- Mining venture combines allure of gold, romance of history
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SUKKARI, Egypt, Aug 23, 1999 (AP Worldstream via COMTEX) -- A little skepticism is in order when someone tries to sell you the pharaoh"s gold mine.
But even with gold prices falling, it"s hard to keep cool in the face of the enthusiasm of the Australian-Egyptian team bent on reviving Egyptian gold mining, which had it heyday in the time of the pharaohs.
The prospectors have a treasure map, a copy of a three-millennia-old cutaway drawing of mine tunnels used during the 1350 B.C.-1205 B.C. reign of King Seti I. The original, on papyrus, is kept in an Italian museum while Pharaoh Gold Mines geologists and engineers use diamond-tipped drills to probe the area the map shows, a stretch of southeastern desert near the Red Sea coast.
Pharaoh Gold Mines combines the undeniable allure of gold with the romance of Egypt"s ancient, glorious past. Following three years of test drilling, it also has facts and figures that have impressed some investment planners. What it doesn"t have yet is much gold: full-scale mining is at least a year away.
""Getting Egypt back in the forefront of mining is imminent,"" says an optimistic Sami El-Raghy, an Egyptian geologist who worked in Australian mines for 32 years before returning home to start up Pharaoh Gold Mines, a wholly owned subsidiary of the Australian-listed Centamin exploration company.
Kris Knauer of Australia"s BNP Equities, an analyst with a special interest in emerging companies, has been following the project and likes what he"s seen. But he says he would have kept an even closer eye ""if gold hadn"t done what it"s done.""
Prices plummeted after Britain"s central bank announced in May that it planned to replace much of its gold holdings with higher-yielding assets.
""As an exploration and mining company, we"re concerned,"" El-Raghy said. ""But we should make money at the current gold price, and we think the current gold price won"t stay that way very long. We think it will go up very quickly. By the time we start producing, gold will be in the range of dlrs 300.""
Sukkari, his mining concession some 800 kilometers (500 miles) southeast of Cairo, is littered with ancient mining tools. The gracefully curved mortars and crushers of gray stone were used to pound ore into powder, which was then washed with water in shallow pans to rinse out gold flecks. The gold was used for the glittering ornaments archeologists have mined from Egyptian tombs.
Later Romans, Britons and Russians worked some of the same mines, each wave widening and lengthening tunnels and adding to the network. Pharaoh Gold plans to dispense altogether with costly tunneling in favor of an open-pit approach.
The company"s Australian executive director, Mike Kriewaldt, estimates extraction costs at about dlrs 120 an ounce, comparable to mines in the United States where extraction costs are among the cheapest in the world.
A drop in a gold prices strangled mining all over the world at mid-century. Mines elsewhere recovered in the 1970s, but by then socialist policies in Egypt were scaring away investment.
Egypt began to open its economy in 1991, but the major mining companies continue to stay away. Continental giant Anglo Gold says Egypt is simply not a priority now.
Under the terms of a 1994 concession agreement with the government, Pharaoh Gold is free to export and sell gold and won"t be subject to taxes for at least 15 years after the start of production. In exchange, the government gets up to half the profits.
To start, the Pharaoh Gold team is concentrating on the 1,400 square kilometers (560 square miles) of Sukkari. It"s possible to drive across the concession for kilometers (miles) without running out of fingers to count the scraggly trees.
The desolation is a welcome sight for geologist Kriewaldt. There"s nothing to hide the red in the rocks that Kriewaldt says indicate oxidation, a sign they bear gold.
Kriewaldt looks at Sukkari Hill, a dragon"s tale of jagged peaks stretched out across the desert, with the eyes of a jeweler sizing up a diamond. He envisions most of it -- some 150 million tons -- pulverized in a mill and treated with cyanide to leach out the gold.
An outside expert"s assessment of chunks of Sukkari Hill drilled out by Pharaoh Gold indicates one section holds just over 2 million ounces of gold, company executives say.
The company already has spent 50 million Egyptian pounds (dlrs 14.7 million), and expects infrastructure costs to reach dlrs 400 million in the next few years, said Kriewaldt, who spent five decades mining in Australia.
""We can"t finance out of income because we don"t have it yet,"" he said. ""So we have to turn to investors.""
Red tape has so far kept the company off the Egyptian stock market. Australian investors, known for being cautious about any project far from home, have stayed away from Pharaoh Gold"s parent company, Centamin.
Though The Australian Financial Review has called it a ""potentially world class gold project,"" low demand has kept Centamin"s stocks in the 10-cent range, compared to hundreds of
times that for more established Australian mining companies.
Copyright 1999 Associated Press, All rights reserved. |
