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THREE MILLION OUNCES OF GOLD WITHOUT A PROFIT!

Jul 01, 2011 Features / Columnists, Peeping Tom

When Omai Gold Mines was first opened, there were high expectations. The Guyanese people were serenaded and told that this investment would do wonders for the country, create a great deal of jobs and improve the economy. Three million, seven hundred thousand (3,700,000) ounces later, the country is still wondering about the wisdom in allowing the exploitation of the mine.
Three million, seven hundred thousand ounces of gold was taken out of this country. In the process, the country suffered its worst ever environmental disaster, and yet Guyana is still poorer for all of that gold being taken out.
The deal also involved generous tax holidays for the company. The taxes that the government derived from the operations did not come from the company, but from the workers. And how many workers were employed then, and how much of a difference did that make to the country’s coffers?
The government got 5% in royalties. Some say that was not a bad deal given the sort of investment that had to be made. After all, this was not a mine which could have been worked by porkknockers. The gold was way deep into the pits and required industrial machinery to drill to where it was.
What was very amazing about this investment was that in all its years in existence, Omai never made a profit. Not a dime. One wonders why they did not pack up and bail out earlier.
Another company is now interested in exploring the mines at the site. And we have been told, through the foreign press, that they are paying US$11.5 million for the rights to the mine. This amount is to be paid over two years
But how much is this mine worth? How much gold is beneath the soil and just how did the government arrive at this US 11.5 million?
The government has so far said very little about this deal, but in an election year it should not making such deals, or if it is, it should exercise greater transparency and public disclosure about this deal.
The opposition parties contesting the elections should demand details of the deal and urge for an independent review. Otherwise they should signal their opposition to the deal.
For years, gold has been extracted out of the country, and given the size of our population every single Guyanese should have been rich by now from the wealth created. Yet Guyana is still one of the poorest nations in the hemisphere.
So what has the extraction of all of this gold done for us and why are we getting into another deal without disclosing what is the value of the gold reserves in the pits at Omai and how the sum of US $11.5 million was arrived at?
While we are signing these deals, we have entered into another one with the Norwegians which basically provides that we will preserve our environment in return for about US$30M per year.
Given the amount of wealth we have beneath our soil, should we not be demanding more from both the mining companies and the Norwegians?
While all of this is happening, it is reported that gold is being smuggled out of Guyana to other countries, including Suriname. The reason why gold is being smuggled is because of the relative differences in royalties between Guyana and those countries. When gold is smuggled out of Guyana, it is the Guyanese people that lose because they gain no royalties.
At the same time, there are many gold miners in Guyana who under-declare their production in order to evade royalties. Thus the government is being short-changed all around.
So why instead of charging royalties on production, does the government not charge a fixed resource tax, based on the estimates of gold reserves in certain areas?
Under such a system, a person receiving a concession would have to pay a fixed fee in lieu of royalties, regardless of whether he or she strikes gold. Such a system would ensure that the country benefits from the granting of concessions, it would reduce the smuggling of gold, since royalties would be removed and therefore there would be no incentive to smuggle, it would lead to increased gold declarations and also ensure that we are not ripped off by large mining companies.

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