By Peter @Newton Bell
They didn’t really need me to be there, but it wouldn’t have happened without me. That's the way I describe a small event I helped organize with Aton Resources in Vancouver last week. The CEO, Mark Campbell, was in Vancouver for a road show from Cairo and the timing worked out great. I went to the Kanye West show afterwards and was impressed. I think his 'floating stage' design has the potential of dramatically changing the social experience of a stadium concert.
I've recently written about the company on CEO.CA and enjoyed trying my hand as a promoter. I still have a lot to learn, but have appreciated the opportunity to get a seat at the table. I learned a few things at the dinner last week and want to share some of them with you here now.
Egypt is important to the West. Like, really important. The obvious reason is the Suez Canal. Approximately 8% of world sea trade goes through the canal, which was opened in 1869 after 10 years of construction. The capacity of the canal was recently doubled in a project that started construction in August 2014 and finished a year later in August 2015. The $8.4B "New Suez Canal" was financed with interest-bearing securities that were issued exclusively to Egyptian entities. Although the domestic-funding raises my concern around nationalist tendencies, I take this as a clear signal that major projects are possible in Egypt today.
A less obvious reason that Egypt is so important to the West is geopolitics. Stratfor does a better job of describing this than I can hope to do (here, here, and here), but the basics are clear: Egypt is too important to fail. Did you notice how things seem to be back to normal in Egypt since the 2011 Revolution? Egypt is too important to fail.
Frank Giustra filmed a 30-minute interview with Real Vision TV back in July 2016 where he briefly mentions how some of his best experiences building mining companies occurred in countries where he could help modernize their mining policy. I don't know the details of the deals that he was referring to in the interview, but it jumped out at me because of my experience in the agricultural investment space (farmland in Saskatchewan). It also came to mind at the dinner when Mark Campbell talked about his role in talks with the Egyptian Government.
Mark Campbell has a seat at the table with the Egyptian Government for talks to redesign of the country's mining policies. Major oil companies, like Exon Mobil, are at the table. Representatives of the single gold producer in the country, Centamin, are there too. I don’t know exactly what they're talking about, but I suspect that it concerns the countries tax policies.
Mr. Campbell discussed the Egyptian mining taxes in our interview here. The short version is that the entire mining policy regime was designed for oil and gas, not metals. This causes good things, like very large concession areas, and bad things, like a 50% marginal tax rate on profits after capital costs are recovered. Truth is stranger than fiction, so I even wrote a short, fictional story that attempts to capture some aspects of the tax policies and the distortions that they are causing for mining companies in Egypt here.
As a junior, Aton Resources is in a unique position for discussions with the Egyptian Government. Mr. Campbell earned his seat at the table through careful and diligent work in the country over decades. If these discussions go well, then Aton Resources can look forward to an open runway for exploration and development of their large concession in the historically prolific Eastern Desert. You can expect controversy as news of this policy change takes shape, as it is very political. However, the country needs to increase tax revenues and their mineral resources are underdeveloped. I encourage you to reach out to Mr. Blaine Monaghan, the Vice President of Investor Relations, at Aton for more information and updates as things progress.
