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Botswana receives 10% royalty on its diamonds while Guyana settles for 1.1/2%
Kaieteur News – While Guyana has settled for a mere 1.5 percent in royalties on its diamonds from Chinese Mining Company, Zijin Mining Group, Botswana, an African nation, has made sure that it collects 10 percent royalty from any mining company, working its mines.
The world’s third largest diamond unearthed in Botswana.
The Aurora Gold Mines, currently being operated by Zijin Mining Group.
The huge difference between the two countries’ royalty rates was brought to Kaieteur News’ attention following reports on Friday June, 18, 2021 that the world’s third largest diamond was unearthed in Botswana.
According to Fox Business Africa, the diamond, which measures 1,098 carats, was mined by Debswana Diamond Company, a joint venture between the Botswana government and De Beers Group, an international Diamond company founded in 1888 by British businessman, Cecil Rhodes.
Fox Business Africa also pointed out in its article that the Botswana government receives as much as 80 percent of the income from Debswana’s sales through dividends, royalties and taxes.
Kaieteur News later found out from a power point document prepared by Botswana’s former Principal Minerals Officer, Onthusitse Melaetsa, that the royalty percent paid by Debswana is 10 percent. In fact, the country’s fiscal regime dictates that any company mining diamonds must pay 10 percent royalty in addition to corporate tax and withholding tax on dividends.
Apart from the 10 percent royalty Botswana receives, it also reaps revenues from its 50 percent shares in the Debswana Mining Company along with 22 percent in corporate tax.
In a press release published in March 2018 by Debswana’s partner, De Beer’s Group published, it was noted that more than 80 percent of the company’s profits is returned to the people of Botswana.
Meanwhile in Guyana’s deal with Chinese mining company, Zijin Mining Group, should it find diamonds in the Aurora Gold Mines (AGM), the country will only receive 1.5 percent royalty on the related sales. The Zijin Mining Group acquired the mine from Canadian owned Guyana Goldfields, which had acquired the licence for AGM, and as such enjoys provisions that were enshrined in the contract for the operations in the Cuyuni-Mazaruni locale.
According to the contract, “The Applicable Royalty for any Valuable Mineral other than gold shall be 1.5 percent on the actual proceeds received by the company from any smelter, refinery or any other arms-length third party purchaser from the sale of concentrates, metals, diamonds or any other mineral or metal products produced from the property.”
Zijin Mining Group’s main operation in Guyana is gold mining but even that the company has the privilege to determine the amount of royalties it pays to country. The same contract allows the Chinese company to pay royalty based on the price it gets for the sale of its gold from the buyer it selects and not at the prevailing world market price.
Should the company sell its gold for US$1,000 per ounce or less, then Guyana gets five percent in royalty. If Zijin Mining Group finds a buyer more than US$1,000 per ounce, then Guyana will receive eight percent royalty from the sales.
A perusal of the contract also illustrates that when it comes to imports, the company also enjoys a wide range of waivers. Under the prescribed provisions in the contract, the Chinese Company 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.
Apart from these “luxury” provisions, Zijin Mining Group is only paying US$5 or GYD$1,000 rental for every acre of land it has in its claim. Despite the startling revelations published by this newspaper, Guyana’s former president, Samuel Hinds, in a letter to this newspaper argued that royalty rates and provisions are “standard” when compared to other countries in the world. While defending the land rental fee, he said, “That statement is true… absolutely true for each and every large-scale gold mine, whether owned by a Chinese, a Canadian, an American, an Australian, a European, a Ghanaian, an Indian, a Pakistani, a Saudi, a Guyanese, or any nationality.”
He added too, that by criticising the contract it sends a bad message to foreign investors who might have interest in Guyana.
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