The high gold price on the international market has pumped vigour into the mining sector and driving export earnings past sugar’s for last year as a result of new investments and financing for small and medium scale miners.
In the last few days, gold on the world market topped US$1,033 an ounce. Secretary of the Guyana Gold and Diamond Miners Association (GGDMA) Edward Shields said that because of the high gold price, many people were either getting into gold mining or getting back into it after a lull.
There have been record declarations for the first three months of this year, he said, adding that he was assured that this was because of the price being paid.
Shields, whose association represents tens of large and small miners, said that because of the boom in prices and in production, miners were finding it easier to access financing to purchase the necessary equipment. “Banks are now pursuing miners to finance their purchases, when before we were shown the door,” Shields said.
He said the Guyana Geology and Mines Commission (GGMC) is opening up new areas to small miners by way of lottery. “More land is being made available for gold mining but the state of some of the roads remains a problem in the rainy season,” he said.
According to Shields, there is a dearth of skills for gold mining in the interior and he noted also that the needs of the sector have grown beyond the GGMC’s monitoring capacity in terms of field officers.
In terms of smuggling, he said, there will always be individuals bent on beating the system and this will only increase with the high price being paid for gold.
For last year, total investment in the mining sector was estimated at US$100 million, with in excess of 12,000 small claims and 4,000 medium-scale permits issued. The declared production of gold in 2007 was 246,199 ounces with a total production value of $62 billion.
Economist at the GGMC, Wycliffe Abrams, told this newspaper that price was the chief catalyst in the upsurge of gold mining activity and productivity. According to Abrams, the average export price for Guyana’s gold in 2007 rose to US$659.23 an ounce, an increase in 16.6 per cent over 2006.
In 2007, the volume of gold exported was 239,995 ounces valued at US$158.2 million, up 18.6 per cent in volume and 38.3 per cent in value over 2006’s result of 202,337 ounces and US$114.4 million. The earning for gold was the highest for any sector, surpassing sugar.
Abrams said this activity was testimony to the work of the small and medium-scale mining industry, since the last operating large scale mining company, Omai Gold Mines Limited, closed its operations in 2005.
“The key factor is making land available, to try to get more people [involved in gold mining] as more blocks become available,” he said.
Abrams said it was much easier for the small and medium-scale companies and operators to adjust their capacity to meet the demand of the sector, brought on by the attractive prices.
He pointed out that before 2005, it was difficult for miners to access loans from commercial banks “probably because of the structure of the industry.” Abrams said too that the industry, from around 2005, began to reform and the commercial banking sector recognised this.
He said the sector was very capital intensive and one of the chief users of heavy equipment.
All time high
Acting general manager of the Guyana Gold Board (GGB) Anantram Balram said that the price of gold was at an all time high, despite what took place in the early 1980s. “In terms of dollar to dollar, gold is at its highest price,” Balram said.
However, he was cautious about pronouncing on whether the price today was higher than that of the early eighties, when the price reached US$800 per ounce.
He said that though there has been a greater declaration, declaration and production were two separate things altogether. He said that in January and February this year, declaration surpassed what it was for the same period last year. He was also wary of pronouncing on March 2008 because of the many holidays.
Gold declarations benefit the state through a five per cent royalty and a two per cent withholding tax.
“Over the past week we have been seeing higher prices for crude oil, to US$111 per barrel…and the US dollar is further weakened with the US economy still on the decline,” Balram said, adding that the reduction in US interest rates has also contributed to the shoring up of gold prices, as investors seek out safe-havens for their investments, rather than financial instruments.
He explained that over the years, gold prices have followed either the strengthening or the weakening of the US dollar.
“With the increasing of the price of gold, I don’t see much bad in it for Guyana. It means a high level of foreign exchange will be available to the country. Gold’s contribution to the economy will be [more significant] and it can give miners the level of financing they need.”
He said that with the high prices, the miners could use cash to diversify instead of reinvesting in mining, so that they could have a wider portfolio.
“The Guyana Gold Board buys and sells gold… we don’t do price setting. We buy gold at the London Daily Fix,” he said, adding that the GGB buys the risk when it buys the gold.
With no end of the US dollar woes or climbing oil prices in sight, Balram opined that the price of gold could reach US$1,200 an ounce in a short time. A report from Forbes magazine, published on Monday last, said that faltering market conditions could see the price of gold going to US$1,800 an ounce within a year.
A number of new mining outfits have been preparing for exploration in Guyana.
Three such companies are Sacre-Coeur Minerals Inc, a Canadian gold-mining firm carrying out exploration Million Mountain in the Northwest District; Strata Gold Corporation of Canada prospecting in Region One (Barima/Waini) and Guyana Goldfields, a company prospecting in Guyana continuously since July 1996.
Now lucrative
Former president of the GGDMA and manager of Jardine Mining, Stanislaus Jardine, told this newspaper that with the high price of gold, claims that would have been previously unworthy of investing working capital on were now lucrative.
Jardine’s operations are located on the Essequibo River at Yaya Landing and at Mahdia.
He too said that record numbers of people were entering into gold mining, since small finds previously considered unfeasible were now in demand.
He said that many areas that were considered not profitable five years ago were now being worked profitably. “Now it’s different… a lot of people are upgrading their equipment every day,” Jardine said.
Jardine was of the view that gold was not likely to fall below US$900 an ounce, ever again. He said that for the country to benefit fully from the high price, both the government and the miners have to build on the partnership that exists between them.
Jardine said that with the boom in gold, his company is investing some US$250,000 in new equipment, which will be arriving in six weeks’ time. He said this equipment includes excavators and pumps.
Asked about the ease with which the commercial banks now made loans to miners, Jardine said this was indeed true, but his company has never had to borrow to finance its investments.
“We want to encourage new investment, but the lottery system isn’t working… these areas should be proven as being [profitable] before being allotted to miners,” Jardine pointed out. He said that many small miners, encouraged by the high price, stake their claims through the lottery and invest large sums of money, only to find that the lot was worthless.
