Tuesday’s formal opening of Guyana Goldfields’ Aurora mining project will again place under close examination the quantum of benefits accruing to the country in return for the extraction of its non-renewable mineral wealth. This is not to gainsay at all the dogged perseverance of its founder Patrick Sheridan Jr whose numerous boat trips up the Cuyuni River going all the way back to 1996 epitomised a variant of the well-established travails of the humble pork- knocker. Numerous drills and assays later, gold in commercial quantities was confirmed to be present – as much as eight million ounces – and three quarters of this sequestered in a precious zone called Rory’s Knoll.
Cobbling together a deal that cost US$231m for the plant couldn’t have been easy considering the mix of mutual funds and international financing agencies that eventually partook. During this period, gold prices fell precipitously from their 2011 highs of US$1800-plus per ounce to just over US$1,000 even if the price of one of the key costs in the mining venture, oil also collapsed. Mr Sheridan and his company should be congratulated for sticking with what could not have been an easy proposition given the infrastructural deficiencies in the country, the investment climate and the political turmoil among other challenges.
With Guyana Goldfields being the first large-scale gold mine since the departure of Omai Gold Mines Limited and coming at a political transition that has seen lofty pledges of accountability and transparency, the public will look on keenly for full information on this deal and all of its regulatory intersections.
The deal with Guyana Goldfields was struck under the PPP/C government which was notorious for its secrecy and willingness to shield investors. The new government should move expeditiously to have the agreement with the company tabled in Parliament. This should include details on all of the tax and other concessions that it may have been granted.
Such information would gel with Guyana’s commitment for full openness in mining revenue flows under the international Extractive Industries Transparency Initiative, membership of which it is slowly inching towards. It would also set a template for the other large scale mining enterprise that is to come on stream later this year. Aside from what is likely to be the substantial purchase of local goods and services, the Guyana Goldfields venture promises significant inflows into the state’s revenue coffers. This includes US$509 million in corporate income tax over the projected 17-year life of the mine, US$263 million in gold royalties, payroll taxes estimated at US$67 million and excise taxes at US$43 million. By early next year there should be an accounting for the partial-year proceeds in all of these areas. In addition, since the ground-breaking announcement by the government of the creation of a Sovereign Wealth Fund, the public should be made aware of how much has been deposited therein from this particular venture.
One of the lasting regrets about the operation of Omai Gold Mines Limited is that it paid no corporation tax over 12 years, admittedly during an era of tame gold prices, and there was much debate on how significant its investment was, its total revenue streams and whether it was a good deal for the Guyanese man and woman. There must be a rolling discussion about Guyana Goldfields and a clear record of annual accrual of revenues will provide context for this. There should also be an inscribed framework for confirming production from the mine. Does the agreement with Guyana Goldfields provide the opportunity for the regulatory bodies like the Guyana Geology and Mines Commission (GGMC) and the Guyana Gold Board (GGB) to be privy to and to audit the gold production returns considering that a key portion of revenue flows is derived from royalty payments? The company should have no problem with this given the Canadian standards of transparency it is expected to abide with. What are the arrangements for the sale of gold from the operations? Is Guyana Goldfields handling this or will this come under the purview of the GGB. While the gold market is flat there is the prospect that shrewd hedging and sales on the futures market could optimise foreign exchange earnings. On the other hand, as has happened in the past with Guyana’s gold, disastrous decisions are also a risk and therefore this area needs to be addressed by all stakeholders and expertly guided.
Ideally, Guyana Goldfields should be offering more and more jobs to Guyanese. This is easier said than done considering the paucity of skills. For example, geologists in this country are hard to come by and many gold companies have had to seek these persons exclusively from other countries. An opportunity therefore exists for the state which under the previous government and this one has had access to mind-boggling amounts of monies injected into technical and vocational training and alternative career opportunities which don’t lead to well-paying jobs or self-employment. The government should work with companies like Guyana Goldfields and others in the industry to determine what positions are required over the next 20 to 25 years and to guide hundreds of Guyanese into training in these areas.
Finally and most importantly, Guyana Goldfields is using cyanide in the extraction of its gold. Cyanide has become a dirty word in the environmental history of this country because of the Omai Gold Mines Limited tailings dam collapse of 1995 which sent huge amounts of toxic effluent coursing through the Omai and Essequibo rivers even though there had been early warning signs that there were structural problems with the dam. In its development Guyana Goldfields has had to pay very careful attention to this area and the involvement of the International Finance Corporation in the deal was premised on rigid adherence to international best practices. Mr Sheridan has given a personal assurance that there is no risk to the dam and that the treated effluent would be safe to drink. However comforting that may be, the regulatory bodies particularly the GGMC and the Environmental Protection Agency (EPA) must have unhindered access to the mine site for regular checks of the structural integrity of the dam and for regular sampling of water in the pond and at any number of points in proximity to the mine and at various points along the Cuyuni River. This would also be an excellent opportunity for the University of Guyana’s environmental programme to be fully involved. The risk from this mine of a spill must gravitate to zero and the only way this is possible would be via the company’s own meticulous following of the standards laid out and by oversight from the regulatory agencies. To achieve this, it is clear that the EPA and the GGMC will require more resources and expertise -hydrologists, geotechnical engineers etc.
Guyana Goldfields provides a welcome and valuable investment. The risks attendant from it, financial and environmental, have to be scrupulously managed.
