Guyana Goldfields yesterday announced that it has clinched a Memorandum of Understanding with the government for the Aurora Gold Project on the Cuyuni River which sets mining royalties and paves the way for a mining licence within 45 days.
In a statement, the Canada-based company said that the MOU sets out the key terms of the Mineral Agreement, also known as a Fiscal or Stability Agreement.
It said that significant among the terms of the MOU are:
-Mining royalty of 5% on gold sales at a price of gold of US $1,000/oz or less
-Mining royalty of 8% on gold sales at a price of gold over US $1,000/oz
-Corporate income tax rate of 30%
-A Mineral Agreement (MA) and Mining Licence and all relevant permits and approvals to be issued within 45 days of signing the MOU.
For Guyana’s last big mining operation, Omai Gold Mines Limited, a royalty of 5% was paid. However with swingeing gold prices the royalty in this deal goes as high as 8% if the price of gold stays over US$1,000.
Corporate income tax was also a pivotal issue in relation to OGML. It paid no corporate tax over the period of its mining as it claimed there was no profit over the 15 years of the mine life.
Guyana Goldfields noted that the MA is the final step in obtaining the Mining Licence since the Company had already received its Environmental Permit in September 2010.
“This watershed agreement is an important milestone for GGI as it will allow the advancement of the mine development project under a clear and stable fiscal and royalty regime”, the company said. It quoted its CEO Patrick Sheridan Jr., as saying “We are pleased to have concluded extensive negotiations with the Guyanese Government on the fiscal terms included in the Memorandum of Understanding for this historic Mineral Agreement and look forward to obtaining our Mining Licence in order to build and operate the Aurora Gold Project. We have agreed upon fair and reasonable terms for the future success of the Aurora mine.”
The statement added that the agreement, which “strikes a fair and reasonable balance of taxation and royalties for gold mining”, reaffirms the company’s view that Guyana is “open for business”.
It reported Prime Minister and Minister of Mines in Guyana, Sam Hinds as stating, “The Government welcomes and fully supports all investment, foreign and local, in the mining sector and are pleased that we have come to a fiscal agreement in order for the long-awaited development of the Aurora Project to begin. We look forward to working alongside GGI as they
move towards production.”
Guyana Goldfields has conducted off-site infrastructure construction work in preparation for the development and construction of the Aurora Gold Project. It said that upon obtaining the Mining Licence, the Company plans to start the construction of the on-site infrastructure including a new camp, airstrip, river dyke and completing road access to the site, which will be followed by the erection of the mining facilities.
The Aurora Project by Guyana Goldfields will be the first underground gold mine in the Guiana Shield. Production is set to begin in 2014 at the location along the banks of the Cuyuni River in Region Seven. Earlier this year, Claude Lemasson, the President and Chief Operating Officer of the company said that it is looking to produce 250,000 ounces of gold per year in a combination open pit and underground mining and expects that this will increase as further studies are done. He had said that the company is well funded and everything is geared towards starting development and construction by the end of this year.
According to the project summary, the development and operation of the mine site will involve construction and operation of the mine site, construction and operation of a hydropower plant on the Cuyuni River, construction of an access road to the mine site, and construction and operation of a wharf at Buck Hall on the Essequibo River.
Ore recovery will consist of a combination of open pit and underground mining and the combined schedule will result in a mine life of approximately 12 years.
Power for the process plant operation and ancillary services, according to the summary, will be provided by a run-of-the-river pondage hydropower plant to be constructed on the Cuyuni River, 8km away from the mine site.
Guyana Goldfields has been operating here since 1996 and has invested $17 billion in exploration from then up to last year. This year $8 billion has been allocated for further exploration and pre-development.
The company has 250 employees and contractors on a full-time basis and during development and construction this is expected to peak at around 700 workers, Lemasson had said. He added that during operations about 400 to 500 workers will be employed and they expect to maintain a workforce that is 90 to 95% Guyanese. The company will provide training to its employees he said while adding that indirectly over 10,000 will be employed in some fashion as a result of the project.
Lemasson had stressed that the project complies with IFC (the private sector arm of the World Bank) and other international standards and noted the potential use of hydropower.
He said they are looking at a 15 megawatt hydropower facility costing between US$75 million to US$100 million with possible financing from the company, the IFC, other development agencies and other private sector partners.