The Story within The Story...Gold: Too Big To Fail

The Story within The Story…Gold: Too Big To Fail

Dec 07, 2014 News

By Leonard Gildarie
After almost more than two years delving into housing issues – on matters affecting particularly first-time home owners

Leonard Gildarie

– I decided that enough had been said and it was time to bring the curtain down. Of course, the calls were many from readers who were starved for information. I will admit I missed sharing my thoughts on housing, a pet subject of mine.
I accepted the inevitable; it was time to move on and explore other areas that are also so critical. I have been following with much interest the phenomenal rise of the gold mining sector in recent years. It is unbelievable how little we know of this country.
As a journalist, I have been fortunate to travel to many parts of the country. We do happen to have an extremely beautiful land. It is difficult to describe the beauty without experiencing it. I know of many Guyanese who never ventured a foot in hinterland or “bush” as it is known. They are missing out big time.
I learnt that one can drive through Linden, along the Ituni trail, and reach Kwakwani, a logging and bauxite mining community located up the Berbice River. I have seen Lethem, a settlement that borders with Brazil. I went to Omai, once the country’s biggest gold mining operation. Port Kaituma, in Region One and Mahdia, Region Eight, along with Bartica, should be a must-see for all Guyanese who profess a love for this country.
Another world lies right within Guyana and it is waiting to be explored. Even Black Bush Polder, Corentyne, Berbice, should be experienced, even if just for the sights for the rolling rice fields or the boulangers and butter squash hanging over the fences on the roadway
I learnt that Bartica can be reached by boat via the Essequibo River by heading south or through Linden and Sherima Crossing. Kaieteur Falls is perhaps one of the biggest sells for Guyana, but a few “bush” lovers would insist that there are many falls and sights just as spectacular. Until a sunset or sunrise is seen, it can never be explained.
Men and women have been drawn to the wildness of the interior, not only for its beauty

Sherima Crossing, Essequibo River.

but for the wealth from mining that can be made. It has been that way decades now, until about seven years ago.
Over the last few years, developments on the world market forced traders to start banking on gold, as the US dollar weakened amidst the global economic crisis in 2008. That situation has proven to be a boon to Guyana and a few other countries. Gold prices rose on the world market, sparking a mad rush by existing operators, speculators and others who were looking to cash in. The dangers of malaria, crime or bad trails meant little when compared to the dream of a big find.
I have been doing some research on gold mining and to use the word staggering to describe the scale and complexity of the challenges facing Government and its regulators, would be quite an understatement.
Gold has literally leap-frogged the other big earners for Guyana, like rice and sugar. The investments that were made have spawned the blossoming of several side-businesses, like transportation, spare parts, heavy equipment supplies, with a high demand for jobs coming along the way. If rice earned US$200M last year, then gold did three times better. It even surpassed sugar in its performance.
The demand for capital to buy equipment and for operating cash proved to be big business for the banks.
Miners were flush with cash as prices rose to a record US$1900 per ounce last year.

A dredge operating in the goldfields. It is tough, dirty work.

The demand for skills in the bush, which proved a headache for mines officers monitoring the situation, was to the detriment of the other sectors like rice, sugar and even construction. The reasons were simple. A manager could earn up to $1M, with an excavator operator more than $400,000 monthly.
Several miners have become very wealthy, with properties being bought and built at levels never seen before. A significant number of mortgages for new homes were also granted to workers of the industry. Mechanic shops were being established at rapid pace, with local flights to the hinterland increasing dramatically, and forcing companies at Ogle Airport to expand their fleets.
Along the trails, the many river crossings have been doing businesses at levels not seen for quite some time.
I have been told that the big soft drink companies in Guyana have been recording significant business from the gold mining operations in the bush. So too are suppliers of fuel, meat, rice and other food items. The logistics of moving supplies in and out are a story by itself.
Thousands of cars purchased because of the gold boom and equipment being shipped have been proving to a windfall in terms of taxes and royalties for Government. And we are not even talking about the billions being collected from gold sales to the Guyana Gold Board.
There is, of course, the bad side of the gold business. There are reportedly a significant number of illegals, mainly fom Brazil and Venezuela, who are operating in the bush. With a vast terrain, criss-crossed by rivers and mountains to patrol, the Guyana Geology and Mines Commission has been facing an uphill task. Conservative estimates put the number of Brazilians in Guyana at around 15,000. Others are claiming around 30,000.There have been significant murders reported in recent years, with deadly river accidents being recorded.
Last year, Guyana achieved its highest gold production since the departure of Omai Gold Mines, with more than 484,000 ounces declared. But the situation has been changing dramatically in the past few months. Gold prices plummeted, down to US$1200 last year, worrying miners, who said that with the cost of operations, including the big fuel expense, they could not break even unless the price goes up back to US$1400.
They are now asking for several concessions, including a reduction on the fuel tax and spares.
Hundreds of jobs have reportedly been cut as several operations close. Heavy equipment suppliers have reportedly been repossessing excavators. The shine of the industry, according to miners, is not so bright any more.
Government, on the other hand, has been depending on the taxes from fuel, the gold and even equipment. The questions and demands have been many. With authorities reporting that Guyana may not even touch 400,000 ounces this year, the situation of gold is likely to not only have crippling impact on the national economy, but on an entire industry which has few options remaining.
Miners know that in the short term, they have to find ways to reduce costs…or go bust.
They are adamant that gold is too big to fail.
We will attempt over the next few weeks to examine the gold mining sector, especially the logistics involved.
Do enjoy your weekend. I would love photos from mining operations in the bush. You can send comments on this issue to [email protected] or call weekdays at 225-8491.