African Mining Network

AMN was established to develop and build relationships across Africa’s mining community, and give the world a preview of what is happening in mining in Africa.

AMN - Egypt out to show removing disincentives can lift exploration – comment by Yolanda Torrisi

Yol headshot May 2011

National mining reforms to welcome small explorers like those being introduced in Egypt can set countries on a path towards positive change and the hope of big projects to transform economies. Egypt is transforming its incentives' model for new projects in a move that could be the change it needs to encourage exploration and prompt new discoveries.

Aton Resources president and CEO Mark Campbell is hopeful that Egypt’s reforms will remove what he called the “exploration investment-destroying regime” of past decades and encourage the discovery of commercial-scale mines.

Campbell has praised upcoming reforms to Egypt’s 1956 Mining Law naming himself among those who have lobbied for change for 25-30 years. “The landmark amendments to the Mining Law and Executive Regulations [introduces an] epic change … the Government getting rid of the oil & gas Production Sharing Agreement (PSA) and going to a tax, rent and royalty regime.

“Developing a real exploration and one day a mining industry that allows for competitive terms and conditions in Egypt was predicated on doing away with the PSA, and Egypt has done that now.

“By getting rid of this exploration investment-destroying regime, the government has really taken a huge step forward in being in a position to attract investment.”

The legislative framework that African nations operate under can make a difference to whether there’s investment in new projects. It can also affect whether exploration takes place at all.

In Egypt, a production-sharing model exists, where the government takes 50 per cent of production revenues through joint-venturing. The model effective disincentivises junior explorers from entering the country to look for resources because the ownership structure made it harder for them to attract the constant financing needed to make discoveries.

Campbell acknowledges big players only come after small ones begin discovering commercial ore bodies. “Large mining companies … will come later, once a major commercial or potential major commercial deposit is found,” he says.

By setting up an environment to welcome juniors, Egypt has hope of attracting investment and new projects to a relatively stable jurisdiction.

Aton’s leader is encouraged by the hope of reforms, saying “What is happening now is the creation of an environment that will compete with the rest of the world to attract exploration companies like Aton to invest in Egypt.

“Aton has persevered over the years because we believe in Egypt, which has a great story to tell and abounds with opportunity. Now, all it needs is to attract the investment needed for companies to explore.”

It’s investment time in Egypt and on the rest of the continent.

A balance between state ownership and incentive models to encourage investment is something industry players need to encourage from regulators, so we can keep things moving and help transform economies.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the continent.