Change to Egypt's mining regulation is critical to the perception of success of Aton Resources (TSXV:AAN), but what change is required, exactly? Some people surely will never feel comfortable investing into mining in Egypt. Others have been doing so for decades already. With good deposits getting harder to find all over the world and an emerging bull market in mining, Egypt has an opportunity to benefit greatly. 

Recently, Egyptian President El Sisi’s directed the Minister of Petroleum Tarek El Molla to commission Wood Mackenzie to prepare a report on how to improve Egyptian regulations for mining. Aton CEO Mark Cambpell told me that this was an unprecedented development over the 23 years he's been involved with mining in Egypt (

The goal is simply to build a robust exploration and mining sector and hiring WoodMac big step in right direction. The Government announced,

"The project is being carried out in two phases. The first includes the work of diagnostic studies and the development of a strategic vision that ends in August 2018. The second phase consists of several operational projects based on the results and recommendations of the first phase, which is due to be completed by the end of next year."

In simple terms, Egypt stands to benefit by moving from production sharing agreements to tax and royalty along with other incentives for minerals exploration and development. They need to bring terms and conditions into line with the rest of the world to create an investment-friendly sector and do it as soon as possible. Mining bull markets can run quickly and it's essential that Egypt doesn't miss out completely on the next phase of the market cycle.

It may sound straight forward, but it depends on local political will. Set against a backdrop of ongoing participation by Egypt in the IMF Extended Fund Facility program (, policy change to encourage the domestic mining industry plays well on a high level.

With the IMF involved in the Egyptian macroeconomy, it is essential to have mining industry experts involved in helping the government understand the mining industry. There are myriad issues to consider from taxes to a national geological survey to avoiding conflict with local communities and much more. WoodMac is the right choice for their job -- look to their recent success with Ecuador, where they helped guide transformational mining reforms. 

You'll be pleased to know that the same team at WoodMac who helped Ecuador is now working with the Egyptian to overhaul the exploration and mining sector. 

In the same way Mark Campbell has dedicated his career to minerals exploration in Egypt, Keith Barron of Aurania Resources (TSXV:ARU) has a deep connection to Ecuador. Both men have been through bad times in the countries, but are there now because the regions off compelling opportunities. In a 2017 Interview with Dr. Barron (, he told me the story of staking properties online just minutes after the moratorium was lifted while competitors were at a cocktail party during PDAC 2016:

"There was a moratorium on staking in Ecuador for seven years. It was just lifted last year during the PDAC. While everyone was at the cocktail reception, myself and my chief geologist were at the computer filing for all the claims. All my competitors were at the Ecuador Day cocktail reception, but we foreswore that because we knew the properties were all coming open that day. It was a minute after 12 o'clock and there we were, ferociously filing all this stuff on two computers." Keith Barron.

It's a stunning short story that shows how important it is to be ready to act when opportunity presents itself. As Mark said in our first interview back in 2016 (, 

"It's difficult to run a business like this from Vancouver or Houston. You have to have someone here that knows their way around. If I was going to do it from Houston, then I'd have to have a 'me' and I don’t know a 'me', so I'm it! I'm here."  Mark Campbell.

You have to be on the ground early and have the support of serious investors. Aurania now has a +$50M market cap and great exploration results with well-known institutional investors. Aton has great results and institutional investors, too, but no love from market with a $5M valuation.

Despite the small valuations of minerals exploration companies, they can drive massive economic activity. Back in 2017, estimates were that Ecuador see $7.9 billion investment in mining in 2021 ( We are already starting to see what that might look like with a recent PEA by Lumina Gold (TSX:LUM) for the Cangrejos gold-copper project in southern Ecuador including initial costs of $831 million and an expansion at $406 million. Mining sure is a capital-intensive business!

The similarities between Ecuador and Egypt go beyond commissioning a report from WoodMac. For one thing, Ecuador had to create a mining ministry, just as Egypt talking about now.

There are differences differences, too. Whereas Egypt has little-no minerals exploration or development, companies in Ecuador were making discoveries but were leaving the country before putting them into production (  With a 70% levy on excess profits based on a pre-negotiated base price due immediately when the mine begins production and weak mining market conditions in 2013, I can understand why.

Since then, Ecuador changed their taxes so that excess profits are based on average commodity price over the prior decade, which is still a very heavy tax burden. However, there was some relief as the taxes started four years after the company recovered their full capital investment. That is an important feature that reminds me of the grace period that Centamin (LSE:CEY, TSX:CEE) had at the Sukari mine. It can be a long time before you recoup capital costs, as mines require ongoing capital expenditures.

As in this slide from the recent Centamin corporate presentation, Egypt received $187.4m in profit sharing and $121.2m in royalties from Centamin since starting Sukari mine. That is a large amount of money, but consider that Centamin returned $390m to shareholders over the past 4 years. In 2017, they paid out 100% of free cash flow for $144m. The Egyptian government needs WoodMac to understand that this is not the only option for taxation of mining companies. Imagine, what would Egypt have received from Sukari under a more familiar mine tax policy?

Beyond that, what could mining contribute to Egypt GDP in the future? Nevada is a major center for gold mining, producing 5.5% of the global total in 2015. All this gold mining is worth $5B or 3.3% of GDP, which provides the state government with approximately $90M in minerals taxes and an additional $250M in sales tax from companies who support miners.

Nevada may have problems with antiquated systems for tracking claims, but they have many strengths. Egypt is in a place now where they can take the best of all parts of the different mining regulatory systems around the world to establish policy that will serve the country decades into the future. 

Watch for news as Egyptian government representatives visit London to meet with exploration companies, miners, and mining investors to hear first-hand from them as to what they would want to see put in place for them to come and invest in Egypt.