The Story Within The Story…Fuel tax reduction

The Story Within The Story…Fuel tax reduction, underground mining and financing for small miners

January 18, 2015 | By KNews | Filed Under News

By Leonard Gildarie

This past week has seen some developments in the mining sector. Government has agreed to slash 10 percent off the tax for fuel, as part of a raft of measures to inject some life into the gold sector. These would follow tax incentives on spare parts and equipment and 4 x 4 pickups.

Dr. Andrew Ramcharan: Thinking outside the box

This year, too, in terms of production, is expected to be a much better year as far as declaration is concerned. While the small- and medium-scale miners managed to scrape in 387,000 ounces, two large gold mining companies are expected to be up and running this year. It would not be hard to envisage declaration surpassing 500,000 ounces. Yes, there you have it. I will be the first to say it.
But miners will have to continue seeking ways to reduce costs. The traditional ways and low recovery rates can no longer cut it.
This week, as we close the chapter on this remarkable sector, I want to touch on the scenario of Guyana moving to underground mining.
It is a totally different ballgame. At the risk of sounding unpatriotic, from several incidents of wall collapses and other incidents in the goldfields, I am tempted to say that we, as a people, like to throw caution to the wind. I believe that per capita, the number of deaths in the ‘gold bush’, is among the highest in the world. The figures, of course, would include murders and accidents. Every week, there is something or other happening. Our population can ill-afford it. We are losing too many, too fast.
Miners will have to find ways also to seek joint ventures or other forms of financing away from the traditional commercial banks.
Do we dare hope that some of our home-grown companies can move into the international stock markets?
Well, according to one company, with the right advice, miners and regulators alike can maximize on the many opportunities that exist.
Guyanese-Canadian, Dr. Andrew Ramcharan, has returned to Guyana and with his company, AAR Mining Consultancy Firm, intends to move Guyana to the next level. Not only does he have the background, but connections as well.
AAR promises to offer a wide range of services to both open pit and underground mining projects.
Ramcharan is targeting banks, Government, major mining companies, exploration and development firms, law firms, individual investors, international organizations and private equity ventures.

A truck with fuel drums at Rubis Gas Station, Providence.

He has worked as far as Alaska, Middle East, Chile, South Africa, Russia, Portugal, and in the underground mines of Canada. He has now partnered with local environmental consultants. The company has expertise, with over 100 mining projects worldwide.
According to Ramcharan, a former employee of the Guyana Geology and Mines Commission, he has international experience in project evaluation, due diligence, mergers and acquisitions, cost estimates, 3D modeling, and financial analysis. He has worked in project start-ups to production, investment banking, consultancy and corporate development.
He has been involved in gold, quarries, coal, industrial minerals, base metals and precious metal mining projects around the world and has assisted in formulation of regulatory documents and mining acts.
As part of his duties, Ramcharan, while working overseas, was involved in major takeovers valued at over US$800m, private placements $20m, raising finance $1B, and fending hostile takeovers.
With his training at the Colorado School of Mines, the University of Leoben and Harvard University’s Continuing Education program, the consultant believes that the time is right for Guyana to move to the next phase.
The current Mining Act, he says, does not cater for underground mining, or copper mining.
He pointed out that in the case of larger companies, like Guyana Goldfields and Troy Resources, they have to go overseas to hire accredited experts to prepare key reports, including of targets and progress that have to be published in keeping with regulatory requirements.  AAR has that expertise, the consultant explained.
AAR also has the capacity to conduct due diligence on investors, Ramcharran said.
He has worked also in IAMGOLD, a company that has operations in Suriname and Trinidad.
So with gold prices on the low side, why has AAR decided to come?
The consultant made it clear that the current gold price situation is an artificial one that cannot last.
“Gold works in cycles. It will go up. So it is an opportune time to come in.”
Ramcharan intends to go after small miners who have some money and want to expand.
“There is a lot of money out there. We can either set up the operations for a takeout or make it attractive enough that an investor can come on board with the small miner. We have this expertise. You need to do the paperwork, and that is what we do.”
Is Guyana ready for a new way of doing business? Only time will tell.
We have delved, in the past weeks into this sector which for many, remained a mystery.
I have asked our friends down at the New Guyana Marketing Corporation to provide us with details of the coconut industry. That industry has been experiencing phenomenal growth in recent years, after an age-old myth that coconut was bad for the health, was duly proven otherwise.
Quite a number of farmers are cashing in. I am hoping we can have those figures.
Have a pleasant week and please do continue to send those comments to or call weekdays on 225-8491.


The Story within the Story…GOLD TOO BIG TO FAIL: Missing a target but plotting a course


So the new year has begun. It brings fresh hope, a time perhaps to revisit the way we have been doing things and improve on them. Life is about mistakes, about not making that perfect decision every step of the way.
It was official on Friday. The gold industry recorded around 97,000 ounces less than the projected declaration that was set at the beginning of 2014. Guyana was again looking for over 480,000 ounces. Less than 390,000 ounces came in.
For hundreds of miners and a similar number of service providers and suppliers, last year was relatively devastating. The drop in gold prices from a high of US$1900 per ounce to US$1200, in a matter of months, could not have come at a worse time. Many of them had invested heavily, buying trucks, equipment like dredges, bulldozers and excavators, and even took loans to build their homes.

A dredge in operation.

When the price came crashing down, many of them were totally unprepared. For some it was the first time in mining. The harsh reality of the downward spiral was a rude awakening. Staffers had to be sent home. Many operations ceased. Suppliers took back their equipment or were forced to suspend payments. It was a dreadful situation as compared to 2012 when the industry was at its zenith and Guyana was glowing from the effects. Gold had become the biggest foreign currency earner.
Recently, I was driving through my street, on the way to work, when I saw the PVC ceiling of a home under construction being ripped apart by high winds. There was a look of frustration on the owner’s face. His contractor had installed the PVC without the necessary straps, and even the gutter boards, in place. So it was obvious that the wind coming in had to go somewhere. It lifted the PVC ceiling, ripping the material from the little that was holding it.
I believe that the man took a mortgage and being ill-informed, and with little advice from his contractor, decided to install that ceiling. It should have been last on the list of things to do. He paid the price.
Similarly, miners, including some of the first-timers, gambled that the price would have held out. It did not. Those who survived are the ones that had deep pockets and large operations feeding off each other. High salaries, costs of services and fuel, were the immediate challenges. The obvious solution was to either cut costs or close operations with the hope that prices rise soon.
There is some good news. The experts are predicting that gold prices may meet US$1400 per ounce this year. However, miners would have to apply their lessons learnt in the past months to keep their heads above water.

Closed operations were a feature during the course of the year.

So what are the answers to the industry?
The Ministry of Natural Resources and the Environment, in its recent year-end roundup, said that it has embarked on a number of initiatives to ensure that the industry remains competitive.
Training has been provided through the Guyana Mining School and Training Centre Inc. for in excess of 220 persons. Some of the training includes some of the best practices in recovering gold.
Another area of concern raised by miners regarding the state of roads to the mining camps is also being addressed. Last year, the Guyana Geology and Mines Commission (GGMC) spent in excess of $1.4B on roads and building infrastructure for 2014.
Government has also earmarked a sum of $1B for a revolving fund, towards mercury-free mining development, in another effort to safeguard the environment.
According to the Ministry, the gold trade, covered under the GGMC, must be seen in the context of the international drop in price for the metal. The price fell on average by 22% in 2014. Total declaration at December 20, 2014 showed a decrease by 22.61% over the corresponding period in 2013; and gold-purchased, by the Guyana Gold Board (GGB) fell by 41.24%.  Dealers’ quantity of gold exported increased by 10.16%, whilst the GGB’s quantity of gold exported fell by 40.26%.
“Thus, the overall quantity of gold exported is down by 22.73%. Moreover, the value of gold exported by dealers increased by 10.86%, whilst the revenue garnered by the GGB decreased by 43.48% during the comparative periods. The total revenue for the comparative time period fell by 23.45%.”

Mercury-free mining technology is being pushed by Govt. and the regulators.

It is obvious therefore that “belts will have to be tightened” if prices remain the way that it is now. It will rise again and Guyana will have to capitalize.
On Friday last, the miners’ association, the GGMC, said that miners had done remarkably well in face of the challenges last year. This year, said a heartened GGDMA, large-scale foreign investors, Guyana Goldfields and Troy Resources, are expected to start operations, with production expected to meet 2012 levels by the end of 2015.
But GGDMA opines that the industry can only be saved if a level playing field is allowed. The body wants the same incentives being granted to foreign investors to be extended to the small- and medium-scale miners. While it was not spelled out, the incentives would include tax breaks on earnings, vehicles and equipment, and even on fuel. GGDMA is adamant that the industry should not be disrespected any longer.
Industry experts are calling for a collaborative effort with the stakeholders and miners that could possibly see meaningful measures being implemented. The talks would include a reduction of fuel taxes – a key input in mining operations – among others.
But other analysts are simply warning miners to be cautious in any investments. Any borrowing would have to be realistically matched with the situation on the ground. The mistakes of last year cannot be repeated where the consensus is that operations were allowed to extend too rapidly.
In addition, the US$1200 per ounce mark remains profitable. But costs must be brought down. A long term look at technology that is mercury-free, in keeping with new requirements that will soon have to be enforced, may well be the way to go.
Guyana will have to greatly improve its recovery rates from operations also, improving efficiency as well. At the end of the day, it will mean adjusting operations to meet growing challenges. It will also mean capitalizing on opportunities that most likely will arise.


The Story within the Story… Measures to steady the gold industry

Guyana Goldfields Inc., a Canadian company, is set to start large-scale mining operations this year at Aurora, Region Seven.

In the past weeks we examined various aspects of the gold sector. From the rise when prices climbed to US$1900 per ounce, and the worrying drop, we have attempted from a layman’s perspective to bring the spotlight on an industry that has made many rich and, more than a few, heartbroken.

The vagaries of the market would make the sector a classic study case for a student.

The ‘gold bush’ is terribly beautiful and dangerous place that continues to draw fortune seekers by the hundreds.

This week we will focus on what Government has been saying with regards to the measures it has taken to help steady the sector.

As we speak, the issue has also started to attract the attention of the Opposition, with APNU stating that it lends support for miners.

According to the Ministry of Natural Resources and the Environment, Guyana’s gold mining sector has a sound footing and continues to grow. However, it is vulnerable to international market conditions, like prices.

The ministry acknowledged that the sector has been a major catalyst for economic growth in recent years. The rise in price on the world market has consistently helped in increasing declaration over the last decade.

“The importance of the gold mining sector to our economy cannot be over-emphasized since gold has been the largest earner of foreign revenue for the last seven years,” the Ministry said.
The Ministry made it clear that it has not stood idly by. Rather, through the Guyana Geology and Mines Commission (GGMC) with collaboration with the Guyana Gold and Diamond Miners Association (GGDMA), several areas have been identified aimed at ensuring that the sector remains viable.


An Inter-Ministerial Task Force was created to undertake specific interventions aimed at supporting and streamlining the sector.

The interventions include duty free waivers on spares and equipment. According to the Ministry, a list of 19 suppliers of mining equipment and spares were approved for tax waivers. This is aimed to reduce the cost of spares and critical supplies for miners and is an addition to other items like pumps, flexes, and mattings.

Based on requests, Government has also granted a fuel licence to GGDMA. The association is reportedly still to start importing, although it was granted the licence last year.

It is unclear what happens now that the oil price has dropped significantly on the world market but is not fully filtering down in Guyana because of the current fuel tax in place.

Also in place is what is called a Mercury Free Mining Development Fund. According to the ministry, stakeholders of the sector are fully aware of the need to increase gold recoveries and eliminate the use of mercury in the gold extraction process. The ministry argued that the adoption and use of mercury-free and improved recovery technologies is even more critical now given the low gold prices experienced by the sector.

The Mercury Free Mining Development Fund with a $1B startup is aimed at promoting such technologies, the Ministry said. Already work has started between the miners association and GGMC to test mercury-free technologies. Any new technology will have to ensure greater recoveries, reduced costs, increased revenues and ultimately a sustainable gold mining sector.

According to the Ministry, it is also continuing to examine different ways to maintain the many miles of hinterland roads. This is against the background that monies and other resources are limited.


“In pursuit of this, a combination of approaches was undertaken. GGMC is currently reviewing feasible road designs and construction methods that can be adopted bearing the constraint of financial resources in mind. Simultaneously, efforts are being made to implement Road Users’ Agreement for specific heavily traversed roads that are prone to destruction, since it is recognized that heavy usage of the road in wet conditions lead to damage and require continuous rehabilitation at significant cost.”

The Ministry insisted that the expenditure of funds on hinterland infrastructure is as a result of a collaborative effort with the key stakeholder, GGDMA. As a matter of fact, last year, the miners association provided a list of hinterland infrastructure for rehabilitation that it deemed critical. “These roads/bridges were rehabilitated and the same approach will be undertaken in 2015 whereby GGDMA will provide its considerable insight on areas for special focus.”

Also duty free concessions were granted on all terrain vehicles (ATVs), excavators, bulldozers and other machinery. “These waivers on duty are available to new entrants to the sector and for current miners based on production levels.”

Last year, according to the Ministry, it also approved the granting of waivers for double-cab pickups to miners based on their production levels which was used to determine the various categories and associated waivers that would apply. Three categories were established – Category A (Declarants with 5,000 ounces and above annually), Category B (Declarants between 2,000 – 4,999 ounces annually) and Category C (Declarants between 500 – 1,999 ounces annually).

Miners also have a concession on fuel where it only attracts 10% CIF Excise Tax.

According to the Ministry, through the interventions of the Inter-Ministerial Task Force, miners can now have access to 10% of their gold sales available in US Dollars to assist in retooling, capital acquisition and diversification of investments.

Last year also, GGMC held an auction where a total of 939 properties were placed for location. In addition, a lottery was held in Georgetown and at three interior locations won during the exercise.


With regards to the contentious delays in work permits, the Ministry said that GGMC has worked in tandem with the Ministry of Home Affairs and GGDMA to streamline the process for applications.

“Measures were instituted to ensure that the process is expeditious and as transparent as possible so as to ensure that mining operations are not constrained by workers not having the requisite documentation. Given the interventions of the Ministry, the application and granting process for work permits was reviewed and the duration for completion was reduced. In addition, as was recommended by the GGDMA, the effective dates of the work permits were revised to be the date when it was granted and not the date of application.”

Also put in place was increased security using police with collaboration from the miners association.

“The Ministry facilitated meetings between the Minister of Home Affairs, the Guyana Police Force (GPF) and GGDMA. This has led to the understanding of the security concerns and constraints facing the sector and established a working relationship between GGDMA and the Guyana Police Force. In addition, a comprehensive security plan was developed and presented to the GGDMA outlining the measures that would be undertaken to provide adequate security for the sector.”

The Ministry has also been working with police to expedite firearm applications for bona fide miners. In terms of training, the Ministry said that the Mining School is working to prepare persons in the entry level skills for the mining sector.

In addition to the fuel importation licence that was granted to allow for the cheaper importation of fuel, the Ministry said that Government is currently reviewing the possibility of providing tariff waivers on imported fuel.

As mentioned before, these are the measures that Government has said are in place to help cushion the impact of the gold price fallout.

Next week we will be examining the situation of what happens as Guyana moves to underground mining.

2014 Guyana Gold Declaration

Declarations short by 97,000 ounces… Gold miners demand same incentives as big operators to stay alive

January 3, 2015 | By chris | Filed Under News

As gold closed out a dismal 97,000 ounces short of its original 2014 target, local miners have stepped up calls for radical changes that will see real incentives to keep the industry alive for small and medium scale players.
Gold declarations ended the year at just over 387,000 ounces.
According to Guyana Gold and Diamond Miners Association (GGDMA), it now wants almost the same benefits as the big operators with the time now for key mining policy changes. This is to allocate more of the fiscal “benefits currently enjoyed by large scale licensees to small and medium scale producers as well.”
The association, in a strongly-worded statement, urged that these strategic changes be made immediately to “close the gap between the generous fiscal incentives awarded to large scale licensees”.
Without those benefits local gold production would continue to decrease and the large scale licensees would be unable to make up the slack, the body said.
“GGDMA is aware that short term strategic change to the fiscal regime for mining is not new to Guyana since the large scale bauxite operations currently benefit from substantially reduced or no royalty on the production of bauxite.”
It said that the strong, local capital investment in the gold mining sector must not be disrespected any longer. “The powerful multiplier effect of the local gold mining industry must not be hidden any longer. The right of the small miners to work in their chosen profession must be safeguarded. The opportunity for poverty alleviation through work in the local mining sector must be defended.” The situation is such that this year, Government must recognize that the aggregate contribution of Guyana’s local gold sector is by far greater than the projected contribution of large scale operations and their foreign direct investments.
“We call on the Government to improve the fiscal incentives for small and medium scale producers so that their contribution would not be strangled. Once again special congratulations to our local miners and best wishes and encouragement to the large scale licensees as they head to commencement of commercial production in the near future.” Government had budgeted 484,562 ounces last year but after a contraction on the world prices, revised the target downwards to 450,000 ounces or a 6.5 percent decline. The first half of 2014 witnessed a 24.6 percent contraction in gold exports earnings to US$226.7M.
Gold exports for the first half of 2014 declined 10 percent to 182,411 ounces. As a result, overall receipts from exports fell by 10.3 percent to US$534.2 million in the first half of 2014 compared to the corresponding period in 2013.
The gold industry achieved total declarations of 481,087 ounces in 2012, a record for the country, despite the falling prices then.
Congratulating the miners, GGDMA noted that this came despite extreme pressure caused by the low price of gold and with only limited support from the government once again.
“The Guyana Gold and Diamond Miner’s Association (GGDMA) congratulates local miners for their combined efforts to produce close to 390,000 ounces of gold for the year 2014. Although this is a shortfall on the 2013 record of 481,000 ounces our small and medium scale (SMS) gold miners delivered a heroic performance in 2014.”
GGDMA said it was confident that the operations of large scale operators –Canadian-owned Guyana Goldfields Inc. and Aussie-owned, Troy Resources Guyana Inc, expected to start this year, will help to boost the production figures.
The gold production shortfall would have severely affected revenue projections by Government with overall growth affected.
Gold has been a mainstay for the economy in recent years until prices fell out in 2012, forcing several operators to curtail operations. Before that, it had been one of the fastest growing employers, with workers attracted by the high pay despite the grueling hours and dangerous working conditions.
The spinoffs have seen the creation of numerous heavy machinery suppliers and other service providers. However, the price fall within the last two years, which has stabilized and hovering around US$1,200 per ounce, has become a major worry for miners, many of whom are heavily indebted to banks and suppliers.