Brexit has spread panic and losses in the global market; despite drastic drops, Gold seems to be surging as a result of a weaker English Pound. With Centamin proving that Egypt is rich with gold, the question is: what is stopping Egypt from launching its own gold rush?
The infamous decision to Brexit the EU has left the world in disbelief and global markets in disarray, going so far as affecting Egypt’s stock market. Although many paint the decision as the beginning of a doom and gloom period for global economies, the reality is that Brexit actually provides Egypt with a golden opportunity to bolster its economy. Egypt’s land is rich with gold, but sadly only one foreign mining company – Centamin – is currently robbing Egypt of its gold and surpassing even their own expectations month after month. Therefore, the question becomes: why isn’t Egypt using the news of Brexit and the soaring value of gold to spur a modern-day gold rush in Oum el Donia?
The decision to leave the European Union is being blamed by some as being the result of growing racism and Islamophobia. However, one of the underlying issues that spurred many to vote to exit is the fact that the so-called establishment is working for the one per cent and leaving the rest shafted. Unhappy with the status quo, the people voted – not knowing the repercussions, but strongly believing that the system is broken and the only way forward is a drastic change. The same thing happened in Egypt, four years ago, during the first democratic Egyptian election in 2012. Faced with choosing between Ahmed Shafiq – a military approved candidate promising more of the same, or a Muslim Brotherhood candidate – President Morsi, Egyptians decided to give the establishment the finger, electing Morsi, even though many knew it would be disastrous to do so. The same thing is happening right now in the States, as clearly Donald Trump is not fit to serve as president, however has attracted a huge following rooted in racism, but also in a desire for an anti-establishment candidate to shock the system in hopes of repairing it or finding a better way forward.
Every time a decision is made that shocks the system, the first casualty is the stock market, as investors are looking to make profits and uncertainty leaves many panicking resulting in massive sell-offs across global markets. Despite being warned that Brexit would wreak economic havoc, many believed the establishment was lying about the consequences; within minutes of the announcement that Brexit had passed, markets began downward spiral with the exception of one skyrocketing commodity: Gold. The reason for this sudden surge is directly correlated to the drastic drop in the price of the English Pound; often, when a strong global currency suffers massive losses, many turn to gold as a safer investing alternative.
How Gold Reacted To The News Of Brexit
How the British Pound reacted to the news of Brexit
Meanwhile in Egypt, there exists only one gold mining operation, Centamin, who have for years been robbing Egypt’s gold from the Sukari mine. Almost every month since becoming operational, Centamin has exceeded the amount of gold they thought they would find. The discovery should come as no shock, as the Ancient Egyptians unearthed massive amounts of gold, having only the tools to dig approximately 30 metres into the ground. Today’s mining operations have the equipment to dig as deep as 800 metres. The Sukari mine has proved to be bountiful since officially launching operations in 2010; however, the deal struck with Egypt was shameful, as Egypt agreed to accepting three per cent of profits until costs of establishing operations are recouped, then they would split profits 50/50. This hasn’t started happening, but Centamin shares dropped toward the end of May as investors starting selling off stock, which has fuelled speculation that 50/50 profit sharing may soon be a reality. According to Seekingalpha.com, "The company's chairman has sold $25M worth of shares in the past three weeks." The timing couldn’t be better for Egypt as Brexit has sent the price of gold skyrocketing, and although this should send Centamin stocks skyrocketing, it has instead proven to provide modest gains, as speculation of profit sharing looms.
Still baffling many Egyptians is why we haven’t invested in our own mining operations. The high price of gold and a proven Centamin track record should fuel a gold rush, but alas it hasn’t. Part of the problem is the lack of know-how in building up the industry, which is made all the more embarrassing by the success of Egypt’s ancient ancestors. However, if Egypt put in the same efforts it did building an arguably useless extension to the Suez Canal, then Egypt would be in the position to replace the losses from the tourism sector with a newly developed profitable industry. Furthermore, over half the world’s gold is mined in Africa, with South Africa leading the way, and yet there are no refineries on the continent capable of purifying gold. The end result is that Centamin unearths approximately 200-400 kg of gold, which is either sent to the UK or Canada to purify. If Egypt were to build a refinery, it would be able to reap billions before gold leaves the continent.
As it stands, many continue to speculate the effects of Brexit, but its overall impact is largely unknown as this is the first time in history that a country has opted out of the European Union. This means there is no precedent on what markets can expect, and if investors can’t pseudo-predict the future of their stocks, they tend to sell, or buy into safer investments like gold. In Egypt, Brexit may come with negative consequences but, on the surface, should be beneficial as cheaper English pounds means a cheaper cost for British imports. We speculate that soon designer clothing like Burberry should be cheaper in Egyptian malls, but rather than rushing the malls, Egyptians should be pressuring their government to launch a gold rush, and by doing so, become one of the few countries that can stand to benefit from Brexit.
To learn more about how Centamin found Egypt's Gold click here.