Latest update March 21st, 2025 7:03 AM
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Secret Contract!! Chinese company determines royalty paid to Guyana
One of the mining pits of Aurora Gold Mines
Kaieteur News – Guyana earns royalty from its largest gold mine based on the price that the Chinese company – Zijin Mining Group – gets for the sale of its gold from the buyer selected by the company and not at the prevailing world market price.
This, in addition to there being a sliding scale for the payments to be made—five percent royalty when gold is sold for US$1,000 and below or eight percent, when sold at one cent above that price.
The Zijin Mining Group acquired the mine from Canadian owned Guyana Goldfields, which had acquired the licence for the Aurora Gold Mines, and as such enjoys provisions that were enshrined in the contract for the operations in the Cuyuni-Mazaruni locale.
According to the contract, the percentage of applicable royalty shall be applied to the quantity of gold or valuable minerals that the company actually realises from a smelter, refinery or other arms-length third party purchaser.
It provides further clarity to state, revenues shall be calculated based on actual price realised in relation to the transaction utilised and not on the basis of world market price for those minerals.
Guyanese miners are required to sell their gold at the Guyana Gold Board where that entity determines the price to be paid and applicable royalty.
The Aurora Gold Mines operation, which was sold by the Canadians last year for US$238M, was originally given a licence in November 2011.
A perusal of the contract also illustrates that when it comes to imports, the company also enjoys a wide range of waivers.
The company, under the prescribed provisions in the contract, is entitled to import into the country or purchase domestically, free of import duties, Value Added Tax and any other direct or indirect taxes on all equipment, supplies and materials for the project.
It is also provided under the contract that “for greater certainty,” the company or any local or foreign contractor retained for the project purposes shall not be required to pay any licence fees, duties or other charges related to importing or purchasing materials in Guyana for the purpose of the project.
Additionally, the company shall also be entitled to import free of customs duties, VAT and other direct or indirect taxes on necessary personal items, including electronic and household effects. This, in addition to paying US$5 or G$1,000 rental for every acre of land it has in its claim.
The Aurora gold project was first developed by Guyana Goldfields, located in Cuyuni-Mazaruni, as an open-pit and underground mining operation spread across an area of 12 kilometres squared or 2,965 acres.
Under the terms of the contract, upon the granting of the licence, the company would pay in advance the Guyanese equivalent to US$5 per acre for each acre included in the licence, and should the Government reduce those fees, then the company’s obligation to pay the rent would be similarly reduced.
It would mean that the company pays just about G$3M in rent to exercise its right over, and mine for gold from just about 3,000 acres of land.
The feasibility study for the project was completed in January 2013 and first gold was poured in August 2015, while commercial production was achieved in January 2016.
The processing plant was commissioned in October 2015. The first gold sale also took place in the same month before it was later sold in 2019 to the new Chinese owners.
When Zijin Mining Group secured ownership of the Aurora Gold Mines in August last, it had laid off a significant number of local businesses, and by extension, hundreds of Guyanese workers.
The company subsequently engaged contractor, Sinohydro Corporation Limited, for the stripping and mining activities at its mines at Aurora.
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