Egypt’s second richest man Naguib Sawiris has made a $500 million bid for the Canadian gold mining group Mancha Resources, the most spectacular move yet into the yellow metal by an Arabian businessman.

Mr Sawris confirmed to The National newspaper that talks are in progress but declined further comment, except to say La Mancha has a ‘geographically diverse portfolio of assets offering exposure to growth.’

Golden assets

La Mancha operates four gold mines in Africa and Australia. Mr Sawris and his even richer brother have amassed a multi-billion dollar fortune as the founders of Orascom Telecom and have major investments in cement, construction, fertilizers and hotels.

They have made a great deal of money by being early investors in sectors before their future value became apparent. But gold mines are a completely new field for Mr Sawris and mark a major diversification away from his past successes.

Naguib Sawiris is worth $3.1 billion and his brother Nassef $5.1 billion, according to Forbes magazine. They could well be readers of the ArabianMoney investment newsletter which has been advising such a diversification strategy for some time (subscribe here).

It certainly does not say much for the global economic outlook that a man of such wealth is turning to the yellow metal as an investor rather than redeploying money into telecommunications, for example, where he has previously done so well.

Investment logic

But if you think the global economy is going to contract and the central banks print money to try to offset that deflation then it makes a great deal of sense to invest in precious metals. The price of these assets along with food, certain commodities like oil and even real estate are likely beneficiaries of central bank money printing even while the rest of the economy struggles at best with stagnation.

In this environment taking wealth out of the stagnant sector and putting it into an asset class that will benefit from reflation is a clever one. By buying a gold company Mr Sawris is also taking a bet that the highly depressed market for gold equities will outperform the metal itself as the price of gold goes up.

That is the theory, although it has not worked for the past few years. Arguably, however, that leaves gold mining shares cheap and even more attractive to bold investors like Mr Sawris. Perhaps his move is bold enough to spark a revaluation of the sector.

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