Egypt May Again Glitter With Gold : Precious metals: A mining company, armed with an ancient map, is laying the groundwork for an open pit operation near the Red Sea.

A little skepticism is in order when someone tries to sell you the pharaoh’s gold mine.

But even with gold prices down, an Australian-Egyptian team is bent on reviving Egyptian gold mining, which had its heyday in the time of the pharaohs.

The prospectors have a treasure map: a copy of an ancient cutaway drawing of mine tunnels used during the reign of King Seti I in 1350-1205 B.C. The original, on papyrus, is kept in an Italian museum while geologists and engineers for Pharaoh Gold Mines use diamond-tipped drills to probe the area the map shows, a stretch of southeastern desert near the Red Sea coast.

Pharaoh Gold Mines combines the undeniable allure of gold with the romance of Egypt’s ancient, glorious past, and three years of test drilling have impressed some investment planners. What it doesn’t have yet is much gold--full-scale mining is at least a year away.

“Getting Egypt back in the forefront of mining is imminent,” said an optimistic Sami El-Raghy, an Egyptian geologist who worked in Australian mines for 32 years before returning home to help start Pharaoh Gold Mines, a wholly owned subsidiary of the Australian-based Centamin exploration company.

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Kris Knauer of Australia’s BNP Equities, an analyst with a special interest in emerging companies, has been following the project and likes what he’s seen. But he said he would have kept an even closer eye “if gold hadn’t done what it’s done.”

Prices plummeted after Britain’s central bank announced in May that it planned to sell off much of its gold holdings and acquire higher-yielding assets. Just below $300 an ounce before the announcement, gold now sells for around $250.

“As an exploration and mining company, we’re concerned,” El-Raghy said. “But we should make money at the current gold price, and we think the current gold price won’t stay that way very long. We think it will go up very quickly.”

Sukkari, the company’s mining concession 500 miles southeast of Cairo, is littered with ancient mining tools. Gracefully curved mortars and crushers of gray stone were used to pound ore into powder, which was then washed with water in shallow pans to rinse out gold flecks. The gold was used for the glittering ornaments archeologists have found in Egyptian tombs.

Pharaoh Gold plans to dispense with the costly tunneling of the old days in favor of an open-pit approach.

The company’s Australian executive director, Mike Kriewaldt, estimates extraction costs at about $120 an ounce, comparable to mines in the United States where removal costs are among the cheapest in the world.

A drop in gold prices strangled mining all over the world at mid-century. Mines elsewhere recovered in the 1970s, but by then socialist policies in Egypt scared off investment.

Egypt began to open its economy in 1991, but the major mining companies continue to stay away.

Under the terms of a 1994 concession agreement with Egypt’s government, Pharaoh Gold is free to export and sell gold and won’t be subject to taxes for at least 15 years after the start of production. In exchange, the government is to get up to half the profits.

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To start, the Pharaoh Gold team is concentrating on the 560 square miles of Sukkari.

It’s possible to drive across the concession for miles without running out of fingers to count the scraggly trees. The desolation is a welcome sight for Kriewaldt, who is a geologist. There is nothing to hide the red in the rocks that he said indicate oxidation, a sign they bear gold.

Kriewaldt looks at Sukkari Hill, a dragon’s tail of jagged peaks stretched out across the desert. He envisions most of it--some 150 million tons--pulverized in a mill and treated with cyanide to leach out the gold.

An outside expert’s assessment of chunks of Sukkari Hill drilled out by Pharaoh Gold indicated one section could hold just over 2 million ounces of gold, company executives said.

The company has already spent $14.7 million and expects infrastructure costs to reach $400 million in the next few years, said Kriewaldt, who spent five decades mining in Australia.

“We can’t finance out of income because we don’t have it yet,” he said. “So we have to turn to investors.”

That hasn’t been easy.

Red tape has so far kept the company off the Egyptian stock market. And Australian investors, known for being cautious about any project far from home, have stayed away from Pharaoh Gold’s parent company, Centamin.

Although the Australian Financial Review has called the Egyptian concession a “potentially world class gold project,” low demand has kept Centamin’s shares in the 10-cent range, compared with hundreds of times that for more established Australian mining companies.