CEO.CA Chairman's Briefing

"In Egypt, time is accordion-like. Certain moments seem to last forever, but then everything is compressed and an era disappears in a flash." Pete Hessler, My House in Cairo https://www.newyorker.com/culture/personal-history/my-house-in-cairo

Bear markets on Howe Street sure seem to last forever, but the bull does run from time to time! And there are clear signs of bullish action in mining markets around the world today. Will Egypt benefit from idiosyncratic growth in their domestic mining industry within the backdrop of a global mining bull market? Will we see #EgyptMining as headline news?

Aton Resources (TSXV:AAN) CEO Mark Campbell has great insight into these issues. Read on for more about the global macro context and how he is leading Aton towards success as a Canadian-listed junior miner dedicated to minerals exploration in Egypt.

In a private conversation in May 2019, Mr. Campbell said the following.

"The fact of the matter is that the leadership at companies like Barrick, Endeavor, Resolute, Newcrest, and other miners with a focus on Africa are interested in the Arabian-Nubian Shield and are interested in Egypt. Egypt has everything going for it. It's stable. It has infrastructure. It has a readily available workforce, which is a low-cost workforce. It is a low-cost operating environment. And it's under-explored."

Aton Resources recently withdrew plans for an ambitious $5M equity financing https://ceo.ca/@Newton/looking-back-to-see-forward-at-aan-abu-marawat-concession . The new plan is to raise $1.5M. So what?

Mark Campbell noted this new financing allows Aton to continue working as the Egyptian government moves forward and generates news on the reform. Mark said, 

"Certainly, we may see news coming towards the end of the summer and beginning of autumn. If that helps put some wind in our sails, then we can always come back for more money. Hopefully, at that point, potential partners look at the work we've done and see us as very attractive opportunity." 

It may seem quiet, but the work continues for Aton! Between zooming around on satellite imagery and looking at old data with new eyes, there is lots of desktop exploration work. 

Hear more from Javier Orduña here, https://www.youtube.com/watch?v=KYeRMBLQv4c

There's also lots of business development work to do.

"Everybody who's come to look at it is very excited. We had a Chinese group visit about three weeks ago. They went away, 'oohing and aahing'. People like it and understand it. It's a great project, but we weren't getting much value in the market out of our drilling. Even though we're building value at the project," said Mark Campbell.

It's interesting to hear Mark speak about "not getting much value in the market out of our drilling". The market for junior miners continues to be challenging and it's important to hear what management do when the times get tough. The tough get going!

Mark Campbell told me, "Given the fact that we put out sensational results at Rodruin last year and got almost no real traction out of that, we had to rethink what was the best way forward. When they started announcing last year that they were scrapping the PSA and things were changing, there was talk about how they were going to have something out by the end of the year. That became a two-edged sword. It was great to hear and everybody got excited about it, but they wanted to see it happen. It's all well and good saying, "We're going to do this" but the proof of the pudding is in the eating. I think that has held us back."

Again, thanks for the comments about prior guidance on expected timelines for legal changes to Egyptian mining policy. Who knows what will happen next. I've written before about the potential for starting a Sovereign Wealth Fund based on government taxation of mining activities in Egypt ( https://ceo.ca/@Newton/op-ed-on-egypt-egyptmining-egyptfund-egyptvision ). There is such great potential here and I look forward to following this story for decades to come.

In passing, I'll briefly mention that I liked the idea of Aton's $5M financing plan from earlier this year. Even that budget was just a start for potential spending at the Abu Marawat Concession. A bullish explorationist may see potential to spend $5M per year for 4 years in a row as "money well spent". That's wildly optimistic.

Watch for Aton at the "Arab & African Mining Conference 2019" https://arabafricanmining.com/ 

Now, Aton is planning to raise $1.5M CAD with no warrants. Mark said,

"We have Middle Eastern investors coming in and it's open for any existing shareholders. I think it's an attractive price at two-and-a-half cents. It's an attractive price, but it's also extremely dilutive. So, we're going to do less. It's half of what we started out looking at. With these changes coming to Egyptian mining laws and people understanding that it's getting better, we will continue to do exploration work. There are things that we can do with geochemical sampling that we need to do. As things start to take shape, we can look at committing to a bigger capital budget to go back to drilling."

Funding for drilling, imagine that! Will we see funding for minerals exploration in Egypt? Yes, and it may prove to be headline news.

Again, Mark said "The fact of the matter is that the leadership at companies like Barrick, Endeavor, Resolute, Newcrest, and other miners with a focus on Africa are interested in the Arabian-Nubian Shield and are interested in Egypt." 

Learn more in an extensive conversation with Mark from December 2018 here https://www.youtube.com/watch?v=K4Bg_b98J8s 

Anticipating large changes in national policy like this require appreciation for cultural context. What do we know about Egypt?

Apparently "time is accordion-like" in Egypt. The writer who wrote that line for the New Yorker is named Pete Hessler and he was apparently a former neighbour of Mark Campbell in Egypt! What a small world.

Another neat thing to consider in passing is the 2016 article for National Geopraphic here ( https://www.eldia.com/nota/2016-8-27-egipto-el-primer-mapa-geologico-estaba-muy-adelantado-para-la-epoca ). Apparently, 

"More than 3,000 years ago, a government official took a roll of papyrus and traced the physical characteristics of an Eastern desert valley with such detail and precision that the document is considered the first geological map in history. If it were not for this map, probably Karr and his team would never have reached Abu Zawal." 

The first geological map? Imagine how that story could inspire Egyptians to become global leaders in mining in the 21st century.

This sense of national identity may not seem important for a junior mining company, but it is. Look at the support Quebec provides to itself through the incentives and funding it dedicates to the domestic minerals exploration business. Or Newfoundland with public support for all minerals exploration records, going so far as to store drill core for public and private companies active in the province. There is such great potential for Egypt to take the best parts of mining industries around the world and make something better. We can do better. Watch for news around June 10th as work starts again in Egypt with WoodMac. In the meantime, it's up to us to look further back to see ahead.

"Egyptian see themselves as Egyptians." Mark Campbell said, "They don't consider themselves Arabs. They don't see themselves, really, as part of anything else. They are Egyptian. And the Egyptians have real memories of when Egypt was a very successful country, economically. It was considered near the top tier of European countries. They want to get back to being seen as a tier one country again. To do that, they know that they have to create an environment that encourages investment. They're doing it."

He continued,

"The PSA is going away. that 50-50 Joint Venture is going away. We don't know specifics of what's coming in, but we know that they want something that is going to be attractive. People are waiting to see what happens in terms of this change. People have been waiting and talking about this change for a long time. I've been talking about it for nearly 25 years. It's coming."

How about specifics?

"The reform process is moving along at a pretty brisk pace. What's happening now is that it goes back and forth between the cabinet the Parliament. We understand the schedule is as follows with Wood Mackenzie. They are meant to start work on the 10th of June, which is the first official working day after Ramadan and the Eid Feast. This will be to implement changes. Part of that includes working on the Executive Regulation."

"The Amendments to alter the law and do all this are the overall operation. The Executive Regulations to the laws are the operating procedures and that's what's important. If it's tax-rent-royalty, then the operating procedures lay out what is the rent, what is the royalty, and so on. It also specifies other things, like exploration periods. What kind of payments and activities are required to hang on to exploration ground? It would also specify how you're able to pick up new ground, for example. All of that is yet to be crafted, overall. There are a lot of people that have an interest in that policy. The Treasury and Ministry of Finance, for example, are concerned with the tax revenue. The Ministry of Planning, Ministry of Investment, even the Central Bank all have some sort of stake in seeing the development of the mining industry. We don't know what the nuts and bolts are going to be until they go through the political process."

Well said, Mark! Watch, also, for more from the IMF, World Bank, and EBRD in Egypt. Egypt has potential to be seen as a pro-business nation, globally. Watch for more government financings and international deals in natural resources and other sectors.

"What we do know is that things are moving at a fairly brisk pace. That's important. They want to get this done. We also know that the task is to make this attractive for foreign investors. Tarek el-Molla and the new EMRA Chairman Osama Farouk Saied are smart guys. They're not career bureaucrats. Tarek el-Molla spent his career at Chevron and Osama Farouk spent his retirement at various companies in the exploration business. They understand the issues. We've had input. We've met with the Minister of Petroleum and we met with the Chairman, both individually and as an industry. We know that they've given it priority. They've had a lot of interface with Wood Mackenzie. And the EBRD. An important task is to help reform EMRA back into the Geological Survey of Egypt. There are various parts to all this, but, on balance, it is extremely good news and we're very excited." 

Thanks again Mr. Mark Campbell, President and CEO of Aton Resources for these extended quotes.

Read more in this article from May 13, 2019 titled, "Egypt’s cabinet greenlights Mineral Resources Act amendments" https://enterprise.press/stories/2019/05/13/egypts-cabinet-greenlights-mineral-resources-act-amendments/ 

Watch for more comments from Mark Campbell as the #EgyptMining story continues to unfold. Look for Mark to continue to lead Aton Resources towards bullish opportunities. The combination of additional discoveries at Abu Marawat and staking new projects makes for nice value-drivers on a micro scale, which fit well with macro scale. Potential changes to Egyptian mining law may soon make headlines around the world. Just look to Ecuador.

Please note that this is sponsored content. 

#EgyptMining, Headlines of Tomorrow? $AAN