Mining

 

	Box 2.11: Standard Fiscal Regime For Extraction of Minerals
	Mining on a Large Scale: Gold and Precious Metals, Diamonds and Precious Stones - Royalty: 5% of production or of gross revenues - Income Tax: 35% - Depreciation: 20% - Duty and Consumption Tax Concessions: Zero rating of duties and consumption tax on all equipment, process materials and spares to be used during and in the course of surveys, prospecting and mining - No free equity to State, but the State shall have the right to nominate a member of the Board - Withholding tax set at 6.25% of dividends - Stability clause - for each mine developed, all conditions maintained for the duration of 15 years from the start of commercial production or the life of the deposit, whichever is shorter, then general rules for duties, income tax and withholding tax apply.
	Bauxite and other Minerals (except sand and stone) - Royalty: 1.5% of product or of gross revenues or of production costs leaving plant, whichever is greater - All other conditions are the same as for gold Medium and Small Scale - Royalty: 5% of gross revenue for gold; 3% of gross revenue for diamonds - Income tax: 2% of gross revenue, in lieu of Income Tax. If the permit holder is a corporation, corporation tax is payable at the rate of 35% of taxable income. - Duty and Consumption exemptions on a range of items

Situated on the mineral rich Guyana Shield, Guyana has attracted international interest from the largest mining companies in the world. While the mining sector is primarily focused on gold, bauxite and diamonds, Guyana also contains deposits of semi-precious stones, laterite, manganese, kaolin, sand resources, radioactive minerals, copper, molybdenum, tungsten, iron, and nickel among others. Guyana produces high-value refractory-A grade bauxite, which is produced nowhere else except China. The mining and quarrying sector represents a critical component of Guyana’s economy, contributing to over 10 percent of GDP and accounting for approximately 40 percent of exports in 2005. In 2005, Guyana produced nearly 1.6 million metric tons of bauxite, 262,528 ounces of gold and 356,950 metric carats of diamonds.

As in other areas of the economy, the Government has looked to private industry—and international investors in particular—to expand opportunities for the bauxite sector. In February 2007,Government gave its consent for China’s Bosai Minerals Group to acquire the 70% share in theLinden bauxite operations that were previously held by Canadian based IAMGOLD, which is the parent company of Omai Bauxite Mining Inc.Bosai paid US$46M for this acquisition withGovernment retaining its 30% share. The Berbice bauxite plant, Aroaima Mining Company, was also privatized. The Russian aluminium giant RUSAL, acquired a 90% stake in the Berbice operations at a cost of US$20M. The remaining 10% is owned by Government. RUSAL has commissioned a study to determine the feasibility of establishing an alumina plant and is also considering building an alumina smelter plant. With these recent investments, bauxite production is expected to increase by more than 50%.

In 2005, gold production was significantly reduced as economical deposits at the Omai Gold mines were exhausted. In the past, Omai produced approximately 70 percent of Guyana’s gold. This closure, combined with high gold prices, has precipitated a surge in exploration for new gold deposits. The prospects are encouraging, with exploration results suggesting that at least one million ounces of gold deposits are accessible in each of two new sites. Once confirmed, production at these sites could start within two years. Furthermore, with the increase in world gold prices, deposits that were previously uneconomical to extract are now economical. This may result in a restart of the Omai mine, where between 70,000 and 100,000 additional ounces could be mined per year.

The Government is interested in securing large-scale investors for the mining industry, especially in the areas of gold and bauxite, for exploration purposes and to improve the efficiency and productivity of operations. The licensing regime established for this sector embraces a royalties and fiscal system, which provides investors with attractive terms for exploration and production projects (see Box 2.11). It should be noted, however, that foreign investors cannot hold small or medium scale properties (up to 1,200 acres) except in partnership with Guyanese firms.

Mining is a trenchant sector of the Guyanese economy, with well-established rules of the game and a safe operating environment that offers investors flexibility in establishing the infrastructure and operations necessary for them to be successful.

Organizational Support
The Guyana Geology and Mines Commission (GGMC) is the government entity responsible for the promotion of mineral development. The GGMC is a self-financing organization, with surpluses beyond statutory reserves being transferred to the National Treasury. Among other functions, GGMC provides technical assistance and advice on mining, mineral processing, mineral utilization and marketing of mineral resources. It conducts research in exploration, mining, and utilization of minerals and mineral products. It is responsible for enforcing the conditions of mining licenses, mining permits, mining concessions, prospecting licenses (for large scale operations), prospecting permits (for medium and small scale operations) and quarry licenses. Finally, it is responsible for the collection of rents, fees, charges, levies, etc. payable under the Mining Act.