Loophole in Mining Act costs Guyana hundreds of millions annually

Jul 07, 2019 News

A loophole in the Mining Act of 1989 allows miners to exceed 1,200 acres threshold allotted to medium scale operators yet avoid paying rental fees required for large operators.
As a result, Guyana is losing hundreds of millions of dollars in revenue.
The issue was brought into focus by the Extractive Industries Transparency Initiative (EITI) report of 2017.
In the report, the EITI noted that the Guyana Geology and Mines Commission (GGMC) approved some 457 permits to companies operating under the category of medium scale mining operators.
Medium scale operators are those considered as having between 150 and 1,200 acres of land on a single mining permit. Large operators exceed the 1,200-acre threshold.
However, the EITI highlighted a trend in operators having multiple medium scale permits with total acreage exceeding the medium scale threshold. The watchdog body said that as a result, the medium scale operators should be paying the same fees as large operators.
According to EITI, several medium scale mining permits, covering plots in the same location, have been awarded on the same date to the same applicant, instead of following the award process for large-scale mining licences.
“The total combined acreage of several mining permits awarded during 2017 to a same applicant exceeded 1,200 acres, which is the maximum surface for a medium scale mining permit.
If these plots had been combined, they would have exceeded the 1,200 acre threshold and would have been categorised as being “large scale tenures”, which would involve paying higher rental fees and the licence award procedure requiring further approvals from other Government Agencies.”
Additionally, the EITI noted that a list of active mining permits shows that several plots were held by the same extractive entity and within the same location.
“The combined surfaces of these mining permits exceed the 1,200-acre threshold in several instances. Such mining permit holders may need to be categorised as large-scale extractive operators as defined by the current legislation whenever it is established that the relating plots run consecutively one after the other.
The annual rental fees due by large-scale operators are US$3 per acre as opposed to US$1 per acre for medium scale mining operators.
As a result, the EITI stressed the total shortfall to the government as a result of such errors may reach considerable amounts per annum.
Furthermore, the transparency body noted that the Mining Act (1989) allows the Commission to conclude agreements with applicants through direct negotiation without any requirement to follow any tendering procedures.
“We recommend that GGMC consider the amendment of the awarding procedures in order to include the clear definition and distinction between large scale licences and medium scale permits.
In order to comply with the legal awarding process of mining permits and large-scale mining licences set by the Mining Act (1989), we recommend that GGMC considers taking into account the combined acreage of the permits when awarding them to the same applicant and when the plots are continuous.
“We also recommend a review and an update of the list of current active mining permits in order to comply with the definition of the large-scale mining licence given that several of them cover neighbouring plots for the same extractive entity and exceed 1,200 acre when combined.”
Additionally, the EITI noted that the allocation of licence and permits calls for the disclosure of information related to the award or transfer of licences pertaining to the companies covered in the EITI report, including: a description of the process for transferring or awarding the licence; the technical and financial criteria used; information about the recipient(s) of the licence that has been transferred or awarded, including consortium members where applicable; and any non-trivial deviations from the applicable legal and regulatory framework governing licence transfers and awards.
The EITI is a global standard for the good governance of oil, gas and mineral resources. It seeks to address the key governance issues in the extractive sectors.

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