Where is the missing 20% of gold?

Where is the missing 20%? While the reason for the 20% reduction in gold declarations is “anybody’s guess” it is unlikely that miners are hoarding the precious mineral with few having the capacity to hold such a large amount of gold, retired Commissioner of the Guyana Geology and Mines Commission (GGMC) William Woolford says.

William Woolford
William Woolford

“The government has a right to be concerned,” he told Stabroek News yesterday. “It has a big impact on the foreign exchange.” Woolford said that the level of operations in the industry has not declined and despite the drop in prices, miners cannot afford to hold gold for a long period of time and several factors have to be looked at in trying to determine why declarations have fallen. He said that only a big player can afford to hold gold for reasons which can be speculated upon. He also warned that the drop in declarations can have adverse impacts on the economy with the majority of liquid foreign exchange earnings coming from gold.

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

“There has been a drastic reduction in declaration which means that there seems to be a lot of hoarding taking place,” the President said. “That’s a very worrying situation at this point in time,” he added. The president hinted that the authorities could go after gold hoarders stating that it is a serious issue that can have impact on the economy and “I hope that we don’t have to use any coercion…that by persuasion they will make their declaration.”



However, Woolford, now a mining consultant, 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 or a drop in production. He pointed to a statement from the Guyana Gold Board (GGB) which said that the level of operations in the industry has not dropped and said that there are roughly the same number of dredges operating. He stated that he also does not subscribe to the view that any gold miner could be hoarding that much gold. “None of them can afford it,” he said.

Woolford pointed out that traditionally about 20 to 25 big miners produce the majority of gold declared while small miners have accounted for between 25 to 30% of gold declared. The big producers, he noted, are executives and members of the Guyana Gold and Diamond Miners Association (GGDMA), which has called on all miners to get more “aggressive” with gold declarations.

In seeking answers for the missing gold, Woolford said, several factors must be taken into account. “70% of the quantity produced came from a few of the miners. They have the means of production,” he said. He dismissed the view that small miners are hoarding gold and said that they cannot afford to do so. He was also skeptical that any of the big miners would hoard gold, though the former Commissioner did not totally dismiss the possibility. “I don’t see any of the big miners holding that quantity of gold…I don’t see any big miner taking that risk,” he said while pointing out that the price of gold, despite fluctuations, has dropped steadily and the forecast is that the decline would continue. Woolford also noted that by law, miners are not allowed to hold gold for more than 28 days.

The retired Commissioner said that outside of the GGB, the majority of gold is purchased by four dealers and together, these four entities account for more than 50% of the gold declared. As dealers they are allowed to export and they can sell to suit whatever arrangement they have, he said. In expressing skepticism that miners would be hoarding gold, Woolford said that the GGB and the four dealers would be the ones having that quantity of gold.


Brazilian miners

Theoretically, he said, one of these dealers or a combination of them could have purchased and kept gold in the register. He noted that in trying to determine where the 20% is, the declarations by the dealers could be examined to see whether there is a drop in their declarations. As it relates to Brazilian miners moving out of Guyana, Woolford said that Brazilians traditionally sell to two of the main dealers, and if this was the case, it would be reflected in the dealers’ declarations.

He also noted that the closure of the Bartica office of the Gold Board could have an impact as it accounted for a high percentage of the declarations. The GGB last week said that the level of operations in the gold mining industry in Guyana has not slowed down as there is an improved level of mine site tasks. “It must be emphasized that the closure of the sub-office in Bartica should not be seen as the main reason for the lower levels of declarations that has been reported for Guyana for the comparative of the 2013 and 2014,” the GGB had said. In April, the GGB shuttered its Bartica sub-office and called in the police to probe allegations of tampering during the purchase of gold.

It would be a big challenge to determine why declarations have dropped so much and he is not certain that it has totally been due to the price of gold, Woolford said.

The former Commissioner said that the drop in declarations can have a big impact on the exchange rate. “That 20% impacts the foreign exchange position,” he said pointing out that more than half of Guyana’s export value came from gold. The consultant pointed out that a significant portion of rice is bartered, while sugar and bauxite are not bringing in big, distributable foreign currency with the actual, liquid foreign currency coming from gold. He also pointed out that gold prices have plummeted over the past two years and thus the foreign exchange normally available would be reduced and the price for the US dollar would move upwards. The situation, more than anything, must be impacting the rate of the US dollar to the Guyana dollar, he said.

“I wouldn’t wager that it is a miner that is hoarding,” Woolford asserted. He said that it could be someone “playing the market” hoping that the gold price goes up or businesses need money. “You could have people who deliberately push the price of foreign currency up for their purposes,” he said. Woolford noted that businesses would have started to place orders for Christmas and thus would need foreign currency now. “If there is any way of controlling the (exchange) rate, this is the way,” he said. However, there are few who can afford to do so, he declared.

Meantime, secretary of the Brazilian Mining and General Association Antonio Szala has posited that a recent exodus of Brazilian miners has played a part in the reduction of gold declarations. He told Stabroek News that many Brazilian miners have moved from Guyana to Suriname over the past several months due to several factors including difficulties in getting work permits and continued harassment from the police and mines officers.


Easier arrangements

“They are going over to Suriname. A lot of them are in Suriname working because of the easier arrangements,” Szala said. He estimated that from December to now, close to 300 Brazilian miners have left the country for Suriname.

Szala said that Suriname has made it easier for miners in that country and the Brazilians who have gone over are reporting that they can get their work permit within a week whereas in Guyana it takes about a month and a half. Arrangements for mining are also easier in Suriname, he said.

The official noted that the length of time that it takes to get work permits and an extension of stay in Guyana has improved compared to past years but there are still many frustrations as Brazilians whose applications have been in the system for years have had their permit backdated. He cited the example of a miner whose work permit for three years was backdated and he recently got the permit but found that he could only work up to February next year. Despite their attempts to resolve the situation, they were told that there was nothing the Ministry could do, he said, adding that the miner became extremely frustrated.

He also said that police and mines officers also harass Brazilians and they are frustrated at the amounts of money that they have to pay to these officials. Others ask for large sums of money to get the work permits for the Brazilians, he said. He pointed out too that many times, locals trick the Brazilians and would refuse to sign contracts to work on their land, only giving “permission” and when gold is found, they would kick the Brazilians out. Others give permission to the Brazilians to work on lands that do not belong to them and when the real owner comes along, the gold is seized, Szala said. All these factors have contributed to the exodus of Brazilian miners, Szala said, while adding that the low price of gold was another consideration.

He said that Brazilian operations play a significant role in the gold mining sector and it was due to their contribution that gold production reached record levels over the past few years. He also noted that some decisions have adversely affected miners. In Suriname, the process has been made easier and Brazilians are continuing to leave Guyana, Szala said.

Over the last several years, gold has been a mainstay of Guyana’s economy and a reduction in declarations could have severe impacts as Guyana earns the most foreign exchange from the mineral. Last year, total declaration was 481,087 ounces, a 9.7 per cent rise above 2012. The level of declarations represents the highest level of production in the history of the industry, exceeding production levels even when Omai gold mines were at their peak.

Gold exports amounted to US$648.5 million, a 9.5 per cent decline compared to 2012 which was due to a sharp decline in average realised prices to US$1,344 per ounce compared to $1,575 in 2012, outweighing the 6 per cent increase in export volume which amounted to 482,527 ounces.On Saturday, the Gold Board said that it has begun working with the relevant stakeholders of the gold mining sector, including the GGMC and the GGDMA to ensure that there is greater transparency and accountability of transactions by licensed gold dealers and entities to trade gold. “This is an ongoing collaborated effort which has been initiated with the full support of the GGDMA. In addition, the GGB is working with all stakeholders and business entities which have been granted the relevant permits to trade gold by the GGMC and the GGB to ensure that they are compliant with all rules and conditions of the legal trade of gold,” the statement said. It noted that the GGB has also begun a sensitization programme about miners’ legal obligations when buying and selling gold.

The GGB added that the services at the various offices are continuously improving by reducing the process time for transactions and ensuring that its customers receive the full satisfaction of the services offered.

The GGDMA has called on all miners to get more “aggressive” with gold declarations. In a statement, the GGDMA said that the recent shortfall in declarations, is having a negative impact on the Guyanese economy at a macroeconomic level. “As a consequence the association is calling on all miners to recognise that, despite the lowered gold price, declarations must continue to ensure that inflation and the rising foreign exchange rates are kept in check,” the statement said.

“The GGDMA reminds it members that gold is the stabilizing factor in Guyana’s economy and calls on miners, members and non-members, to embrace their national responsibility to ensure that devaluation and inflation do not become a reality that will cause all Guyanese to suffer,” it said.

There needs to be greater monitoring of licensed dealers and buyers of gold, the GGDMA also said, while disclosing that it believes that some buyers are not adequately declaring their transactions and as a result are creating a negative impression about the true output of the industry. The association also urged the GGMC and the GGB to increase their monitoring of gold declarations not only from the miners but also from the buyers.

Last week, the Ministry of Natural Resources and the Environment also said that government is pursuing measures to halt the decline in gold declarations, including a crackdown on illegal gold trading entities countrywide.

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