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Omai, GGMC to sign US$2M Eagle Mountain exploration pact

Omai Gold Mines Limited (OGML) and the Guyana Geology and Mines Commission (GGMC) are expected to conclude an agreement shortly under which Omai will pursue mineral exploration at Eagle Mountain in the Potaro area.

Omai Human Resources Manager Norman Mc Lean

In an exclusive briefing with Stabroek Business recently, Omai Human Resources Manager Norman Mc Lean said that under the agreement Omai’s licence will allow the company to prospect for gold, valuable minerals and molybdenum as well as base metals including copper, lead, zinc, tin and tungsten.

Under the agreement the company will pay the Government of Guyana an annual rent of US$3 per acre for the first group – gold, valuable minerals and molybdenum and an additional US$1.50. per acre for the second group – base metals including copper, lead, zinc, tin and tungsten.

According to Mc Lean Omai’s Eagle Mountain exploration exercise amounts to an investment of around US$2M and reflects the company’s ongoing commitment to doing business in Guyana. He said that while the future of the present exploration exercise will determine the long-term feasibility of the Eagle Mountain project he believed that it was entirely possible that the future could see another Omai mining operation in Guyana on a scale comparable to the one that is due to officially come to an end on October 1 this year.

Under the terms of the agreement Omai will also be allowed - subject to the submission and approval by the GGMC of a feasibility study - to apply for a mining licence to exploit minerals found in the Eagle Mountain area. The licence will cover an initial period of twenty years in the first instance and will be renewable for periods of no more than seven years thereafter.

Mc Lean said that he could provide no definitive date for the signing of the agreement at this time but disclosed that Omai and the GGMC had almost completed studying a draft of the document.

Under the prospecting agreement Omai will be required to provide the GGMC with various types of technical data on the Eagle Mountain area on a quarterly basis as well as all gold, valuable minerals and base metals found during the exploration phase.

Mc Lean told Stabroek Business that the agreement between the company and the GGMC also included specific stipulations with regard to “a mindfulness of both the indigenous communities in the Eagle Mountain area as well as a recognition of the importance of applying a sense of environmental responsibility during the exploration exercise.” He said that he believed that during the course of its mining operations in Guyana Omai had already demonstrated a capacity to adhere to the highest environmental standards.

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12 Responses to “Omai, GGMC to sign US$2M Eagle Mountain exploration pact”

Charriot
on September 5th, 2008 12:47 pm

What percent of the proceeds is Guyana getting? And where is the EPA in all of this? What about the silt runoff from the mining, have we forgotten about the CYANIDE spill a few years ago. Also the impact left on the rain forest and it’s inhabitants?

SOMEONE PLEASE LOOK INTO THIS BEFORE SIGNING ON THE DOTTED LINE.
$2MIL US/year is not worth it.

[Reply to this]
Kenneth N. Shonk
In reply to the above comment on October 7th, 2008 3:21 pm:
This is an exploration project. That means that if there is a mineral deposit on the property, it hasn’t been found yet, it hasn’t been delineated yet, it has been studied yet, the metallurgical characterisitcs aren’t known, it hasn’t been engineered yet, there is no resource or reserves on which to base the construction of a mine, the mine hasn’t been constructed yet, and until all of these steps are completed, there will be no production (or in your little mind no exploitation and raping an pillaging of the land). The exploration step alone if successful will not cost $2m, It will cost more like $10-30m before a minable resource is even identified. Early stage exploration results in little surface disturbance relative to a mine or even delineation drilling so no Environmental Report is needed until the nature of the exploration that will be conducted is known and plans are laid out. Initial work will likely be a sequence of stream sediment sampling, soil sampling, geophysics to define drill targets. All of which result in virtually no surface disturbance. This will then be followed by construction of local access roads (access to the property is by air or river), trenching and first pass drilling to test the drill targets. If significant mineralization is found, the first pass drilling will be followed up with a second drill program. If that is successful in defining an inferred resource, it will be followed by additional drilling to upgrade the inferred resource to measured and indicated resources. These resources will then be the basis for a scoping study, then a prefeasibility study, then a bankable feasibility study that will including the engineering and price forecasting and preparation of equipment purchasing and construction schedules and mine closure plans. While all of this is going on, the company, if the exploration is successful and the odds for this property I estimate at 1 in 25 (excellent odds by the way since the industry average for raw exploration prospects is 1:1000 to 1:2000), will be conductiong environmental baseline studies and seeking the environmental permits that are typically required at least from the delineation drilling stage on if at the initial trenching and drilling stage. Actual construction of a moderate sized mine will then cost $100m to $200m. Once production begins Guyana will have a royalty on produciton, taxes on profits, salaries going into the economy, taxes on salaries, and net foreign exchange benefits. The royalty alone will be roughly equivalent to a 25% net profits interest. In the end net profits to the company will be about 10% of net proceeds if they are lucky (after all only 1 out of every 2 mines that goes into production even turns a profit in spite of all the studies given the unknowable unknown of future prices for the production) and those profits are at least 5 years if not 10-20 years down the road. It is at leat 5 years even if the discovery is made and delineated in the first 1-2 years. Have you ever heard o the time value of money, calculated a DCFROR or IRR or a payback period on a project. The risks are enormous and radical without having to deal with ignorant people like you. If no discovery is made or more likely mineralization is discovered but it is determined to be uneconomic, the $2m or $10m or $30m spent before the decision to build a mine is even reached then these expenditures have to be written off as a bad investment. That is why the whole process is conducted as a series of little steps. Each little step having to be successful before the next step is taken. And don’t forget the risks of dengue fever and malaria that if the workers contract these illnesses, will also cost the company money.

Your post only reveals your lack of knowledge of the exploration and mining industry and the steps from exploration to production and the risks involved and basic economics. If you want to see an environmentally exploitive mine, go visit the government run mine in China where a 128 workers just died in a pit wall failure. Why don’t you educate yourself. The computer you used to type out you e-mail has gold electical contacts and uses 30 other metals, the light bulbs in your house have tungsten filaments, the condenser tubes for the desalinization plant that will provide your water is made of molybdenum alloy steels, molybdenum alloy steels will also be required for the structural supports set out in the ocean for the wind turbines that generate the renewable source electricity you want to use (the molybdenum increases the corrosion resistance of the steels and increases their strength by a factor of 3, thereby reducing the amount of steel needed and thereby decreasing the amount of energy required to make the steel and thereby increasing its useful life and reducing the replacement materials and costs involved in maintaining the structure - all environmental benefits.

[Reply to this]
Charriot
In reply to the above comment on October 10th, 2008 1:06 am:
Well Mr. Shonk, all of us cannot be doctors and laywers, some of us have to dig graves. You seem to be well schooled in the minning industry, while at the same time to have a tunnel vision to the question, because of the ignorance and arogance portrayed in your comments.

If you read my comment, I raised a concern and seeked information from caring knowledgeable Guyanese, who cared about our environment and the well being of our people.
If you felt that this was too much to ask, then your comments clearly shows where the ignorance lie.
Deo 173.32.98.235 not found
on September 5th, 2008 11:40 pm

Omai should not have granted permission to ever operated in Guyana because of the past history.
Omai did not properly compensate the Native Guyanese for the cyanide spill. The case was never tried or never made it to court. And as for the people of Guyana, and the economic development are not over run by the multi-national cooperation.
So in my opinion, Omai just overstayed their welcome and I hope you don’t block/edit my comment.

[Reply to this]
kateo terry lallb
on September 6th, 2008 10:14 am

Good morning! I was reading the article about OMAI proposal and it made me very qurious to find out what is government posession on this isue? I think the government has take a stand to perserve the rain forest with an agreement with the World Bank .(If I am correct ). I will like also too make maintion of one of the fastest growing Economic in the world (INDIA) These people are all over the world working and are going home to invest their money. And I can make for sure if the crimerate should fall and security and stadlity should take that place, there are lot of guyanese who is willing to make their way home.
When Omai started operation I was a truck driver with the company it was initiated for workers to be paid in US dollars” that man” Mc Lean objected to it.He is there still making proposial for another 20 years.What is 5% to 60% &35%.Are we sure that guyana is getting 5% and who is benefiting from it . Government need to act in a more respondesible way.
I wish to see that better steps being taken in the wright direction .
GUYANA is ours not only one special set of people.
thank you
Kateo Lallb

[Reply to this]
Charriot
on September 6th, 2008 7:28 pm

McLean is family, but he is not representing the best interest of Guyana and it’s peoples. The government needs to step in and stop this operation.

[Reply to this]
Sonny
In reply to the above comment on September 7th, 2008 12:29 pm:
The Guyanese who sit on the GPL, GT&T Boards and so on have to answer questions. Nothing is wrong with profits, but if the interest of the locals is not being considered, then to hell with these people. Caribbean people must learn to pool their resources together for the better of all concerned. Never believe that these multi national corporations would relinquish the hold they have on the poorer countries easily. You see the fight in Venezuela. Have you seen what happened with Zimbabwe?
The people in charge of Guyana’s development seem to be very short-sighted, but again, Guyana does not have a large pool of intelligent people. At times too, positions are not given to people based on their merits, but instead on the basis of party loyalty and social status. They are in a hurry to do things to make them look good in the short term, but in the long term, they make no progress. There are some good projects and a lot of bad ones. Most of the infrastructure work that were done 10 years ago needs attention today; roads, bridges, buildings and so on. In my village I have seen Councilors buying themselves trucks and awarding their family members contracts to fill the streets with sand. This is paid for with the Tax Payers’ money, and when the rain falls everything ends up in the drains. There are cases of these same Councilors allocating house lots for their family members; some at the age of 15 and 16, while families living with extended families are waiting for years. In my area (Good Hope, ECD), I have seen a drainage canal and an important strip of land that was reserved for a road, being incorporated into the property of the Councilors.
Is it right for a Minister to award a Contract to a real estate developer and to have that same developer doing improvement work on his, the Minister’s property? Sure, the Minister would say that he paid for his work, but this is definitely a conflict of interest.
I have noticed that the Government has recently been taking a very tough position with the mining and logging companies. This is a positive step. It tells the world that you can manage you resource in a sustainable manner.
Rgds,
Red Lion

[Reply to this]
Sonny
on September 7th, 2008 8:56 am

Can’t Guyana come up with people or a group of people to do these things themselves? The Berbice Bridge is an example for others to learn from. Trinidad now has its own oil exploration companies that are as good as the foreigners.
When local people undertake these projects, most of the money stays in the country. It increases their Net Domestic Production.
There are still a lot of opportunities for Guyanese at home. I see tremendous potential for Guyana, especially in export related industries. No, not the “side-by-side” cake shop attitude, where if one man buys a mini van, his neighbor wants a van too. If he has a shop, his neighbor wants one too.
I was looking recently how a certain oil from a plant in Australia has become popular worldwide, all because of the way it was marketed. It is “Tea Tree Oil”. It is extracted from the “Tea Tree Plant”, and it has some great therapeutic values. “Tea Tree Oil” is the best thing to fight fungus and bacteria that cause skin infections and finger nail fungus. 1 oz of pure “Tea Tree Oil” retails for app US$20.00.
Now, Guyana has its own “Tea Tree Oil”. We have the “Crab Oil”. It too has some very important therapeutic values, but this oil is poorly marketed. Infact, it is extracted and taken mainly to England by a group of people. The oil is then placed in the right bottle with the appropriate label, and then sold for extremely high prices. I have seen “Crab Oil” coming to Canada from Guyana in transparent bottles. Light tends to have an effect on all “Essential Oils”, and they must be placed in dark bottles.
I can go on and on. The last time I mentioned about our “Casareep”. For “Casareep” to hit the shelves in a real big way, it must be packaged and labeled nicely. Guyana manufacturers have to start putting tamper proof seals on these products if they want to target an international market. Have you seen how Soy Sauce has now become a household word the world over. Casareep be just like that.
Rgds,
Red Lion
http://www.mainlandweb.com

[Reply to this]
michael tannassee
on September 7th, 2008 12:45 pm

…… 3 and 1.5 USD respectively for each ACRE !… rented from the people of Gy ?,,
and now we hear that mcclean is “family ” whose family ?,, and what does family have to do with what is apparently broad day light robbery ,, by the “mouth” of omai,, which is the very thing he was opposed to,, when he used to make raids in tiger bay,, albouystown,, and other crime ghettos in and,, around the city ,, on the paddy waggon in the 60s ! thank god that the “agreement ” has not yet been signed on !

if mcclean and omai is convinced that they can invest 2 million USD ,, just for exploration ,, they must,, by all rationale,, be convinced that they expect to be compensated for their investment ,, and by extension ,, be rewarded the right to harvest all the extracts mentioned for the less than measly sum of what pan handlers here where i live,, sometimes refuse,, due to their PRIDE !…..

the govt ,, for the peoples sake ,, need to look with a microscope at anything that mcclean and omai ,, is referencing for the removal of any thing further from GUYANA !…………….

i demand on behalf of all the people ,, — but first the ” indigenous ” inhabitants and owners of all the land in GY — ,, before any signature on any document by anyone,, it must be made public in every forum ,, for all to be involved for mutual benefit of our resources !……………

[Reply to this]
roger griffith
on September 13th, 2008 7:12 pm

Can we Guyanese learn from the past.Look what Omai did back in the 1995 with the spill yet they continue their operations.In other countries they would have been kicked out & had to pay massive compensation,but it was a big cover up here.

5% royalties to the government is a shame.
Guyana will continue to be exploited by these rich companies until we become beggars of south America,is time we take our stand against these blood suckers.

After all the president is asking for International help for the protection for his rainforest but what will happen if Omai have their way into eagle mountain.

Burnham was the right man 60% for me & 40% for you,take it or leave it.

[Reply to this]
kemraj
on September 13th, 2008 7:21 pm

This is due mainly to the very high illiterate percentage of the GT population..
Ask the average man in the street about Omai……see what he will say..

In other countries people would have protest against Omai going into eagle mountain..but not in GT..where is the opposition parties on this ?
Come on robert & raphael.

After another spill then EPA might say something…
The Amerindian Affairs should get their act together before it is too late.

[Reply to this]
THOMAS ROOTS
on September 13th, 2008 7:34 pm

It look like the Guyana government has not learn from Omai. They polluted the river that caused massive environmental and social damage, then tells us that they did not make a profit because the gold price was low..

This PPP was against the PNC approval of similar projects now they are guilty of doing the same..

Giving Guyana away to foreign investors for peanuts,
There seems to be a mad rush to get this eagle mountain project moving.
but have we analysed the previous operations of OMAI?

Have we done a post audit to examine how beneficial was this investment to GT? do we want to make the same mistakes again?

How come OMAI is interested again when I have heard Mclean repeat at several ocassions that they did not make a profit?
We now have a huge tailing pond that is cyanide polluted for the next 100 years.. do we want to have another one of these sitting in the middle of our natural rainforest?
Why isn’t there national consultation similar to that held for the EPA?

[Reply to this]