Local gold industry slides into crisis

Nov 27, 2014 News

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– achieving target unlikely; stakeholders appeal for critical interventions

In what could be the worst nightmare yet for Government – in a year characterized by one bad occurrence after the

other – gold declarations are set to fall far below target, leaving the industry reeling from poor global prices.
With just over a month left for 2014 to end, declarations remain around 20 percent below last year levels for the same period. It is highly unlikely that the country could even rally to 400,000 ounces, much less the 484,562-ounce target set for this year.
More than 35 percent of the dredges have reportedly been closed by producers in recent months with local miners now declaring that the industry is in crisis from the fallout due to low prices.
Hundreds of workers have been sent home. Scores of businesses that depend directly on the industry are at a virtual standstill with key mining communities like Bartica and Puruni, Region Seven; Mahdia, Region Eight, Linden, Region Ten;  and Port Kaituma, Region One, reporting very little business from an industry that has been their lifeblood.
Banks have been reporting delinquent loans from mainly miners and other businesses that depend on the gold industry.
Heavy equipment companies are also reporting an increase in the repossession of machinery like bulldozers, excavators and trucks from miners, as monthly payments fall through.
Yesterday, prices were just below US$1,200 per ounce, way below the US$1,400 that miners say is the break-even point for profitability.
What could compound the problem for Guyana, is the fact that gold has for the last few years leapfrogged the traditional rice and sugar to become the country’s top earner.

In addition to the estimated 90,000 workers, the industry has been providing employment for spare parts and mining supply dealers; poultry farmers and groceries; fuel suppliers and transportation operators, hotel accommodation and boat owners. But there are now reports that businesses have declined significantly. Many would have borrowed heavily from the banks to expand their operations.

THE TIME IS NOW
According to the Guyana Gold and Diamond Miners Association (GGDMA), the time is now for critical interventions by the Government. “We cannot wait any longer,” one miner said.
Over the weekend, the association in public appeals in the daily newspapers, made it clear that the industry is in a crisis.
GGDMA, in a half-page advertisement in Kaieteur News on Sunday, urged miners to speak out so that Government can understand the gravity of the situation. The Association also called on miners to start wearing their yellow shirts to drive home the need for action.
“The mining sector has been driving our economy for the past seven years, generating enormous amount of wealth, employment and other spin-off activities in-keeping with economic growth.
Since last year, following the drop in the price of gold, the association has been meeting with Government, and submitting proposals that would ensure the sustainability of the mining sector.”
According to the GGDMA, President Donald Ramotar, at a meeting with miners on January 6, 2014, promised that certain actions would be taken. These included the immediate establishment of an inter-ministerial committee that would report

directly to him.
“The rationale for the necessity of an inter-ministerial committee is that the granting of duty free for equipment and spares, and reducing taxes for fuel is the responsibility of the Minister of Finance.”
Miners had also proposed a reduction of the rental payments for mining lands.
“The President stated that he foresees no problem in approving this, since it was within the remit of the Ministry of Natural Resources and the Environment (MNR&E). It is to be noted that this concession is only for small and medium scale miners.”
The Association has also requested a reduction on royalty.  This authority falls with the Ministry.
According to the GGDMA, the situation facing the mining sector today is dire. Not only are there daily shutdowns of dredges as operations become unsustainable, but so far “more than 35 percent of miners have been forced out of operation because of falling gold prices, increased fuel prices, high rentals for properties, inability to honour bank commitments, failure to pay instalments on machinery, deteriorating roads, among other prohibitive production cost.”
The association said it has held several meetings with the government in an effort to find solutions to the crisis spurred by low prices, “and particularly for the sake of the survival of the sector and to protect employment, but to date,  there has been little progress to alleviate the crisis”.

SIDELINED
Local miners fear that they are being deliberately sidelined and even driven out in favour of the

bigger, foreign operators.
“The mining sector produced a record 481,000 ounces of gold in 2013. Apparently there is no longer the need for the current crop of miners since foreign mining companies are promising to produce gold exceeding the Guyanese miners’ contribution.”
GGDMA also questioned the rationale used by Government to grant concessions to foreign investors, when very little is coming to the locals.
“The major fact is that profitability is determined by the cost of production, vis-à-vis the price of gold. It must be noted, however, that the price for fuel, spares, land rentals and wages, among other operating expenses, have remained extremely high.
“It is obvious, therefore, that these foreign mining companies are receiving concessions from the government that will dramatically reduce their cost of production. This is providing an unfair playing field for local companies.”
GGDMA said it must be noted that all concessions are a cost to the Guyanese taxpayers.
“It is an insult that minimum concessions cannot be approved to save the Guyanese miner.  Further, the concessions to the foreign mining companies are for the life of the mine; the minimum concessions being requested by the GGDMA are only temporary during this period of crisis.”
GGDMA pointed out, also, that it is a fact that local miners now own equipment that is almost the same as those used by foreign mining companies.
“We are investing billions of dollars to train our very own people to use this equipment.”
Staffers in the mining sector include operators for excavators, bulldozers, processing plants, mechanics and technicians, jet-men and pit-men, chainsaw operators, welders and fabricators, maintenance workers, cooks and boat captains.
According to the association, “Mining has become a way of life. We welcome foreign investors, but at the same time, we believe the local miners should be given a chance to succeed in our own country as well. The industry is too big to fail.
“We are not asking much. We are paying billions in taxes and royalties. We have many workers. We are the biggest foreign currency earners. We are asking Government to help us save Guyana and its people.”

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