With two new large-scale gold mines set to open in the coming years, President of the Guyana Gold and Diamond Miners Association (GGDMA), Patrick Harding, says mining will be the future of Guyana.
“In the next three, five years mining will be the economy of Guyana,” said Harding. He added that production will increase significantly and small and medium-scale miners will play their part as well, since it is expected that their operations will move to a higher level with prospecting being done and more equipment utilized. “Within the next five years, we [the country] will move from agriculture to mining,” he said.
Two Canadian companies, Sandspring Resources and Guyana Goldfields are moving to open two large-scale gold mines in Region Seven in the coming years. On Wednesday, Sandspring and government inked a Mineral Agreement, which the company described as the “first comprehensive Mineral Agreement in the gold sector in Guyana since the Omai Agreement in 1991.”
Sandspring plans to operate a large-scale open pit gold and copper mine at its Toroparu Gold Project in the Upper Puruni.
In October, Guyana Goldfields announced that it had clinched a Memorandum of Understanding with the government for the Aurora Gold Project on the Cuyuni River which sets mining royalties and paves the way for a mining licence within 45 days. The Aurora Project will be the first underground gold mine in the Guiana Shield.
“We welcome the development. It shows the role mining is playing in Guyana,” Harding said. It shows that Guyana’s mining potential is being exploited, he said. “Mining will be the future of Guyana,” he stated, while adding that it is hoped that by the time production begins, the small and medium scale sector would have also developed tremendously. There would still be a role for the smaller miners to play even when the big operations start production, he emphasized. He added that they are anxiously awaiting the final report of the Special Land Use Committee, which was being discussed at the Cabinet level for some time now.
The Mineral Agreement sealed between Guyana and Sandspring details all fiscal, property, import-export procedures, taxation provisions and other related conditions for the continued exploration, mine development and operation of the open pit mine at the Toroparu Gold Project. The key fiscal terms are a newly implemented two-tiered gold royalty structure of 5% of gold sales at gold prices up to US$1,000 per ounce and 8% of gold sales at gold prices above US$1,000 per ounce; a royalty of 1.5% on sales of copper and other valuable minerals; a corporate income tax rate of 30% and no withholding tax on interest payments to lenders; and duty and value added tax exemptions on all imports of equipment and materials for all continuing operations at Toroparu, including the construction and operation of a planned port facility, road and power improvements and the construction and operation of the mine at Toroparu, according to a statement from the company.
The signing of the Mineral Agreement paves the way for the US$600 million to US$700 million investment to go on stream. The company has said that annual production over the first four years of operation is expected to average 310,000 ounces gold and 29 million pounds of copper. According to the company, at current prices, the mine would contribute approximately US$550,000,000 annually to Guyana’s Gross Domestic Product and it envisions some 1,000 jobs being created.
Under the Mineral Agreement, there are two pre-conditions to the issuance of a mining licence for Toroparu. These are the issuance of an Environmental Authorization by the Environmental Protection Agency and delivery of a feasibility study to the government. “Sandspring is in the final stages of securing the environmental authorization for mining operations at Toroparu, pre-feasibility work has commenced, and subject to a positive pre-feasibility study the company intends to proceed thereafter through to feasibility,” the statement said.
Meanwhile, it relation to Aurora, under its MOU, which sets out the key terms of the Mineral Agreement, Guyana Goldfields has received similar terms as Sandspring. The MOU sets the royalty rate at 5% on gold sales at a price of gold of US$1,000 per ounce or less and 8% on gold sales at a price of gold over US$1,000 per ounce. Corporate income tax rate is set at 30%. It also said that a Mineral Agreement (MA) and Mining Licence and all relevant permits and approvals were to be issued within 45 days of signing of the MOU.
For Guyana’s last big mining operation, Omai Gold Mines Limited (OGML), a royalty of 5% was paid. Corporate income tax was also a pivotal issue in relation to OGML. It paid no corporate tax over the period of its mining as it claimed there was no profit over the 15 years of the mine life.
Guyana Goldfields has said that the Mineral Agreement is the final step in obtaining the Mining Licence, since the Company had already received its Environmental Permit in September 2010.
Guyana Goldfields has conducted off-site infrastructure construction work in preparation for the development and construction of the Aurora Gold Project. It has said that upon obtaining the Mining Licence, it plans to start the construction of the on-site infrastructure, including a new camp, airstrip, river dyke and completing road access to the site, which will be followed by the erection of the mining facilities.
The Aurora Project will be the first underground gold mine in the Guiana Shield. Production is set to begin in 2014. Earlier this year, Claude Lemasson, the President and Chief Operating Officer of the company said that it is looking to produce 250,000 ounces of gold per year in a combination open pit and underground mining and expects that this will increase as further studies are done. He had said that the company is well funded and everything is geared towards starting development and construction by the end of this year.
According to the project summary, the development and operation of the mine site will involve construction and operation of the mine site, construction and operation of a hydropower plant on the Cuyuni River, construction of an access road to the mine site, and construction and operation of a wharf at Buck Hall on the Essequibo River. Ore recovery will consist of a combination of open pit and underground mining and the combined schedule will result in a mine life of approximately 12 years.
Guyana Goldfields has been operating here since 1996 and has invested $17 billion in exploration from then up to last year. This year $8 billion has been allocated for further exploration and pre-development. The company has 250 employees and contractors on a full-time basis and during development and construction this is expected to peak at around 700 workers, Lemasson had said. He added that during operations about 400 to 500 workers will be employed and they expect to maintain a workforce that is 90 to 95% Guyanese. The company will provide training to its employees, he said, while adding that indirectly over 10,000 will be employed in some fashion as a result of the project.
Lemasson had stressed that the project complies with IFC (the private sector arm of the World Bank) and other international standards and noted the potential use of hydropower. He said they are looking at a 15 megawatt hydropower facility costing between US$75 million to US$100 million with possible financing from the company, the IFC, other development agencies and other private sector partners.
