Gold price tumbles, miners call again on gov’t for help

With gold at a more than four-year low of US$1,137.40 an ounce this week, the miners association yesterday upped the pressure on government for help, warning that at a price of US$1,000 many miners will exit the industry and most of the big ones are now operating at 25-30% capacity.

The tumbling gold price has resurrected memories of last year’s 28 percent slide to $1,196. That fall forced producers to cut costs. Gold prices recovered early in 2014, but the decline in the past three months has troubled the industry.

Yesterday, the Guyana Gold and Diamond Miners Association (GGDMA) issued a position paper warning that if the price for gold reached US$1,000 many operators will have to quit the business. Gold has been the lynchpin of the economy in recent years but the slumping price for gold and other factors has seen declarations here declining.

“Most of the big miners have scaled down operations and are currently operating at 25% – 30% of capacity and this has had a ripple effect on many businesses that service the industry”, the GGDMA said.

It also raised again the concern that large-scale, foreign owned interests were getting a better deal from the government than small and medium scale miners.

“It should be noted that by comparison the aggregate of small and medium scale mining operations consist of more capital investments, employ more Guyanese nationals, and produce more than any of the foreign-based mining companies. The local miners re-invest in Guyana. Whereas the price of gold keeps declining, operational costs remain high. The Association is seeking some form of parity in concessions which will bring immediate relief and keep operations going”, the GGDMA declared.

 

Fuel

 

It listed a clutch of issues for the government to address.

It said that fuel is the highest single cost to any mining operation.

“The Association would like to request that small and medium scale miners be granted the same duty free concessions as granted to the Large Scale Prospecting License holders as stated within their Investment Development Agreements. However, we would suggest that these concessions could be tied to gold declarations and a mechanism can be implemented in conjunction with GGMC (Guyana Geology and Mines Commission) and the Ministry of Natural Resources where the Guyana Gold and Diamond Mining Association Trading Inc. will be responsible for the selling of the duty free fuel to miners who qualify based on their declarations”, the GGDMA proposed.

In relation to rental payments, the association said that in 1998 a proposal by the GGDMA was adopted by the then finance minister to reduce rentals on medium and small scale properties by 50%. This, the GGDMA said greatly helped long term serious miners to stay in business.

“It can be argued that prospecting costs have increased considerably from the 1990s to today. The chances of finding new areas with payable alluvial gravel are much lower than before as almost all of the close and easily accessible lands have been mined out and miners now have no choice but to go deeper in the jungle into “no man’s land” to find ever more elusive new reserves. It is also worth noting that due to the evolution in the alluvial mining industry since the 1990s to present day, it is common for heavy duty earth moving equipment to be utilized in the mining process which moves many times more material than was typically moved in the 1990s when most operations utilized strictly jetting and manual labour”, the GGDMA said.

As a result, the association said that mineable lands have been exhausted at a faster rate than previously and while there has been a large increase in overall production by local miners, the cost of production has risen considerably.

 

Imperative

 

“Thus it is imperative that in order for production levels to be sustained in the long term, miners are allowed to keep all their lands i.e. claims, mining permits and prospecting permits, so that they have options of additional lands on which to explore for resources and then to mine. Due to these additional costs associated with mining and identifying the feasible resources, we wish to request that a sliding scale be implemented for the payment of all claims, medium scale prospecting and mining permits. We suggest that at $1,400 and below the rental payments be reduced by 50% and that a grace period of 6 months be allowed in addition to waving the late payment penalties”, the GGDMA proposed.

It also took aim at the royalty rate. It argued that at 5%, Guyana currently has one of the highest royalty rates in the world.

“As the price of gold continues to fall, in order to support their operations and stave off bankruptcy, the option of selling gold to an illegal buyer will become ever more enticing to miners who may never have sold to these individuals in the past. The sliding scale that is currently in place reduces the amount of royalties to be paid if and when the price of gold is $1,000 or below. We would suggest that the sliding scale be changed and that the price at which the royalty is reduced by 2% is at $1,400 and/or below”, the miners association stated.

 

Components

 

It added that if duty-free concessions were to be issued on components for excavators, bull dozers and dredge equipment, this would greatly assist in lowering operating cost.

“Traditionally, concessions on heavy duty spares are only catered for in large scale Investment Development Agreements; however again it is worth noting that with the evolution in the technology within alluvial operations from the 1990s to current, heavy duty machinery plays a very big role in alluvial mining today whereas they did not before the last decade”, the GGDMA declared.

It therefore called for the regulations governing the granting of these concessions to be reviewed and to encompass concessions for spares utilized by small and medium scale alluvial miners.

Most of the key hinterland roads, the GGDMA argued are in poor states. “Although significant sums are spent on contracts to repair and (maintain) these roads it would appear that these contracts are not implemented with value for money. Roads in poor state(s) cause a lot of damage to vehicles which adds to transportation and other indirect operational costs”, the association lamented. Further, lost time affects production due to delays in delivery of much needed spares, rations and turn-around time for key employees, the GGDMA said.

“These roads need to be maintained to the recommended standard. Maintenance contracts should be in place for the main roads with regular monitoring by the responsible agency”, the association chided.

It argued that these interventions will go a long way in addressing miners’ concerns. It added that these interventions will help to stave off bankruptcies of businesses dependent on mining, will lower unemployment and help cut crime.

The GGDMA also played up the importance of mining to the economy.

“It is no secret that 2014 has been a financially trying time for the vast majority, if not all, businesses located throughout Guyana. It is an undisputed fact that alluvial mining is one of the main drivers in the contributions to Guyana`s GDP and Foreign Currency Earnings.

The above initiatives, by enhancing mining operations viability and increasing employment, will have the effect several known spin-offs”, the association said.