DIGGING in Egypt’s Eastern Desert, 25km from the Red Sea, geologists for Centamin, a UK-listed gold miner, turned amateur archeologists when they stumbled on evidence of mining dating back 3,000 years. “They turned out to be pharaonic,” says Centamin CEO Martin Horgan, referring to the ancient diggings.
Modern-day Egypt has lowered a mandatory requirement for state ownership as part of the liberalisation of its mining code. Centamin operates the 500,000 oz a year Sukari mine in the region, which is known as the Nubian Shield, but it wants to find more gold.
While the Nubian Shield is well understood geologically, it is chronically underexplored in a global gold industry growing short of new discoveries. There’s a lack of exploration similar to Egypt’s in regions throughout West Africa, such as Liberia. As with copper and lithium, gold is facing a potential supply crisis.
“A statistic I find very interesting is that if you look over the past 30 years, the S&P says that on average there’s only one new mine of more than 200,000 oz, and 10-million ounces of reserve,” says AngloGold Ashanti CEO Alberto Calderon. “That is nothing in terms of stock and flow of the industry.” He thinks the gold sector is heading for “an interesting place”.
Mining equities are often less preferred in an elevated gold price environment, like now, but the scarcity of new gold could put a premium on those companies that have a pipeline. One reason for this is the lack of investment foresight. Investors are captive to quarterly returns — quarteritis, as Barrick Gold’s outspoken CEO, Mark Bristow, has described it. “We’re not finding the gold and that’s a big challenge,” he says. “Mining is a long-term game requiring long-term capital deployment.”
Says Horgan: “We have access to cash flow and can explore. But the real life blood comes from the junior mining companies. They are like R&D in the medical industry.” Before joining Centamin in 2020, Horgan sold his Toro Gold, a junior gold mining firm, to Resolute Mining, an Australian company, for just over $300m. “If I was a junior now raising money for exploration, it would be tough. In five to seven years from now we will start to see the impact of the lack of investment. We need to be exploring. The junior market is really hurting.”
One sceptic of this argument is Rhona O’Connell, head of market analysis, Europe, the Middle East and Africa and Asia for StoneX.
“I started working in the mining sector in the 1980s and I have heard this concept of peak gold, peak oil, peak copper … it never happens. The oxygen brought by the juniors has always borne through. I’m not saying it’s always going to, but a rabbit comes out of the hat almost every time.”