Lower production, not hoarding main cause of 20% decline in gold declaration

– industry insiders

Industry insiders have rebuffed government’s position that miners are hoarding gold, saying instead that a drop in production is one of the major factors responsible for the 20% decline in gold declarations for this year which has seen Guyana losing $20 billion in foreign exchange earnings.

“There is a crisis in the industry which started since last year,” Guyana Gold and Diamond Miners Association (GGDMA) consultant Edward Shields told Stabroek News, citing the drop in gold prices. “I am aware of many people who closed their operation,” he said adding that some closed their operations voluntary while others were forced to do so. Shields, along with several other industry insiders, said the drop in gold declarations could be as a result of a number of factors with a drop in production being a major one.

Gold declarations for the first five months of the year have dropped 20% compared to the same period last year and President Donald Ramotar two Saturdays ago expressed worry at the “drastic” reduction, articulating his belief that the reduction in declarations was due to hoarding.

Retired Commissioner of the Guyana Geology and Mines Commission (GGMC) William Woolford, however, told Stabroek News that while the reason for the drop in declarations is anybody’s guess, he does not believe that it is due to hoarding by miners. He also referred to a statement from the Guyana Gold Board (GGB) which said that the level of operations in the industry has not dropped and discounted a drop in production. Other reports have suggested that smuggling is to blame.

But Shields, last week, dismissed hoarding by miners as the reason for the drop in declarations. While saying that there is no one reason for the drop in declarations, he said no miner hoards gold particularly with the drop in gold prices and many are struggling to stay afloat. “The average miner cannot afford to keep gold,” he said noting that he knows many who have been forced to close their operations.

The official stressed that the price drop has affected miners significantly. He recalled that the GGDMA in the wake of the drop in gold prices has been lobbying government for concessions and government agreed to give certain incentives but nothing has happened. He pointed to a current campaign by the Ministry of Natural Resources and the Environment for miners to declare their gold and said that the GGDMA supports the position that miners must declare their gold to the legitimate bodies. However, with the decline of 20% being a significant amount, Shields noted that last year only five miners declared over 5,000 ounces of gold and a few hundred declared over 100 ounces of gold, and said that the authorities are “barking up the wrong tree.”

He pointed out too that there are some affluent businesspersons who “hold” gold and buy when prices are low and look to sell when prices rise, and in so doing, two or three companies can destabilize the industry. The official also pointed out that dealers are not obligated to sell gold to the GGB and are licenced to export gold. “All the dealers have to do is tell the Gold Board they buy a certain amount of gold and pay the 7% [taxes]” he said.

The GGDMA consultant said too that there has always been a question of whether all the gold produced here is declared. He noted comments by officials who have said at various times that only about 40% or 70% of gold produced here is declared. No one had ever accepted that all the gold produced here is declared, he said. “There will never be a situation whereby 100% of gold [produced here] will be declared,” Shields added.

 

Smuggling

In terms of smuggling, he acknowledged that this occurs. “Smuggling is as old as prostitution. There will be a degree of smuggling,” Shields asserted.

He said too that the “great majority” of persons do not declare their gold directly to the gold board and when pressure is applied as in the campaign, it is the “good” ones who would be affected. “Threatening people [is] no longer applicable in the twenty-first century,” Shields declared.

He was also critical of the GGB and said that the closure of its offices as well as its inefficiency are reasons why miners are not selling to the entity. “The Gold Board needs to function on a business footing,” and review its mission, he said while adding that the GGDMA supports the GGB to be functional and noted that it acts as a parameter of price.

Meantime, Chairman of Region Eight Mark Crawford, said that many miners in the district have shut down operations. Region Eight is one of the premier gold-mining districts in Guyana. A lot of persons have parked their operations or downsized, he said. “Most of the lands are worked out…they need more lands. Government needs to release more lands,” he said adding that more assistance needs to be given to miners. “The production really drop,” he said adding that this has been felt in the businesses in Mahdia.

He noted that the drop in gold prices are of concern though it is still high enough that miners continue to operate but the lack of lands to work is a critical factor. From his daily interactions with miners, he does not believe that they are hoarding gold, Crawford said. Citing GGDMA statements, he said that last year over 100 excavators were repossessed because the miners could not pay the instalments.

The regional chairman called for assistance for miners noting that government has stepped in before to assist the rice and sugar industries. Several other contributing factors are also hindering miners, the regional official said, citing the deplorable state of the roads including the Linden to Mahdia road as well as the Bartica-Potaro road. He also cited security and pointed out that the Mahdia police only have one ATV to patrol the vast area. “Nobody wants to operate where there is no proper security,” he said.

 

Diversify

Crawford said it is important that government listens to the Regional Democratic Council and creates other jobs in the region that can generate revenue. In this light, he mentioned the stalled rehabilitation of the Tumatu-mari Hydropower station and said that government should ensure that it comes online. Some of the money from the Guyana REDD+ Investment Fund should be directed towards this project, he said.

Meantime, it has been revealed that Guyana has lost about US$100 million ($20 billion) in foreign exchange and approximately $1.5 billion in royalties and taxes due to the decline in declarations. The Government Informa-tion Agency (GINA) reported that Chairman of the Guyana Gold Board Gobind Ganga made the revelation during a recent panel discussion. Ganga noted that for the period January to the end of May, 20 per cent less gold was declared when compared with the same period last year. He added that Guyana Gold Board was expecting between, 40,000 to 50,000 ounces of gold thus far for the year, but this has not materialised.

This present situation, Ganga said, is very threatening to Guyana’s economy as gold has been a key driver in recent years. “So with this decline it’s going to have an adverse effect, not with respect to the exchange rate per se in the immediate future, but later down the road it will have the effect,” he was quoted as saying.

The report said Ganga opined that it is easy to conclude that the main causes for the decline are the “continuous decline in the price for gold, some amount of hoarding and the possibility of illegal export.” He contended, “There is a strong indication that indeed there is some level of hoarding.” According to the official, miners are producing more and declaring less.

Also on the panel were President of the GGDMA Patrick Harding and Shields. Shields said he would rather use the words ‘holding on’ as opposed to hoarding, GINA said, while adding that he took the view that the gold crisis has been brought on primarily by the low price of gold, and it caught everyone off guard.

“We have to accept there is a crisis, and we have to look to see how best one can survive this. It will not go away until such time the price of gold increases and until we start to get good returns. It is high risk business and this is because if you’re successful you get good returns, at the present moment you are not getting good returns,” Shields said.

He said he believes that well-off business owners and some dealers are holding on to their production in anticipation of better days. He said he does not believe this is so for most small and medium-scale miners.

GINA said Harding was also of the view that the falling gold price is a main contributing factor to the problem the gold industry now faces. He said many miners were forced out of operation because of the current situation with the falling gold price. “One of the things we look at is the amount of dredges that are registered. It doesn’t mean they are all working, maybe they are selling gold outside, but certain causes include the price, cost of production; so the miners are finding it very difficult to stay in business and are leaving,” he said.

Harding also pointed out that the cost of staying in business is very high. “Equipment [companies] are taking back equipment, miners are giving back equipment, in addition miners are complaining that they don’t have proper lands to work, when the price was high, it’s difficult for them to survive,” he explained.

Harding said all stakeholders have reached consensus that there is a crisis in the sector and the relevant bodies have agreed to meet miners’ call for better lands to work on.

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