandbank overlooking the slums of Gaza, a man who calls himself Abu Nafaq points to a block of canary-yellow flats just beyond the Egyptian border fence.

“That is where the Israelis bombed a few days ago,” he says, referring to the Israeli bombing raid in response to last week’s ambush by terrorists in southern Israel. According to the Israelis, the gunmen who murdered eight people near the Red Sea resort town of Eilat came from Gaza – possibly sneaking out through the warren of smugglers’ tunnels leading into the nearby Egyptian shantytown of Rafah.

If anyone should know whether that is true, it is Abu Nafaq, whose nickname means “Father of the Tunnel” in Arabic, and whose livelihood depends on the network of subterranean routes used to ferry goods into the blockaded Gaza Strip. “During the January 25 revolution there were hundreds of Gazans coming through here,” he said. “Now it’s down to around 60 or 70 a day. Of course the Eilat attackers could have come through the tunnels. But they would need the support of the Bedouin people living here, because everywhere they will find checkpoints and roads they are not familiar with.”

Last week’s attack came only a few days after Egypt’s ruling military council – which took power after the president, Hosni Mubarak, was toppled in February – dispatched hundreds of tanks to the North Sinai region following outbreaks of violence in its provincial capital, Al-Arish, about an hour’s drive west from Rafah. Egypt’s generals said the operation was intended to drive out “al-Qa’ida-inspired militants” in the region. After the Eilat attack there was an added piquancy to the deployment.

Israel has been wary of its neighbour since the fall of its ally Mubarak, and suggested the military council had lost control of the Sinai. Tensions were further heightened when five Egyptian soldiers were killed during the Israeli response to the attack, sparking angry protests yesterday outside the Israeli embassy in Cairo.

But a recent visit to North Sinai by The Independent suggested the picture is far murkier than the official narrative provided by both Egypt’s generals and leaders in Tel Aviv.

No doubt, as the Israelis have claimed, there has been some movement of Palestinian militants across the border. But some say the al-Qa’ida threat is exaggerated. One military official based in North Sinai told The Independent it was not true that the Egyptian army was hunting for Islamist extremists inspired by Osama bin Laden’s terrorist network. “There is hardline Muslim sympathy here, but no al-Qa’ida,” he said.

Yet something is up. On 29 July, the same day thousands of conservative Muslims rallied in central Cairo and called for a greater Islamic role in post-Mubarak Egypt, gunmen laid siege to Al-Arish’s police station in a battle which lasted for nine hours. Some of the attackers launched rocket-propelled grenades at the 12ft-walled compound, yet when the fighting had finished, all the assailants escaped unharmed.

It was against this background – along with several unsolved bomb attacks on a gas pipeline to Israel – that the military sent its armour in. Locals who witnessed the fighting told The Independent they believed the attackers had local support. One man, a doctor who identified himself only as Hossam, said: “The people who attacked the police station were locals from Al-Arish. They used weapons from some of the big families here.”

The idea that locals nursing anti-government grievances were responsible for the operation has some credence. For years the vast expanses of the Sinai desert have been beyond the control of central authority in Egypt. Lawless Bedouin tribes hold sway in the central regions, while in the urban north there was never much respect for Mubarak or his policemen.

Yet, Hossam added, some of the attackers were fundamentalist Salafi Muslims, the hardline Islamists who eschewed politics under Mubarak but have become increasingly vocal since his toppling.

It is a view supported by Yahya Abu Nasira, a Bedouin tribal chief from Rafah, who claimed the threat from Salafi fundamentalists was growing. “The Salafi people want to separate from Egypt and to start an Islamic state from here,” he said. “After that they want to go from city to city. That’s why there was the action in Al-Arish.”

Others on the streets of Al-Arish pointed the finger of blame at Takfir wal-Hijra, a shadowy, amorphous offshoot of the Egyptian Muslim Brotherhood, blamed for terrorist attacks around the world since the mid-1990s.

Perhaps unsurprisingly, a Salafi sheikh in Al-Arish denied his followers were responsible for any violence. Mostafa Azzem said it was “the thugs and criminals in the Sinai who attacked the police station, not Salafis”.

Others are not convinced either. Lina Atallah, managing editor of Egypt’s Al-Masry Al-Youm newspaper, who has spent years covering the region around Al-Arish, said she was “in doubt” about the threat of an “Islamic emirate in the Sinai”. “Talk like that is taking it to the extreme,” she said. “I’m also extremely in doubt about the al-Qa’ida threat.”

Al-Arish itself has come under increasing Islamic influence since Mubarak’s fall. It remains a tourist city, but the niqab-wearing women who pack the streets at night during Ramadan lend it a distinctly provincial feel. And while government talk of “al-Qa’ida in the Sinai” seems far fetched, the military council has obviously been rattled by developments here.

Perhaps it genuinely fears the influence of hardline Islamism. Perhaps, as some have suggested, it simply wants to regain control of North Sinai after six months where police authority evaporated and the Bedouin stepped in to fill the vacuum. Either way, with Israelis rattling their sabres across the border over last week’s attack and Egyptians voicing their outrage at Tel Aviv’s response, the Sinai Desert – so often the theatre of the Middle East’s most pivotal conflicts – is on the frontline once again.