gold and diamond mining study guyana.pdf

DRAFT FOR DISCUSSION ONLY

TOO BIG TO FAIL:

A Scoping Study of The Small and Medium Scale

Gold and Diamond Mining Industry

in Guyana

By

Clive Y. Thomas Distinguished Professor and Director

Institute of Development Studies

Faculty of Social Sciences

University of Guyana

November 2009

i

CONTENTS

Page

Preface iii

List of Acronyms iv

List of Tables v

List of Schedules vii

List of Graphs vii

List of Maps vii

Section 1: Introduction 1

─ Historical Background 1

─ Recommendations 3

Section 2: Performance 4

─ Output 5

─ Exports 8

─ Prices and Sales 9

─ Royalties and Taxes 12

─ GDP and Employment 12

─ Dredges and Claims 13

─ Investment 15

─ Recommendation 15

Section 3: Organization and Operations 16

─ Structure 16

─ The Fiscal Framework 20

─ Technology 21

─ Cost of Production 23

─ Backward and Forward Linkages 27

─ Jewellery Manufacture 27


Section 4: Legal, Policy and Regulatory Framework 31

─ Legal 31

─ Policy 32

─ Guyana Geology and Mines Commission (GGMC) 33

─ Guyana Gold Board (GGB) 35


ii

Section 5: Environmental Concerns 39

─ Land Degradation 39

─ Water Degradation 44

─ Hazardous Materials (Mercury Usage and

Contamination) 46

─ Integrated Environmental Management and

GGMC’s Environmental Division 48


Section 6: Recent Exchanges on Environment Issues and the

Low-Carbon Development Strategy (LCDS) 54

─ Recent Exchanges 54

─ Recommendations (1) 62

─ The LCDS and Small and Medium Scale Gold and

Diamond Mining 63

─ Recommendations (2) 71

Section 7: Amerindian Communities and Mining in

Guyana 72

─ Impacts 72


Section 8: Concluding Remarks 75

References 78

Appendix I: Letter of Transmittal 81

iii

PREFACE

This Scoping Study analyses and maps the main features of the current situation of the

Small and Medium Scale Gold and Diamond Mining Industry. Its aims are:

To bring together in a single document a concise situational analysis/baseline

scenario of the sub-sector that can be made widely available.

To make Recommendations, which hopefully the GGDMA would consider and, if

found to be useful, promote on behalf of its membership.

To identify areas for future in-depth studies (involving surveys, field visits, and

other direct methods). This would include scientific analyses of some still

unresolved scientific issues.

The main methodology used consists of:

The study of reports, other studies and documents.

Internet research and,

Interviews/discussions with knowledgeable persons.

For these purposes the GGDMA covered the cost of temporary research assistance (for 3

months). We were able to recruit Marciano Glasgow, Development Policy and

Management Consultants for this purpose.

The next stage envisioned is that, on the basis of this Draft Report, and after joint

consideration with the GGDMA, a proposal for further research could be developed by

the GGDMA in partnership with the University of Guyana and funding sought for this

purpose.

iv

List of Acronyms

DPMC Development Policy and Management Consultants

EDA Environmental Development Agency

EDD Environmental Development Division

ERC Ethnic Relations Commission

EVN Economic Value to the Nation

GENCAPD Guyana Environmental Capacity Development Mining Project

GFC Guyana Forestry Commission

GGB Guyana Gold Board

GGDMA Guyana Gold and Diamond Miners Association

GGMC Guyana Geology and Mines Commission

GLSC Guyana Lands and Surveys Commission

GoG Government of Guyana

IDS Institute of Development Studies

LCDS Low Carbon Development Strategy

NDS National Development Strategy

SFE Standing Forest Estate (Guyana)

UNDP United Nations Development Programme

UNIDO United Nations Industrial Development Organisation

WTO World Trade Organisation

WWF World Wildlife Foundation

v

List of Tables

Page

Table 1: Gold Output (ozs) 1880s 2

Table 2: Value of Gold Output (1890s) 2

Table 3: Tenure Arrangements (Small and Medium Scale Gold and

Diamond Mining) 2007 – 2008 5

Table 4: Guyana Mineral Production Declared 1979 – 2008 6

Table 5: Gold and Diamond Exports (US$ million) 8

Table 6: Indexes of Gold and Diamond Output and Export (Constant prices) 9

Table 7: Average Prices paid by the Guyana Gold Board (1999-2008) (US$) 10

Table 8: % Distribution of Gold and Diamond Declarations by Mining District

(2008) 11

Table 9: Royalties and Taxes Collected by the Guyana Gold Board (G$ million) 12

Table 10: Guyana: Real GDP Growth Rates (1999 – 2008) 13

Table 11: Registered Dredges 2001 – 2008 14

Table 12: Breakdown of Dredge sizes by Mining District, 2008 14

Table 13: Small and Medium Scale Mining Activity, 2008 14

Table 14: Mining Operations Sampled and Operating Costs 24

Table15: Weighted Average Operating Cost by Mining Method 25

Table 16: Fuel and Lubricants, Wages and Transportation contribution to

Operating Costs 26

Table 17: Estimated Mobilization Costs by Mining District 26

Table 18: Average Productivity per dredge (m3/week) – 2005 27

Table 19: Gold Board Purchases 36

Table 20: Area Available for Mining in Guyana 40

vi

Table 21: Licenced Dredges: Distribution by Mining District

(2005-2008) 41

Table 22: Status of Soil and Biological Degradation in Mining Districts 42

Table 23: Land Degradation from Mining 43

Table 24: Status of Water Degradation in Mining Districts 44

Table 25: Estimated Annual Land area Degraded from Mining in Guyana 46

Table 26: Mercury use practices among miners 48

Table 27: Comparative responsibilities for GGMC and miners under

the new mining environmental regulations 50

Table 28: Projected Gold Prices 2009 – 2018 70

Table 29: Projected Gold Output and Mining Area 70

vii

List of Schedules

Page

Schedule 1: Constraints/Weaknesses in Artisanal (Pork-knockers) Operations 3

Schedule 2: GGMC: Functions, Roles, and Areas of Responsibility (FRAR) 34

Schedule 3: Summary of Recommendations 77

List of Graphs

Graph 1: Guyana Mineral Production Declared 1979-2008 (Gold (ozs)) 7

Graph 2: Diamond Prices (average annual), 2000-2008 11

List of Maps

Map 1: Activity in the Mining Districts in 2008 17

Map 2: Regions of Gold and Diamond, Forested Areas and Class I-II Soils 67

Map 3: Economically Rational Deforestation Path 68

1

Section I: Introduction

Historical Background

Gold and diamonds have numerous industrial and commercial uses worldwide, as well as

being considered as a preferred store-of-value. At times of economic uncertainty and with

the prospect of inflation this is particularly true for gold. Gold has also been an

investment instrument that several Central Banks use as a store-of-value for part of their

international reserves holdings. The demand for gold and diamond is a function of all

these properties, but as a store-of-value, this ensures that there will always be a

significant speculative content to its demand, which creates fluctuations in price.

Despite these fluctuations however, in periods of strong bull-markets, as at present, there

is a strong expectation that over the long term there will be a growing persistent demand

for these precious metals. Price declines are treated, more often than not, as deviations,

aberrations and distortions produced by prevailing speculative conditions in the market.

Given their rate of formation over geological time these precious metals are in finite

supply subject to their discovery. Because of this the costs of exploration, development,

and mining trend upward as easily accessible resource material is used up. Advances in

technology cannot fully negate the upward pressures on costs and prices.

Guyana recorded its first commercial gold and diamond exploration and production more

than a century ago. Indeed the first recorded systematic efforts were made approximately

12½ decades ago, starting in the early to mid 1880s. Despite this long lineage, the

industry is perceived today as it were, the proverbial step-child in the Guyana family of

major commodities produced and exported.

The historical data show the first systematic gold production as taking place in the Potaro

area in 1884. This was preceded by earlier exploration recorded as far back as 1720 when

a gold seeking expedition took place in Berbice, but found nothing (Harrison, 1908;

Swain 1980). A later expedition to the Mazaruni/Cuyuni districts, sponsored by the Dutch

West India Company also found nothing. In 1743 a third expedition to Essequibo

2

mounted by the then Governor (Storm Van Gravesande) also failed. In 1863, the British

Guiana Gold Company led an expedition, which discovered gold bearing quartz in the

Cuyuni River (Wariri) but operations had to be halted because of the Venezuela boundary

dispute (Harrison 1908).

Two years after the first recorded production the first set of mining regulations were

enacted (1886). By 1895, it was being reported that Guyana was one of ten most prolific

gold-bearing regions in the world (Harrison, 1908; Swain, 1980). The data in Tables 1

and 2 below indicate the magnitude and rapid growth of the industry in that period.

Table 1: Gold Output (ozs) 1880s

Year 1884 1885 1886 1887 1893

Ounces 250 939 6,518 10,986 138,527

Source: D. Canterbury (1998).

Table 2: Value of Gold Output (1890s)

Year 1889 1890 1891 1892-89

(average)

G$ million 0.1 1.1 1.8 2.3

Source: D. Canterbury (1998).

While some foreign companies were involved in these early operations, small artisanal

operators (pork-knockers) formed the bulk of the domestic contribution to national output

(Dunn, 1912). It has been estimated that in the 1880s that about 61,000 ounces of gold

altogether were produced on operations in the area that Omai subsequently mined as a

large-scale foreign owned enterprise (Omai, 1984; Thomas, 1998). In 1896 a German

syndicate acquired this Omai property but let it go to Anaconda in 1947 who later

abandoned it in 1950 (Thomas, 1998).

The pork-knockers worked as individuals or in small groups using basic tools and

equipment and employing traditional technology in gold recovery from near surface or

soil deposits. Thomas (1998) reports that rates of recovery were low (about 20 percent).

This type of mining operation has a romantic folk-lorish appeal attached to it. It certainly

3

marked an adventurist entrepreneurial and innovative approach to developing livelihoods

in Guyana, but as business-outfits these artisanal operations suffered from several critical

constraints/weaknesses including those listed in Schedule 1 below.

Careful note should be made of this formidable list of constraints and weaknesses. These

point to basic policy, legal and regulatory failures. As we shall see since the hey-day of

the pork-knockers, efforts have been made to address these constraints starting in the

1970s and focussed on in the Mining Act of 1989.

Recommendation (Section 1). The clear recommendation from this brief historical

review is that the Guyana Gold and Diamond Miners Association needs to pay careful

attention to raising the profile of the gold and diamond industry in the country. More

attention should be placed on education and public awareness, publication and

dissemination of the seminal issues in the development of the industry. These efforts

should be carefully tailored to the heterogeneous economic, social and political groups

that make up the country. Professional/expert support should be obtained for this task. It

cannot continue to be left to well-intentioned but occasional amateur attention.

Schedule 1: Constraints/Weaknesses in Artisanal (Pork-knockers) Operations

Number Constraints/Weaknesses

1 Manual Labour (low or non-existent mechanisation)

2 No enforced health and safety standards

3 Lack of training

4 Poor pay (where labour employed)

5 Poor productivity

6 Capital deficient

7 Insecure property rights

8 Environmental damage (pollution, land and water degradation,

mercury use)

9 Weak, poorly organised markets (inputs and output)

10 Security

11 Poor infrastructure

12 High dependency ratio

13 Weak/non-existent basic services

14 Weak/non-existent economic support institutions (especially credit)

15 Policy failures

16 Tragedy of the Commons and Poverty Trap situations (Too many

miners, chasing too little resources)

4

Section 2: Performance

In this Section the main features of the industry’s performance over the past three

decades will be indicated (output, exports, price and sales, distribution of output by

mining district, royalties and taxes, GDP, employment, dredges and investment). Like the

previous Section, it concludes with the Recommendation(s).

A century later, after small scale gold and diamond mining began, beginning in the

1980s, gold and diamond mining has developed and is now organised around four basic

types of operations, including a residual artisanal (pork-knocker) component from the

earlier years. Based on the Mining Act 1989 these are: i) small scale (including artisanal

claims) 500 x 800 feet [2.7 acres for land claims and for river claims one mile (0.6 km) of

navigable river] ii) medium scale properties and mining permits of 150 – 1,200 acres iii)

large scale prospecting licences 500-12,800 acres; and, iv) permission for geological and

geophysical surveys (reconnaissance surveys are to be done with the objective of

applying for prospecting licences after the aerial and/or land reconnaissance results are

obtained).

Categories i) and ii) are restricted to Guyanese, but joint-ventures with foreigners are

allowed to jointly develop properties on the basis of a strictly private contract between

the parties.

Recent data on claims, prospecting licences and permits, mining permits and

reconnaissance are shown in Table 3 below. These illustrate the current state of tenure

arrangements in the small and medium scale gold and diamond mining industry.

5

Table 3: Tenure Arrangements (Small and Medium Scale

Gold and Diamond Mining) 2007 – 2008

Tenure 2007 2008

Claims (small scale) 10,563 12,582

Prospecting Licences (small scale) 65 107

Prospecting Permits (small scale) 2,001 859

Prospecting Permits (medium scale) 3,594 5,413

Mining Permits (medium scale) 373 550

Mining Licences 10 10

Reconnaissance 13 13

Source: Guyana Geology and Mines Commission.

Foreign companies may apply for category iv) listed above. It should be noted here that,

as we shall see later, for purposes of the mining environmental regulations, claims are

also classified by volume of material excavated/processed. In these regulations large

scale refers to the processing of more than 1000m3 of material (including overburden)

excavated or otherwise processed in 24 hours. Medium scale refers to a minimum of 200

to 1,000m3; and, small scale a minimum of 20 to 200m

3.

Because of issues in the production and marketing of gold and diamonds, the amounts

declared to the Authorities are used as the standard proxy for actual output. Over the

years there have been widely varying estimates of the gap between the two amounts,

ranging from 20 to 80 percent. The consensus however, seems to be that this gap has

been narrowing in recent years.

Output

Table 4 and Graph 1 show gold and diamond production declared for the three decades

(1979-2008). The data displayed separate the contributions of the large-scale producer

(Omai) for the years it was in operation 1993-2005. Declared gold output for the three-

year period 1979-1981, averaged 13.6 thousand ounces. For the next three-year period

1982-84 the average was reduced by one-half to 8.3 thousand ounces. For the next three

6

successive three-year periods (1985-87; 1998-90; 1991-93) declared output grew rapidly

reaching an average of 75.3 thousand ounces by 1991-1993.

Table 4: Guyana Mineral Production Declared 1979 - 2008 MINERALS GOLD/(ASM)* GOLD -

OMAI

GRAND TOTAL DIAMONDS

Units

Year

Ozs Ozs Ozs Ozs

1979 10,592 - 10,592.00 15,410.29

1980 11,003 - 11,003.00 9,968.07

1981 19,263 - 19,263.00 9,289.98

1992 8,655 - 8,655.00 11,191.84

1983 5,039 - 5,039.00 12,043.45

1984 11,132 - 11,132.00 7,236.23

1985 10,328 - 10,328.00 11,569.91

1986 14,036 - 14,036.00 9,237.54

1987 21,415 -- 21,415.00 7,460.21

1988 18,803 - 18,803.00 4,240.43

1989 17,343 - 17,343.00 7,846.01

1990 38,717 - 38,717.00 14,877.31

1991 59,296 - 59,296.00 22,524.09

1992 79,581 - 79,581.00 43,649.83

1993 87,100 202,229.96 289,329.96 48,773.52

1994 99,095 251,848.46 350,943.64 36,443.30

1995 91,451 178,356.15 269,807.15 51,049.35

1996 110,135 253,442.49 363,577.49 44,304.51

1997 98,051 333,567.81 431,618.81 34,675.63

1998 110,047 324,245.31 434,292.31 32,614.12

1999 110,684 312,089.79 422,773.79 44,246.19

2000 105,289 329,603.37 434,892.37 79,557.94

2001 101,849 354,068.59 455,917.59 174,745.00

2002 117,240 319,431.00 436,671.00 241,905.22

2003 105,747 270,693.00 376,440.00 401,691.33

2004 116,236 242,192.00 358,428.00 433,242.45

2005 162,527 100,001.00 262,528.00 347,565.72

2006 205,970 - 205,970.00 331,590.00

2007 246,200 - 246,200.00 261,933.00

2008 260,387 - 260,387.00 277,026.60

Total 2,453,211 3,269,539 5,924,980 3,012,499

Source:

Note: *Artisanal, small and medium-scale producers

With the coming on stream of Omai’s contribution to total gold output, declared total

output grew from about 80,000 ounces in 1992 to 289,000 ounces in 1993. Overall

declared output peaked at 456,000 ounces in 2001. When Omai closed down in 2005 total

output fell to 263,000 ounces. Producing on their own, the small and medium scale

7

producers continued to increase their declared output, reaching over 260,000 ounces for

the year 2008. This declared output is about two and one-half times the declaration at the

turn of the last century. This year (2009) there is the expectation that the small and

medium scale producers will be declaring output at or above 300,000 ounces, because of

the huge price incentives currently facing the industry.

Graph 1 illustrates the trends in declared gold and diamond production over the three

decades. From lows averaging approximately 10,000 metric carats in the 1980s, declared

diamond output increased steadily reaching 82,000 metric carats by 2000. This climbed

to 445 thousand metric carats by 2004. After successive years of decline this total was

down to 169,000 metric carats by 2008. Some of this decline has been attributed to

miners switching output from diamonds to gold because of the price attractiveness of the

latter.

Graph 1: Guyana Mineral Production Declared 1979-2008.

Guyana Mineral Production Declared 1979-2008 (GOLD (Ozs))

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

19791980

19811992

19831984

19851986

19871988

19891990

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

End of Period

Ann

ual G

old

(Ozs

)

GOLD/(ASM) (Ozs) GOLD-OMAI (Ozs) Grand Total (Ozs)

8

Guyana Mineral Production Declared 1979-2008 (DIAMONDS (Ozs))

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

19791980

19811992

19831984

19851986

19871988

19891990

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

End of Period

Ann

ual D

iam

ond

(Ozs

)

DIAMONDS (Ozs)

Exports

The total value of gold exports in 2008 was approximately US$203.7 million, and

diamond exports US$31.7 million, for a combined total of about US$235.4, which is

about 30 percent of Guyana’s total exports for that year. Table 5 below shows recent gold

and diamond exports (2003-2008).

Table 5: Gold and Diamond Exports (US$ million)

Year 2003 2004 2005 2006 2007 2008

Gold (US$ m) 130.9 145.1 111.9 114.4 153.1 203.7

% of total 19.7 18.4 15.0 14.0 20.2 25.6

Diamond (US$ m) 29.7 48.8 43.6 44.9 35.5 31.2

Diamond % of total 4.5 6.2 5.8 5.5 4.7 3.9

Source: GoG official statistics, GGMC, Bank of Guyana Reports and

the Bureau of Statistics.

Constant price indexes of gold and diamond output and exports are shown in Table 6 for

the period 1998-2008, with 1998 as the base year (100).

9

Table 6: Indexes of Gold and Diamond Output

and Export (Constant prices)

Year Output Exports

Gold Diamond Gold Diamond

1998 100 100 100 100

1999 101 136 95 126

2000 96 244 96 216

2001 93 536 93 515

2002 107 742 108 819

2003 96 1232 96 1340

2004 106 1328 109 1529

2005 148 1066 155 1130

2006 187 1017 188 1187

2007 224 803 223 907

2008 237 504 234 645

Source: W. Abrams, Guyana Geology and Mines

Commission, 2008.

The data show far stronger fluctuations in declared output and exports for diamond than

for gold. While gold output and exports peaked at about 2.3 to 2.4 times that of the base

year for 2008, in the case of diamonds the peak reached was over 13 times for output and

fifteen-fold for exports in 2004. This underscores the recent decline in declared diamond

output indicated above.

Prices and Sales

Much of the recent prosperity of the gold and diamond mining sector has depended on

rising prices. Data on prices paid by the Guyana Gold Board support this (see Table 7).

An examination of the Board’s pricing arrangement is presented later.

10

Table 7: Average Prices paid by the Guyana Gold Board

(1999-2008) (US$)

Year $US

1999 281.16

2000 279.77

2001 272.88

2002 310.29

2003 368.28

2004 411.49

2005 446.00

2006 608.32

2007 702.81

2008 876.62

Source: Guyana Gold Board.

These prices are daily averages for the year. This means that in a good year like 2008,

prices would fluctuate considerably. As a case in point, in that year it fluctuated from a

low of US$692.50 to a high of US$1052.50 for a yearly average of US$876.62

Graph 2 indicates the behaviour of diamond prices over the past decade. From a low of

less than US$80, at the beginning of the period the average annual price had more than

doubled to over US$160 during the period. As we shall see gold and diamonds are legally

required to be sold to the Authorities [Guyana Gold Board (GGB) and the Guyana

Geology and Mines Commission (GGMC)]. Almost all the purchases by the local

Authorities are re-sold overseas. Thus for example, in recent years it is only between 0.1

and 0.3 percent of the gold purchased by the GGB from miners that is resold locally.

11

Graph 2: Diamond Prices (average annual), 2000-2008


The distribution of gold and diamond declaration by the six Mining Districts of Guyana

for 2008 is shown in Table 8 below. The four Mining Districts (2-5) account for the vast

majority of the declared output with Mining District 3 the largest, accounting for over 40

percent and 56 percent of the gold and diamond declarations respectively.

Table 8: % Distribution of Gold and Diamond Declarations

by Mining District (2008)

Mining District Gold (%) Diamond (%)

1 Berbice - -

2 Potaro 19.0 28.1

3 Mazaruni 40.2 56.3

4 Cuyuni 17.8 15.3

5 North West 19.8 -

6 Rupununi 2.4 0.2

Source: W. Abram’s, Geology and Mines Commission, 2008.

Note: Gold sales to licenced dealers account for about one percent

of gold declarations.

Diamond Prices (average annual), 2000-2008

12

Royalties and Taxes

Royalties and taxes are collected by the Gold Board on local purchases. These funds form

the bulk of the incomes received by both the GGB and the GGMC. In the case of the

latter, other items like fines and rentals of properties also contribute to income. The main

point is that the industry finances this complex framework of public organisations linked

to the industry. The details will be introduced later when the GoB and the GGMC are

considered. However, it should be noted that collections since 1998 have grown by more

than nine-fold. Reflecting the rapidly increasing trend of declared output of gold in recent

years, most of this increase has occurred during the years 2005-2008. Indeed in the early

period 1998-2001 collections fell. Details are shown in Table 9.

Table 9: Royalties and Taxes Collected by

the Guyana Gold Board (G$ million)

Year Collections

(G$ million)

1998 306.1

1999 346.7

2000 284.8

2001 271.1

2002 422.5

2003 478.8

2004 603.5

2005 997.5

2006 1,557.4

2007 2,205.6

2008 2,882.7


GDP and Employment

Gold and diamond production contributes about 7.4 percent to Guyana’s current GDP.

The growth rate for value added of the gold sub-sector in 2007 was 15.7 percent and 9.7

percent in 2008, based on Government of Guyana statistics. Value added in the diamond

sub-sector has declined over the two years by -21.0 percent and -37.2 percent

respectively. The 2009 Budget has projected sub-sectoral growth in 2009 of -1.5 percent

for gold -2.3 percent for diamonds. These figures should be looked at in the context of the

optimism now being expressed by leading figures in the industry and real GDP growth

rates for Guyana over the period 1999-2008 (see Table 10).

13

Table 10: Guyana: Real GDP Growth Rates

(1999 – 2008)

Year Real GDP Growth Rate

(%)

1999 2.6

2000 (-0.7)

2001 1.6

2002 1.1

2003 (-0.6)

2004 1.6

2005 (-1.9)

2006 5.1

2007 5.4

2008 3.1

Budget 2009 4.7

Source: Government of Guyana Statistics (various years).

Various estimates of employment in the sector have been made, but to the best of my

knowledge no direct estimation has been attempted. A recent (2009) GGMC estimate is

that 11,200 persons were employed in 2007 and 14,130 in 2008. Applying the same ratio

of dependents to employees used to estimate total employment in the mining sector this

gives a figure of approximately 90,412 persons directly and indirectly dependent on the

fortunes of the industry.

Dredges and Claims

As we shall see when we come to discuss technology and methods of production

registered dredges are at the heart of the expansion of the small and medium scale gold

and diamond mining operations in Guyana. Table 11 below shows the rapid expansion in

the number of registered dredges in recent years. The number has more than doubled

since 2001 but most of the increase has occurred between the end of 2004 and 2008, as

approximately 900 new dredges were registered as compared to about 260 registrations

between 2001 and end 2004. Data on dredges by size and mining district are shown

below in Table 12. When we examine the cost of production later, these data will be of

further use. It is important to note here the heavy concentration in dredge sizes 4" - 6"

and in mining districts 3, 2, 4 and 5 in that order.

14

Table 11: Registered Dredges 2001 – 2008

Year No. of Registered Dredges

2001 927

2002 1,022

2003 1,092

2004 1,188

2005 1,504

2006 1,617

2007 1,774

2008 2,072

Source: Guyana Geology and Mines Commission

Table 12:Breakdown of Dredge sizes by Mining District, 2008

Size MD #1 MD #2 MD#3 MD #4 MD #5 MD #6 Total

2" 0

3" 1 1 1 3

4" 1 118 290 89 32 19 549

5" 1 109 174 58 21 14 377

6" 2 291 283 249 123 35 983

8" 11 22 6 4 2 45

10" 6 14 19 1 40

12" 1 9 26 26 1 63

14" 6 1 5 12

Total 5 551 811 453 181 71 2,072

Source: Guyana Geology & Mines Commission

A composite Table 13 showing dredge registrations and prospecting permits is also

presented below.

Table 13: Small and Medium Scale Mining Activity, 2008 Activity/District Berbice Potaro Mazaruni Cuyuni N.W.D Rupununi Other Total

Dredge

Registration

4

200

211

167

54

29

-

665

Dredge Renewals 2 351 600 286 127 42 - 1,408

Dredge Licensed 5 551 811 453 181 71 - 2,072

Prospecting

Permits

(Small Scale)

0

77

205

0

0

0

@577

859

Land Claims 38 2,675 2,689 1,034 2,446 446 - 9,328

River Claims 201 493 1,263 287 384 626 - 3,254

Specified

Machinery

0

38

45

16

27

3

-

129

Source: Guyana Geology & Mines Commission @

Issued in Georgetown.

15

Investment (Changes in Capital Stock)

The World Trade Organisation’s (WTO) Trade Policy Review of Guyana (WT/TPR/

S/218) has reported: “no figures are available on investment in the mining sector” (P63).

However, the GGMC has subsequently estimated capital expenditure in the sector at

approximately G$10.7 billion for 2007. This estimate was 17 percent up on the estimate

for 2006 (G$8.3 billion) mainly for dredges. The capital expenditure was measured at

book value and related to dredges G$10.2 billion plus specified equipment: excavators,

bulldozers, washplants, crushers, sluice boxes, gravel pumps (G$0.3 billion).

An unspecified, but significant portion of this investment comes out of joint ventures

with companies/individuals in other countries, principally Brazil, Canada and the United

States.

Recommendations (Section 2)

1. The industry will continue to operate largely in the dark as it has been for decades

if it remains dependent on irregular studies and reports. A standard package of

data reporting on the industry in a timely manner should be on the Website, where

it can be readily and timely accessed.

2. This does not rule out irregular studies, which focus in-depth on areas of

particular concern. Many of these types of studies will be science-based and

survey-based.

3. Data acquisition, storage and dissemination among miners and the wider public

should be given much more attention and professionalized. Plans for these

activities should be set in place as soon as practicable.

4. Finally, build strategic alliances/working relations with key institutions outside

the industry, which can help with data gathering. The Bureau of Statistics is an

obvious priority, but so should the research departments of the Bank of Guyana,

Government Ministries like, finance and trade and the University of Guyana.

16

Section 3: Organization and Operations

In this Section we shall examine the broader structural and organizational features of the

gold and diamond sector. This sets the stage for an assessment of the legal and regulatory

framework, which follows in the next Section. Its operations are also evaluated in the

context of production and mobilization costs. Finally, backward and forward linkages of

the industry are examined.

Structure

According to the GGMC gold and diamonds are mined in the Guyana Shield with the

potential concentrated in the areas of greenstone belts. Placer deposits are found in the

main rivers draining the greenstone area. Lode gold is found in the greenstone belts in the

Precambrian terrain in quartz veins. Diamonds are located in placer deposits in the main

rivers of the North West and are believed to be largely derived from the Pakaraima

Mountains. According to the GGMC (2009): “the primary source of the diamonds is

unclear”.

Guyana is divided into six mining districts as shown in the Map overleaf. The Mining

Act, which regulates all mining including gold and diamond vests ownership of all

mineral rights in the State. Under the Amerindian Act, however, Amerindian lands before

they can be exploited for minerals, are subject to the consent of their respective

communities. Further, under any agreement between a mining operator and an

Amerindian Community, residents of that community must be first offered employment

at market rates for any position, for which they have the requisite skills. Outside non-

resident employment is only permitted where the required skills are unavailable.

18

Legally the term miner covers three broad categories of persons. First, property or licence

holders who have legal property to the mining area. Second, “tributors” or persons

working for the owner(s) for a share of mineral output. And, thirdly, any person(s)

employed to work on the mine. The first category is regulated by the GGMC. The second

category of miners is regulated by both the GGMC under the Mining Act (who grants

permission to mine) and private contract law (which regulates the relation between the

tributor and the mining property owner). The third category is governed by the labour and

employment laws of Guyana.

As a group most miners are relatively young males. Survey estimates show that most of

them have a basic primary education (95 percent) as well as secondary education (62

percent). If the technically trained are added to those with a secondary education the ratio

goes up to above two-thirds. As a result it is fair to say that the miners as a group have “a

strong basic education” (Lowe, P.18). But having said that, reports also indicate there is

much to learn about mining and modern business methods. Miners as a group are highly

mobile and transient. Most come from outside the areas where they are currently

operating. Maintaining their livelihoods require them to remain on the constant look-out

for mining areas with greater results potential to which they would seek to move.

A significant number of Brazilian miners, estimated at over 1,000 are said to be operating

in the industry, often with local partners, as ownership for small and medium scale

miners is reserved for Guyanese. The Brazilians however, are reported at all levels of the

industry: equipment suppliers, shop owners and traders. it is claimed that they own about

one-sixth of all dredges (17 percent) and a similar share of the small scale gold and

diamond mining operations in partnership with locals. They have been attributed with

some of the renewed vigour being exhibited in the industry in recent years as well as

some of the new equipment (lavadoras), and mining methods introduced. It is also the

view that they are disproportionately responsible for much of the undeclared mineral

production in Guyana, and the environmental abuses reported in the industry.

19

Two structural considerations flow from the structure of small and medium scale gold

and diamond mining described so far. One is landlordism. Industry observers (Lowe

2008) have identified landlordism as a key constraint. The practice of accumulating

mining territory through claims, then holding on to them while seeking renters, is

estimated to be very high. As much as eighty percent of mining is alleged to be taking

place under some form of landlordism. If this is true, the problem has to be addressed at

its root.

The traditional share allegedly given by miners to tributors is said to be around 10

percent. The arrangements between tributors and the mining property owner(s) are

monitored by the “rangers” that the owners employ. Some tributors resent this resort to

private monitors and enforcers. Their concern is that owners are using them for

exploration. That is, as a means of discovering where the potential is on a particular claim

and afterwards seeking to revoke the contract at that stage so the owner can cash in on the

value in the property without going through the exploration expenses.

To what extent this occurs is unclear to this researcher, but the more fundamental concern

must be that such arrangements 1) encourage speculation in properties 2) yield a high-

turnover 3) yield under-production, from properties 4) sustain the usurious abuse of the

property-less tributors who carry the costs and risks attached to mineral exploration. This

last item is considered widely to be socially unacceptable.

Indeed, this is both an economically and socially expensive way to seek to identify the

best and most worthwhile claims. It is also unscientific and based on a hit or miss

approach. The Recommendation is that the GGDMA should join in efforts to devise a

rental mechanism or system of disincentives to prevent this type of hoarding and the

keeping of mining properties idle. Means should be found to promote “beneficial

occupation” of mining properties.

The other related issue is the role and status of the Brazilian small and medium scale

miners in the industry. While the estimates of their number and location vary, all

20

observers agree their number is significant. The GGDMA has to lead the search for a just

solution through the development of a proposed policy framework to govern the

operations of this sub-sector. There are some very important criticisms of Brazilian

miners as a group. These include:

─ environmental abuse in their mining methods

─ tax evasion and illegal export of gold and diamonds

─ for whatever reason, a noticeable reluctance to employ Guyanese nationals

─ the language barrier reinforces social barriers

─ their lack of exposure to local training and public awareness campaigns,

largely due to the above

─ security and related concerns

─ their continued undocumentation and resistance to regularization

The Fiscal Framework

The taxes and incentives regime for small and medium scale mining is a major factor

defining its structure and operations. As matters stand royalty payments are charged on

gold varying between 3 and 5 percent of gross proceeds depending on the world price of

gold prevailing. Five percent is paid when the world price is above US$285/ounce; four

percent when the world price is between US$260 ─ US$285/ounce; and three percent

when the price is below US$260/ounce. For diamonds, small and medium scale miners

pay three percent of gross proceeds.

Incentives given to the small and medium scale mining sector derive both from the

general across-the-board programmes and incentives offered by the Government and

those specific to the group. The former therefore constitutes the floor of the incentive

regime. The general incentives on offer are: 1) custom duty relief (zero rating for items of

plant, machinery and equipment and input raw materials for goods produced for export)

2) loss carryover (unlimited) from previous years 3) accelerated depreciation 4) full

unrestricted repatriation of capital, profits and dividends for corporate bodies. There are

also double taxation treaties with some countries for foreign interests.

21

In addition those incentives specific to small and medium scale mining are:

1. Exemption of VAT and Excise Tax for all-terrain vehicles (ATVs), pumps,

matting, dredge flaxes and expanding metal

2. Withholding tax is waived

3. Special incentives for pioneering investments and investments in selected

communities, e.g., Linden

4. In the case of gold, 2 percent of gross proceeds on all declared gold is taxed.

There is no further income taxation.

Technology

Broadly speaking the operational, mobilization, and efficiency costs for small and

medium scale miners are a function of several crucial variables, not all of which can be

isolated for careful measurement, given the prevailing state of the data on the industry.

Among the important ones are:

1. Mining location, including both geological and geographical features

2. Mining techniques used, as these affect the volume (as through-put, recovery

rates and productivity)

3. Business skills (entrepreneurship generally, as well as skills specific to the

industry)

4. Key inputs and their cost (especially transport, fuel and lubricants, wages,

infrastructure and rentals)

5. Security and stability, as these affect expectations, prices and supply of inputs

6. The legal and regulatory environment/framework

7. The policy environment

8. The market environment

9. Other factors, including weather, health conditions, and support institutions

Starting with mining methods we find that overall, dredging operations constitute the

principal method of small and medium scale gold and diamond mining in the six mining

districts. These operations follow two basic forms: land and river dredging. The former is

further sub-divided into two categories: hydraulicking and dry mining.

22

Hydraulicking has become over the past two decades the most frequently used type of

dredge operation. It utilizes high pressure water jets to break up the ground into a

“slurry”. This works well with loose material like sand, loam, clay and gravel. Gravel

pumps are then employed to “suck-up” the slurry onto the processing unit (sluice boxes).

Processing involves a washing cycle to sort out the slurry and then amalgamation, which

involves the use of mercury to separate out the gold.

Some observers consider this method to be low productivity because of three technical

considerations, namely i) the difficulty in getting water jets to fluidize clayey soils ii)

excessive dilution with unwelcome overburden during water jetting iii) the excessive re-

handling of the material in order to increase yield (See Lowe, 2008, Pages 20-24).

River dredges are housed on pontoons in the rivers, which allow changes in the location

of operations on the river. This method uses suction (gravel) pumps to vacuum the

dredged material from the riverbed. With mining regulations permitting river dredging up

to 20 metres on both riverbanks, missile dredging has, as we shall see, raised concerns

about the turbidity of rivers that are being mined and the damage (disfigurement) of river

channels. The suctioned material is put in a sluice box located on the barge for processing

where the washing cycle and then amalgamation take place to remove the gold particles.

For diamonds a lavador is used.

The GGMC reports underground shaft mining operations in several locations in the North

West mining district. Lowe reports that hammer milling is “the preferred option for

deposits that have gold bearing quartz stringers and veins”. (ibid, P23) The crushed

material is processed in a conventional manner in a sluice box with a similar

amalgamation process or utilizing centrifugal equipment to obtain the concentrate which

is then massaged with mercury and the amalgam burnt to obtain the gold.

In some instances a more basic method is employed, ground sluicing. This involves

utilizing the ground as a sluice box. Dry mining is relatively rare. It is called “dry”

because of the use of excavators to excavate and transport the mining material to the

23

processing unit. The processing unit has a “grizzly” above the sluice box. The material is

fed into the grizzly where it is water-jetted and the slurry flow into the sluice box where it

is further processed in the usual way.

The choice of mining method depends on multiple factors including geology,

location/geography/accessibility, as well as characteristics of the ore body. In turn these

are major determinants of mine efficiency and the cost of production.

Artisanal/porknocker-type mining operations are on a relative decline in terms of

contribution to output. These operations are individual/small group based, utilizing non-

mechanised production methods. Relying on their knowledge of the local terrain tools

such as batels, trowels and pick axes are used to exploit alluvial deposits, which are

conveyed to sluice boxes, where mercury is used for gold separation.

Above this size small scale operations combine manual labour and dredges. The dredges

are calibrated in inches but there are two main groupings: land based dredges which have

3-8" diameter suction pumps and river based dredges which utilize 8-14” suction pumps.

Cost of Production

There is no regular tracking of the cost of mining operations in the small and medium

scale sector. The Guyana Gold Board has reported an estimate that the cost of producing

gold in Guyana is between US$240 to US$300/ounce. That apart, the only systematic

detailed effort I know of, aimed at estimating the costs and mobilization of mining

operations in Guyana has been produced by the Economist (Wycliffe Abrams) at the

GGMC for the year 2005. More studies need to be conducted on a regular basis in order

to monitor trends in the industry and inform policies. The cost items identified in the

GGMC study includes wages, fuel and lubricants, transportation, maintenance, royalties

and taxes, tribute, licences, medical expenses, consumable items, and depreciation (non

cash charges).

24

The key findings of the 2005 study are summarized below. The study covered 69

operations in the top four mining districts. These accounted for approximately 100

percent of gold declared in 2005 and 97 percent of the diamonds. The study sought to

determine average total production costs, based on a discounted cash flow rate-of-

return method using constant prices at the “breakeven” (0%) cost of production. Key

assumptions are: 1) 100 percent utilisation of mine capacity throughout its life 2) capital

investments that are incurred more than 5 years prior to 2005 are treated as “sunk” costs

3) investments incurred less than 5 years prior to 2005 have their “undepreciated

balances” entered as capital investment in 2005 4) the Guyana dollar is the standard of

value. Altogether, the 69 operations represent a little less than three percent of the total

number of operations at the time. The number of sampled operations is shown below and

the weighted average weekly cost of mining operations the study arrived at (See Table

14).

Table 14: Mining Operations Sampled and Operating Costs

Source: W. Abrams, 2005. Guyana Geology and Mines Commission.

Operating costs for dredges are significantly affected by factors such as: site location, ore

body, and overburden. The study identified the land based 5" suction dredge in the Potaro

mining district as the lowest cost dredge type operation (G$256,000 weekly). The

operating costs of dry mining at G$380,000 is lower than that for hydraulicking, but its

capital and mobilization costs are higher mainly on account of its utilization of earth

moving equipment. In the study hydraulicking was observed to be the most frequently

used type of dredging operation. Its weekly operations costs averaged G$395,800, with

Mining Districts Sampled

Operations

Weighted Average

Weekly Operating Cost ($G)

1) (Berbice) - -

2) (Potaro) 28 259,500

3) (Mazaruni) 13 370,425

4) (Cuyuni) 10 763,000

5) (North West) 18 518,733

6) (Rupununi) - -

Total/Average 69 477,914

25

those in the Potaro mining district having the lowest and those in the North West mining

district the highest.

In general also, the costs for river-dredging are significantly higher (21 percent) than

those for land dredging, mainly due to higher transport costs. The study estimated the

weighted average weekly operating cost for river dredging at G$820,000.

Underground mining operations, which occur mainly in the North West, had a relatively

high weighted average weekly cost of G$563,000. Underground mining is relatively

labour intensive.

Quartz mining had an average weekly operating cost of G$400,000. These results are

shown in Table 15. Labour and fuel and lubricants costs were found to be quite high in

the study.

Table15: Weighted Average Operating Cost

by Mining Method

Method Weighted Average Weekly

Operating Cost (G$)

Land Dredging 380,000

Dry Mining 395,000

Hydraulic 820,000

River Dredging 563,000

Underground (Shift) Mining 400,000

Quartz Mining 387,900

Source: W. Abrams, 2005. Guyana Geology and Mines Commission,

The study found that the major cost elements in mining operations are transportation, fuel

and lubricants, and wages. These on average accounted for just over 57 percent of weekly

operating cost, with fuel and lubricants contributing 24 percent, wages 18 percent and

transport 15 percent. This varied in the mining districts as the data Table 16 below show.

26

Table 16: Fuel and Lubricants, Wages and Transportation contribution to

Operating Costs

Mining

Districts

Percentage Contribution to Estimated Average Weekly

Operating Costs

Fuel and

Lubricants

Wages Transportation Total

Mazaruni 22.83% 18.3% 15.13% 56.26%

N.W.D 25.8% 21.67% 9.7% 57.17%

Cuyuni 27.8% 11.9% 27.6% 67.3%

Potaro 18.9% 21.5% 7.6% 48%

Weighted

average

23.83%

18.4%

15%

57.18%


Mobilization cost (prospecting, exploration and development) were estimated in the study

at 30 percent of the monthly operating cost. The estimated average mobilisation cost was

G$573,498. This varied from G$311,400 in the Potaro mining district to G$915,600 in

Cuyuni (See table 17 below). This is indeed a very wide variation.

Table 17: Estimated Mobilization Costs by

Mining District

Mining District Average Weekly

Mobilization Costs (G$)

1 (Berbice) -

2 (Potaro) 311,400

3 (Mazaruni) 444,510

4 (Cuyuni) 915,600

5 (North West) 622,480

6 (Rupununi) -

Average 573,498

Source: W. Abrams, 2005: Guyana Geology and

Mines Commission.

The study reported on dredge production and productivity (m3/week) based on the size of

dredges. The 6" dredge had the highest production and accounted for the largest number

of dredges. This was followed by the 5" and 4" dredge size. These data are shown in the

Table 18 below. Generally, however, one can observe that as might be expected the

output of the dredges varied directly with their size.

27

Table 18: Average Productivity per dredge (m3/week) – 2005

Dredge Size # of Dredges m3/week Productivity (week)

3" 5 295 1,475

4" 434 520 225,680

5" 337 675 227,475

6" 649 1,365 885,885

8" 17 1,635 27,795

10" 29 4,200 121,800

12" 25 6,050 151,250

14" 7 8,235 57,605

Total Dredges 1,503 Total Productivity 1,699,005 (m3)


Background and Forward Linkages

The small and medium scale gold and diamond mining industry has numerous strong

linkages. Its inputs place a substantial demand on the supply of air services, river

transport, basic infrastructure (roads, bridges, water control networks), basic social

services (health, education and welfare), communications (postal, packaging and

telephone), security and protection (a raft of retail services in supplying food, clothing,

pharmaceuticals, toiletries, entertainment), banking (finance and credit) as well as

industrial suppliers of fuel, lubricants, repair, fabricating and metallurgy. It is the major

supplier to the jewellery industry and also basically finances the operations of two major

government organisations: the GGMC and the Guyana Gold Board.

Jewellery Manufacture

Tracing the economic dimension of these linkages or the input-output structure of the

industry is clearly a priority area for future research. The main value added to the

industry comes from the fact that it is the main supplier of inputs into the jewellery

industry. The current size of this industry is not known, but the number of registered

establishments was given as 350 in 2004. There are an estimated 400 operations, many of

them small enterprises that produce and sell jewellery to individual consumers as well as

larger establishments. One estimate is a total of 1050-1200 persons are dependent on the

jewellery industry, both in the fabricating and retail sectors.

28

The last survey of the industry I could find in the literature was that done by the GGMC

and the Caribbean Development Bank in 1993. That survey noted several deficiencies

and constraints in the sector. As a result of that study the Guyana National Association of

Goldsmiths and Jewellers was established in 1994 to deal with the problems affecting the

sector. In 2002 a Training Institute was established to improve design and manufacturing

skills of jewellers. Local sales of gold by the Gold Board was only G$47.2 million

(US$236,000) in 2008, compared to double that amount in 2007 (G$93.6 million or

US$468,000). It is estimated though that the jewellery industry as a whole makes most of

its purchases from other than the Guyana Gold Board, given its apparent size and

vibrancy in the country.

Guyana has had a long tradition of Creole hand-made jewellery, mostly gold. These

producers have often manufactured and retailed the items they produce themselves.

Reportedly, these items have not been of a high standard. However, this has been

changing over the period since the mid-1990s as higher-standard outfits have emerged,

and still combining manufacturing and retailing. A few of these firms have expanded

enough to set up retail offices in population centres outside of Georgetown (their main

headquarters) as well as in CARICOM (Trinidad and Tobago and The Bahamas) and

New York, USA.

Much of the initial impetus for the expansion has been due to the formation of the

National Association of Goldsmiths and Jewellers in 1994. This has not been active in

recent years. In collaboration with the GGMC, the Guyana Jewellery Training Institute

was established in 2002 with the goal of seeking “to enhance jewellery-making through

skills training and improved quality”. The Guyana Bureau of Standards has also played

an important role in quality improvement. Some of the well established local firms (for

example, Kings Jewellery Ltd and Topaz Jewellers) have had employees trained

overseas. Thus Kings Jewellers presently employs several graduate gemmologists,

diamond graders, jewellery designers and accredited jewellery professionals.

29

Although both gold and diamond jewellery is produced, the concentration is mainly on

gold items: rings, brooches, pendants, chains, necklaces, bracelets, and cut shaped and

polished diamonds. New technologies have been introduced by these establishments such

as: computer aided design (CAD), lasers, powder metallurgy processing, and rapid

prototyping. This new technology has reduced scrap wastage and lowered inventory

requirements thereby lowering costs and allowing for more competitive pricing.

There are now three main methods of jewellery manufacture coexisting in establishments

in Guyana. These are 1) the traditional Creole hand-made methods 2) machine production

where components are cut and stamped with dies manufactured for each component of

each item of jewellery and 3) casting (lost wax) where items are made from pre-shaped

moulds. Most of the firms however, remain basically as “family owned enterprises”. This

might have aided marketing of their products as family reputation for jewellery design,

quality and honesty plays an important role in highly competitive markets.

The question arises as to whether the industry, despite its own evolution to more

professional outfits, might not be contributing to the overall informalisation of the small

and medium scale gold and diamond industry. For one, most of its exports are assumed to

be “undeclared”. While if its inputs are not purchased from the Guyana Gold Board or the

Authorised Dealers, this is another instance of informalisation.

LEAP in one of its Business Opportunity Profiles has estimated that an investment of

G$4 million would allow for the establishment of an “effective jewellery manufacturing

operation”. For a more elaborate enterprise it estimates the investment costs at G$5

million.

30


Two earlier Recommendations were made in regard to efforts by the GGDMA to

contribute to the resolution of:

1. The problem of landlordism and the promotion of the “beneficial occupation” of

mining properties as a solution.

2. The status of Brazilian miners.

Further to these:

3. The GGDMA should support feasibility studies to guide its members about the

possibilities for profitable forward linkages and other spin-off domestic business

opportunities linked to gold and diamond mining.

4. The provision of regular quantitative studies, which measure operating costs,

mobilisation costs, as well as the technical and economic efficiency of various

mining techniques used in the industry. These should be done in intervals of no

longer than 2 to 3 years, in order to encourage their updatedness and to ensure

close attention is paid to these variables by miners in recognition of their major

contributions to profitable business operations.

31

Section 4: Legal and Regulatory Framework

Legal

The legal framework for small and medium scale gold and diamond mining in Guyana is

provided by the Mining Act of 1989, which was signed into force in 1991. This Act deals

with all vital areas of mining including: the delineation of Mining Districts, the size of

mining operations, the categorisation of persons as miners, prospecting, surveying,

mining operations and the licensing of mining equipment and machinery, licensing and

registration of mining operations, environmental regulation, health and safety practices

and the regulation of mining on Amerindian lands. All mineral rights are vested in the

State and administered by the GGMC.

Since the 1989 Mining Act, no comprehensive mining regulations have been enacted to

replace those of 1972. Regulations governing environmental protection were enacted in

2005 and Lowe (2008) reports that regulations have been drafted to cover 1) occupational

health and safety, and 2) financial and administrative issues. As matters stand therefore

there is “no single unified document that contains all the country’s mining regulations”.

(WTO, Second Trade Policy Review)

The Mining Act, 1989 has to be read in conjunction with three other pieces of major

legislation impacting on the small and medium scale gold and diamond mining sector.

These are the Environmental Protection Act (1996), The Guyana Gold Board Act (1981)

and the Amerindian Act (2006). These will be addressed in later Sections of this Report,

but it should be noted that, in regard to the first, the GGMC had entered into a

Memorandum of Understanding with the Environmental Protection Agency (EPA) in

1997 concerning cooperation and collaboration between the two agencies. As we shall

see below the second Act regulates the sale and purchase of gold mined in Guyana,

making the Government the sole purchaser and exporter other than authorised dealers,

which it had been licensing since 1997.

32

Policy

The Mining Act is not a mining policy. It cannot also, substitute for a mining policy.

Policy responsibility for small and medium scale gold and diamond rests with the Prime

Minister, who has the Ministerial portfolio responsibility for making policy for the sector.

Modern best-practice, however, supports the view that effective and efficient policy for

any significant sector of activity in a country should be formulated as the product of a

sustained, transparent and open process of consultations with all the sector’s key

operators, major stakeholders, interested persons and organizations, as well as interested

participants from the wider society ― to the extent that they express an interest in so

doing. This Policy Document should be documented and made widely available, within

and outside of the industry. Without such a procedure, the result is likely to be

insufficient “buy-in” and ownership of the policy, which is promulgated, from both the

operators in the sector and wider stakeholders in the industry.

Stakeholders in the small and medium scale gold and diamond mining sector constitute a

growing list, particularly with the present emphasis on a “low carbon development

strategy”. At present it includes a range of local, regional and international environmental

or environmental-related bodies, as well as traditional stakeholders like Amerindian

communities, jewellers, and those engaged in forestry. Increasingly eco-tourism and

those persons producing non-timber forest products (NTFPs) like wildlife, fruits,

medicines, resins, dyes, spices, nuts, vegetables and so on have become important

stakeholders.

Notwithstanding this general observation there exist documents and decisions referring to

the sector, which make reference to features of mining policy. By construction, these

documents will be clearly limited in their usefulness although they will provide indicators

of what present policy is. These documents would include for example, the National

Development Strategy (NDS) 1996 and 2001, and a reported Policy Paper entitled:

Mineral Policy and Fiscal Regime in Guyana produced in 1997. This latter has not been

widely circulated. In practice, policy is now set by the Prime Minister (who has portfolio

33

responsibility) and the Board of Directors of the Guyana Geology and Mines

Commission. There is however, no over-arching Policy Document to guide these persons.

Guyana Geology and Mines Commission (GGMC)

The principal responsibility for implementing and administering policy in regard to

mining activity for the small and medium scale gold and diamond sector in Guyana falls

on the GGMC. The GGMC was established three decades ago in1979. It is intended to be

a semi-autonomous body and it has its own Board of Directors. Organisationally, under

the Board, the body’s Chief Executive Officer is the Commissioner, who along with

Managers of four core divisions, three of which affect the small and medium scale gold

and diamond mining sector: Geological Services, Mines, and Environment, are

responsible for the administration and execution of the Government’s responsibilities

under the Mining Act.

The GGMC is not simply an “omnibus organisation” as it is often described. Over the

years it has accumulated a large and extraordinary range of responsibilities in fulfilling its

functions and roles. I have identified twenty (20) of these, each of which is very crucial to

the future of small and medium scale gold and diamond mining, but not all of which have

been separately identified as simultaneous and concurrent areas of operation for the

organisation. For convenience these are listed in Schedule 2 below:

34

In conclusion I should point out that given the resources required by GGMC it would be

very useful for the GGDMA to consider whether its present structure and mode of

operation are as cost-effective and fair as they could be, given its responsibility for the

administration of so many far-reaching and complex responsibilities implicit, if not

explicit, to its existence in its present form. Members/Executive of the GGDMA may

want to ponder on this. All parties should recognize and expect that the purpose of the

GGMC is to serve the industry and not the other way around, even if unintendedly.

Schedule 2: GGMC: Functions, Roles, and Areas of Responsibility (FRAR)

Number FRAR

1. Regulatory: Oversight, inspectorate, institutional-incentive framework

2. Rule-setting, Adjudication and Enforcement: rules, regulations, penalties, fees

etc.

3. Promotional: Public awareness, education, training, communication.

4. Productivity Enhancement: Of all productive factor inputs: land, labour, enterprise,

capital and management.

5. Capacity Building: Training, demonstration projects, tours, conferences etc.

6. Standards-Setting: Quality control, compliance with industry norms.

7. Research and Development (R&D): Research, technology transfer and

development.

8. Informational: Creation of database, means of storage, retrieval, management and

dissemination

9. Fiscal Agent: As designated by the State. The GGMC itself requires lots of

resources to function effectively

10. MRV: Continuous monitoring, review and verification of industry operations.

11. Policy Formulation: Board of Directors and as key player and stakeholder.

12. Legal Framework: As specified in the present and future laws of Guyana and

regulations

13. Change Agent: Transformational role/innovator/conduit for best-practices outside

of Guyana

14. Land Management: Based on Mining Act and the vesting of mineral rights in the

GGMC

15. Direct Producer: The Mining Act does not prohibit GGMC from direct production.

Earlier failure in this regard is to be noted.

16. Geological Depository: The GGMC is the national depository for all geological and

mineral resources.

17. Advisory: To governments, miners, mining communities, other players and

stakeholders.

18. Networking/Interface and International Compliance: Particularly in regard to

external bodies, rules, regulations, obligations, agreements, standards compliance.

19. Environment/Amerindian Communities.

20. Other Mining: These other areas of mining are specified in the Act and covers

sectors like bauxite, quarrying and petroleum.

35

I have not attempted in any way to undertake a scientific evaluation of the GGMC. I am

however impressed by what it has done and is continuing to do. But like all organisations

some questions which should be addressed after a considerable period of time has elapsed

are: Is the structure and modus operandi of the organisation still the most efficient and

effective? If yes, then how can it be strengthened? If no, then what form should reform

and renovation take?

The GGMC’s annual income of G$3.5 billion in 2008 is derived from payments made by

the mining sector to it. The largest source of its income comes from Royalties collected

by the Gold Board. Between 2006 and 2008 income grew by about two-thirds. Royalties

as a proportion of its income ranged between 55 and 60 percent for these years. Next in

importance was rental income, which averaged about 30 percent of total income. This

amounted to G$904 million in 2008. Other sources of income (fees and fines, permits and

licences, drilling charges and so on) were not nearly as significant.

Guyana Gold Board (GGB)

The Guyana Gold Board (GGB) was established by the Gold Board Act in 1981 and

commenced operations a year later by Order No 24 of 1982. The Act regulates the sale

and purchase of gold mined in Guyana investing the Board as Agent of the Government

to be the sole purchaser and exporter of gold mined in Guyana. Since 1997, Amendments

to the Act allow for licenced dealers to buy and export gold. The GGB remains the

overwhelmingly dominant purchaser of declared gold output accounting for about 99

percent in 2008. Purchases of gold by the Gold Board since 1989 are shown in the Table

19 below. The data reflect the trend already observed in declared production of gold in

Section 2.

36

Table19: Gold Board Purchases

Year Purchases

(troy ounces)

Year Purchases

(troy ounces)

1989 17,290 1999 110,160

1990 38,536 2000 104,493

1991 55,296 2001 101,849

1992 79,582 2002 116,617

1993 87,101 2003 103,438

1994 99,081 2004 115,086

1995 91,461 2005 161,683

1996 110,131 2006 200,241

1997 92,146 2007 238,298

1998 110,048 2008 257,827


Increasing purchases by the GGB over the years reflect an element of the reducing gap

between miners gold declarations to the Board and actual production. In its 2005 Annual

Report the Board had estimated that about one-third of actual production is not officially

declared. The GGB believes that its efficiency has improved however, and this is a

principal factor in the increase in annual purchases. This increased efficiency is attributed

to 1) its opening of a branch Office in 2006 to cater for miners in the Cuyuni/Mazaruni

Mining Districts 2) higher prices leading to increased profitability and investment in gold

mining 3) a shift from diamond to gold production and 4) the improved method for fixing

local gold prices.

The gold price paid by the GGB is based on the London Bullion Market daily fixes.

Local sales are made principally to jewellers. External sales are made through the Royal

Canadian Mint where it is sent to be refined and then marketed through the Board’s

overseas agent, Mitsui and Company Precious Metals Inc. While sales of the refined gold

can be made in the spot, forward and options market the Board overwhelmingly focuses

on spot transactions. It did however, indicate in its Annual Report for 2008 that the Board

had three short-term call options during the year.

For accounting purposes the Board recognises revenue when the customer takes

possession of the gold in the local market based on the gold price at the London fix at the

37

time of sale. For foreign sales the revenue is recognised when the Bank of Guyana

acknowledges receipt of the funds due from the overseas agent.

The purchase formula used is:

[London Price Fix] x [Raw weight x % purity] x [Rate of Exchange].

The rate of exchange used is the average United States dollar exchange rate of the

commercial banks cambios less a deduction of G$4.25 since November 2005. Formerly

the reduction was G$3.00 Added to this the Board makes two fiscal adjustments as

required by law. Royalties based on the gross proceeds are collected and paid over to the

GGMC. A withholding tax is also collected from individual sales, in lieu of income tax

and paid over to the Revenue Authority. In the case of corporate entities, taxes are paid

on net income as provided for in the Companies Act. Details on prices paid by the GGB,

royalties and taxes have already been examined in Section 2.


1. The joint-production of a Policy Document for the sector reflecting two basic

features in its formulation, namely (i) it is the product of a transparent process,

which fully engages the GGDMA and its members, in keeping with best-practices

aimed at producing designated policy documents and (ii) it secures widespread

recognition and support for the fact that the government fully appreciates that it

cannot be a “neutral observer” in relation to the sub-sector. Instead, jointly with

the GGMA, Government seeks to encourage and support affirmative programmes,

policies and incentives for the artisanal, small and medium scale gold and

diamond mining businesses.

2. A review/re-evaluation of the GGMC in light of trends in the mineral industry and

the intimidating number of functions/roles it is presently required to perform, with

limited human and other resources.

3. A more pro-active role for the GGDMA in electronic data-gathering, review,

analysis, dissemination and information usage among its members.

38

4. The GGDMA should push for an expert review of the pricing and marketing

arrangements for gold with a view to exploring the possibilities for more forward

sales/hedges, while minimizing risk through the adoption of modern risk

assessment/management methods. Previous large scale suppliers of Guyana gold

to the world gold market (Omai) had explored and in some instances utilized

these possibilities. Small and medium scale miners may wish, based on their

costs, to consider these options. It should be observed that a number of analysts

believe that there are strong underlying pressures in favour of a long-term bull

market for gold. And that, in real terms, even at present price levels of over

US$1,000 per ounce gold has still not done as well as other commodities over the

long haul.

39

Section 5: Environmental Concerns

Presently, environmental management issues constitute, by any reasonable measure,

some of the most critical and controversial concerns facing the small and medium scale

gold and diamond mining industry. Of these, LCDS-related concerns are the most

paramount over the medium to long-term. The LCDS-related concerns will be addressed

separately in the next Section (6). Of the many remaining concerns, this Section will

address five:

i. Land and forest degradation

ii. Water degradation

iii. The use of hazardous materials and related pollution effects

iv. The full and systematic integration of environmental management into standard

operating mining methods, and

v. Related to all the above, relations with the Environmental Division of the GGMC

Land Degradation

The total acreage in the six Mining Districts is approximately 46 million acres (16.6

million Ha). Of this, GGMC has reported Closed Areas as approximately 3 million acres

and acreage available for mining at approximately 34 million acres or about three-

quarters of the total. Acreage available for mining ranges from a low of 6 percent in the

North West Mining District to 98 percent in the Berbice Mining District (see Table 20).

It is estimated that about 20 percent of this area was being mined in 2008 and that about

28 percent and 9 percent of it are available for medium and small scale mining

respectively. (Development Policy and Management Consultants, 2008)

It has also been the practice for miners to re-work mining areas abandoned decades ago,

particularly in the Potaro, Mazaruni, and Cuyuni districts when improved mining

equipment becomes available. Such practices could obviously have an aggravating effect

on the environment in these areas.

40

Table 20: Area Available for Mining in Guyana Mining District Total Acreage GGMC Closed Areas

in Acreage

Acreage for

Mining

%Area of

Mining District

Total

Berbice 8,680,376.3 96,608.68 8,474,267.63 98

Potaro 3,511,109.42 1,002,557.32 2,088,144.95 59.5

Mazaruni 7,780.723.3 347,331.8 6,608,960.27 85

Cuyuni 4,388,713.7 511,053 3,712,402.69 85

North West 3,873,683.5 871,020.44 2,292,139.73 6

Rupununi 17,607,344.1 86,681.16 11,034,615.03 63

Total 45,841,950.32 2,915,252.47 34,210,530.30 74.5

Source: Development Policy and Management Consultants, 2008 and GGMC Table 7.

Judging from studies in this area the main causes of land degradation in small and

medium gold and diamond mining sector are:

Destructive land clearance practices

Poor production planning and excavation

Limited post-mining reclamation

Weak monitoring, review and verification (MRV) of mining operations

Weak enforcement of the prescribed environmental regulations

The presence of highly mobile/transient features in many mining operations

The low monetary value of the environmental bond required from practising

miners

Inadequate inter-agency collaboration to deal effectively with the competing

land uses in the mining communities.

In actuality, these environmental effects manifest themselves unequally over the various

mining localities. A useful proxy for the potential intensity and extent of land degradation

impacts in exposed mining areas is the number and location of licensed dredges. As we

saw in Table 11 there were 2,072 licensed dredges across the six Mining Districts in

2008. This can be compared with the average for the years 2005-07, to gauge the rising

intensity and distribution of these environmental effects across Mining Districts as

revealed in Table 21 below. The increase in the total number between the two periods has

been approximately 24 percent. As we noted earlier the main concentrations are in

Mining Districts 3, 2, 4 and 5 in descending order.

41

Table 21: Licenced Dredges: Distribution by Mining District

(2005-2008)

Mining District Average

(2005-07)

2008

1 Berbice 7 5

2 Potaro 363 551

3 Mazaruni 759 811

4 Cuyuni 337 453

5 North West 169 181

6 Rupununi 35 71

Total 1670 2,072


The Development Policy and Management Consultants (2008) has reported, based on a

flyover survey, that their assessment:

“validates that degraded lands are more visible in localized areas along

the Mazaruni. Potaro and Cuyuni districts where there are visible signs of

soil, biological, and water degradation. The degree of degradation varies

from moderate to severe across and even within districts”. (ibid, P.53)

Table 22 below summarizes their data in regard to the status of soil and biological

degradation.

42

Table 22: Status of Soil and Biological Degradation in Mining Districts Mining

District

No.

Mining

District

Example of

Area in

District

Presence of

Mining

Degree of

Degradation

Types of Degradation Comments

1 Berbice Aroaima Active Severe Vegetation/Biological

Soil Degradation

Water Degradation

Secondary Forest

Cover observed

in Kwakwani 1 Berbice Kwakwani Mined-out Medium

Secondary Forest

Cover observed

in some areas 2 Potaro Mahdia Active Severe Vegetation/Biological

Soil Degradation

Water Degradation

3 Mazaruni Teperu Active/Quar

ry

Severe Vegetation/Biological

Soil Degradation

Water Degradation

Secondary Forest

Cover observed

in some areas 3 Mazaruni Okuma Active Severe

4 Cuyuni Aranka Active Severe Vegetation/Biological

Soil Degradation

Water Degradation

Secondary Forest

Cover observed

in some areas

5 Northwest Mazawini Vegetation/Biological

Soil Degradation

Water Degradation

Secondary Forest

Cover observed

in some areas 5 Northwest Matthew’s

Ridge

Mined-out Mild

5 Northwest Arakaka Active Severe

5 Northwest Aruka Active Potentially

Vulnerable

Source: Development Policy and Management Consultants Flyover Survey Table 8 (2008)

The flyover survey observed signs of secondary forest growth in some mining areas

indicating a reduced trend towards further severe degradation. (ibid, P.53) The

Consultants were however, also careful to point out “current degraded areas are not likely

to recover … the reason being that there is little if any reclamation by miners with

modern mining technologies”. (ibid, P.53) Table 23 highlights the key features in the

assessment of land degradation from mining in the Consultant’s report.

43

Table 23: Land Degradation from Mining

Land

Degradation

Mining

Rank Description

Extent Negligible 3.66% of Guyana’s land mass or 5.6% of the area available for mining5

Degree Moderate - severe Degradation apparent; control and full rehabilitation of land is possible

Rate Moderately

Increasing

Positive relationship between industry’s expansion and increased rate of degradation

Direct Causes Improper waste disposal & hazardous chemicals

Improper tailing storage/management

Abandoned mined sites/no reclamation of excavated pits

Erosion fro mining on steeply sloping lands

Lack of prospecting before mining commences

high level of mobility of miners

Indirect Causes Poor enforcement of mining/environmental regulations

Low fee charged for environmental bonds

Fragmented jurisdiction, poor inter agency collaboration and competing land use on same land use units

Unregulated activities among small scale miners

Impacts Productive, ecological and socio-cultural and human well-being

Soil removal and loss into creeks and rivers

Soil contamination & compaction

water quality depletion and biological degradation/depletion

Conflicts with and impacts on livelihood of local communities

land-use conflicts

Response For prevention, mitigation and rehabilitation: EMP for large and medium scale operations, capacity building, re-

vegetation activities, and provision of technical assistance for miners, proper environmental planning, and

increasing enforcements of mining regulations by GGMC.

Source: Development Policy and Management Consultants Flyover Survey, Table 10 (2008).

Note: 5As large scale mining operations are being subjected to more stringent environmental regulations that seek to ensure reclamation, the area mined by

large scale operation is not included in this estimate.

44

Water Degradation

High levels of water degradation have been observed in various mining districts.

Sedimentation, discolouration, and alterations in the flow of streams have become quite

visible in some mining areas. River-dredging has declined as the rivers have become less

productive. In the land mined areas in the absence of complete removal and storage of top

soils for re-use in reclamation, studies have found that the practice of washing top soils

into rivers and creeks (particularly where the topography supports this practice) has led to

the degradation of waterways. (ibid, P.56) Table 24 below shows the status of water

degradation as reported in the Flyover Survey of the Development Policy and

Management Consultants (2008). Breaches in the water turbidity regulations are reported.

Direct disposal of tailings into waterways was observed. Overall, they concluded:

“findings from the flyover survey revealed medium to severe level of water pollution,

particularly in mining districts Mazaruni, Cuyuni and North West “. (ibid, P.56)

Table 24: Status of Water Degradation in Mining Districts

Mining

District

No.

Mining

District

Example of

Area in

District

Presence of

Mining

Degree of

Degradation

Types of

Degradation

1 Berbice Aroaima Active - -

1 Berbice Kwakwani Mined-out -

Sedimentation

Discoloured waters 2 Potaro Mahdia Active Medium

3 Mazaruni Teperu Active Medium to

Severe

Sedimentation

Presence of plumes

Discoloured waters 3 Mazaruni Okuma Active

4 Cuyuni Aranka Active Severe Sedimentation

Discoloured waters

5 Northwest Mazawini Mined-out Severe

Sedimentation

Discoloured waters 5 Northwest Matthew’s

Ridge

Active

5 Northwest Arakaka Active

5 Northwest Aruka Potentially

Vulnerable

Source: Development Policy and Management Consultants Flyover Survey, Table 8.

(2008).

45

It should be stressed here that the negative impacts of mining are not only significant to

Guyana’s freshwater ecosystems, but they also pose severe public health hazards. The

increased turbidity of the water, which accompanies the practice of poor tailings

management in the mines, affects downstream communities adversely. The degraded

water quality conveys water-borne infections/diseases, provides breeding grounds for

infectious insects, and more often than not conveys dangerous levels of mercury to those

using water from the affected streams and the fish inhabiting them.

The Development Policy and Management Consultants have estimated the land areas that

may be degraded annually by small scale miners could reach over 26 thousand Ha over

the next 5 years for a total of 132 thousand Ha over the period. (See Table 25). The main

drivers of degradation have been attributed to both policy-related and market-related

failures. The former would include: the absence of a national land use policy and plan;

regulatory weaknesses; inadequate data-management; insufficient monitoring and

enforcement; inadequate inter-agency cooperation/collaboration; and population pressure,

poverty and poor infrastructure in the mining areas. The latter principally includes: ill-

defined property rights; inequality; a failure in market valuation of the non-market

benefits of land; and, the “public goods” dilemma in private-sector driven economic

systems face the ever present potential for a “tragedy of the commons”. To these we

could add the availability of adequate resources to the responsible public agencies as a

key constraint.

46

Table 25: Estimated Annual Land area Degraded from Mining in Guyana

Assumption Description Total Expected

degradation from

(Small scale) in

hectares

Expected total

Annual

degradation (total

divided by 5

years) in hectares

Comments

There is an annual

average8 of 8,461

mining land claims

Each small scale

claim has a size of

11.13 hectare

94,201.4

18,840.1

Assuming that

there are no

reclamation

activities after

mining

There is an annual

average of 1,524

mining river

claims

24.29 hectares

37,378.7

15,133.1

Assuming that

turbidity exceeds

50 NTU

Total estimated

area degraded

(land and river)

131,530

26,307.2

This area could be

degraded if there

are no reclamation

of lands after

mining or

reduction of

turbidity levels

during mining

Source: Development Policy and Management Consultants. Table 25. (2008).

Note: 8Based on the average area allocated for small scale mining claims in 2006 and 2007.

Hazardous Materials (Mercury Usage and Contamination)

Mercury contamination is both a critical environmental issue and a pressing health

concern in small and medium scale gold and diamond mining communities. These arise

at a number of points along the mining process, including 1) the handling/storing/

distribution of mercury in the country 2) the escape of mercury fumes in uncontrolled

processing environments 3) the discharge and spillage of mercury contaminated materials

into waterways and 4) the use of mercury as an amalgam massaged into concentrates in

order to exploit them for their gold content.

It is widely acknowledged that mercury usage is a preferred technique for miners in

Guyana, largely because of 1) their accumulated knowledge of its application 2) the ease

of its application and, 3) its relative cost effectiveness. While it is reported that most

miners apply mercury to the concentrates collected from the mats in the jig box after the

processing of the slurry in sluice boxes, unlike practice in other countries, other practices

have also been observed. Thus some miners (allegedly in the main Brazilians) are said to

apply mercury to the ground during water-jetting or into the slurry sump or sluice box

47

(Lowe, 2008). It is also claimed that in some instances the mercury is applied in the gold

pan directly into some creeks. The negative environmental impacts of these latter

practices are notorious. Lowe (2008) reports “top Government officials however, are

convinced that this practice is on the decline as a result of rigorous enforcement efforts”.

To the extent that this is in fact true, then the negative environmental and health impacts

of mercury use in gold mining in Guyana would be reducing.

The technique of massaging concentrates with mercury leads to the placing of the

amalgam in cotton afterwards to squeeze out the excess mercury for recycling by way of

burning the amalgam in the open air. Unsuccessful efforts have been made to make the

use of retorts standard at this stage. Miners have resisted retorts because it has been found

to prolong the process of separating the gold from the concentrates.

There are few longitudinal scientific/systematic studies on the negative impacts of

mercury usage on the environment and health in mining communities. One of these is a

decade-old and was based on field surveys conducted by the Environmental Division of

GGMC. The data from that survey are summarized in Table 26 below. These confirm

several of the observations noted above: the limited use of retorts, discharge of hazardous

material into waterways, and applying mercury to the ground.

Another study conducted by the Institute of Applied Science and Technology (IAST)

(2000) sought to identify the sources of mercury contamination in two mining

communities in the Mazaruni Basin so as to address them (Kurupung and Isseneru). The

results show serious mercury contamination due to the mining techniques employed. The

study makes the point that to the average person the health effects are not immediately

discernible, but shows up in human hair and urine samples. It also shows up in food

(especially fish) caught in the affected waterways.

48

Table 26: Mercury use practices among miners

Area of Study/Year/Number of Operations Visited

Mahdia, 1998

(11 operations)

Mahdia, 1999

(21 operations)

Tiger Creek, 1999

(4 operations)

Arakaka, 2000

(22 operations)

Good (adding mercury placed

in jig-box, bucket or drum with

covered hands; “pumping” and

“spin-out” in jig-box only;

using a retort and gas mask

when burning amalgam.)

-

-

-

-

Satisfactory - - - 27.3%

Moderately satisfactory 18.2% 62% 50% 27.3%

Marginally satisfactory - - 50% 27.3%

Unsatisfactory (massaging

concentrate with mercury in the

sluice box; no jig-box;

“pumping” and “spin-out” of

concentrate in pond, creek or

river; burning amalgam in the

kitchen)

72.7%

14%

-

-

Very unsatisfactory (using

mercury on the ground; no jig-

box; burning amalgam in the

kitchen)

9.1%

-

-

-

Unknown - 24% - 18.1%

Source: Lowe Table 4. (2008). Information extracted from paper, titled “Mercury use in Placer Mining in

Guyana”, presented by Ronald Glasgow, Mining Engineer in the Environmental Division, at

Workshop on Mercury Use in the Mining Industry in Guyana, Georgetown, Guyana. May 17,

2000.

Integrating Environmental Management and GGMC’s Environmental Division

Two environmental challenges facing the small and medium scale gold and diamond

industry, namely: integrating environmental management into standard operating

practices and relations with the GGMC’s Environmental Division can be considered

together as they are directly and inextricably linked. While miners have legal and other

compunctions for compliance with environmental practices, the development,

application, monitoring and enforcement of these practices fall principally on the

Environmental Division of the GGMC. Its obligations and responsibilities are to be seen

in the broader context of the all-Guyana environmental management framework. The

declared role of the Environmental Research and Development Department (ERDD) of

the GGMC is to coordinate, promote and oversee “the implementation of efficient

mineral processing and environmentally sound mining technologies across the entire

spectrum of the mineral industry”. (GGMC, Website, 2009)

49

In order to fulfil this aim the functions of the ERDD in collaboration with other

departments are:

─ The generation and development of environmental regulations, procedures,

standards and guidelines

─ The preparation and review of 1) monitoring and management programmes, 2)

emergency and contingency plans, and 3) mine-site rehabilitation

─ The development of an open database of environmental information for purposes

of analysis and information-sharing

─ The preparation of environmental strategies

─ The promotion of public awareness and education

─ The separate development of a database on mineral processing

─ The conduct of R&D activities in mineral processing and environmental

management

The Environmental Division of the GGMC was established in 1995. The Environmental

Protection Act was passed in 1996 establishing the Environmental Protection Agency

(EPA). By October 1997 a Memorandum of Understanding was reached between the two

bodies and this outlines the environmental management responsibilities specific to

mining, which have been delegated to the Unit, the role and responsibilities of the EPA,

as well as those areas targeted for joint inter-agency action. In furtherance of inter-agency

collaboration and capacity building for both organisations, the Guyana Environmental

Capacity Development Mining Project was formulated for the period 1998-2004. The

project had a number of goals directed at removing constraints facing environmental

management in Guyana including the capacity of their respective organisations, the

provision of resources (including technical), the absence of standards and guidelines in

the industry, weaknesses in baseline data, the weak monitoring and enforcement capacity,

and the lack of awareness, training and education of miners and their related

communities/ stakeholders on environmental issues.

50

After a number of training exercises for miners and staff of the two bodies, field studies,

and demonstration exercises, the project had built up capacity in the two organisations

and achieved a high-profile (both nationally and locally among miners and their

communities). The object was to highlight the crucial importance of integrating best-

practice environmental management methods into mining operations. Of particular note,

draft environmental mining regulations were completed and enacted into law (Mining

Regulations 2005) as well as Codes of Practice (2003) for implementation in the areas of

major environmental concern (mercury use, mine reclamation, mine discharges/waste

management/tailings management, and contingency and response plans). Table 27 below

reproduces Lowe’s (2008) summary of the respective responsibilities of the GGMC and

the miners under the new environmental regulations.

Table 27: Comparative responsibilities for GGMC and miners under the new mining environmental

regulations

Miners GGMC

Register of poisons at mine site, with separate

records for each poisonous substance. Register to

be open for inspection.

Public Register on Cyanide Permits in

Commission’s Office Inspection of registers of

poison at mine sites.

EIA to be done by independent consultant for

projects that are likely to have significant

environmental impact.

Participation in EIA Scoping: Review of EIA and

EIS reports for EPA.

Mandatory use of approved retorts, gloves and

protective gear when burning or handling mercury

or amalgam by Small and Medium Scale placer

miners.

Approval and registration of mercury retorts for

Small and Medium Scale Placer mining.

Creation and use of setting ponds or devices.

Tailings dams > 16ft/3 meters high to be inspected

annually by a qualified, registered and approved

engineer. Settling ponds with < 2hrs minimum

water residence time storage to discharge.

Discharges to be within effluent limits.

Provision or facilitation of technical assistance and

research. Review of engineers’ report on annual

inspection of tailings dams > 16ft/3 meters high.

Monitoring and regulation of settling ponds and

discharge limits.

Application for Cyanide Permit for Large, Medium

and Small Scale Operations. Satisfactory

completion of the questionnaire provided by GGMC

by Small Miners shall fulfil the requirements.

Issuance, suspension, cancellation, transfer and

monitoring and regulation of Cyanide Permits.

Questionnaire for Small Scale Miners (individually

or as a syndicate) to be provided by the

Commission. Completion of the questionnaire shall

fulfil the requirements.

Training on the proper use of mercury and cyanide. Approval of curricula and provision of training and

certification of Miners (together with EPA, Mining

Associations, and Educational training Institutions).

Progressive rehabilitation and restoration of the

environment.


research.

Backfilling placer mines, where applicable; sealing

shafts at closed mines.

Monitoring and Inspection.

Stripping and stocking topsoil; restoration of water

courses.


research.

51

Environmental Bond or Reclamation Fee/Bond For large and medium Scale operations,

rehabilitation of sites when these works are judge as

unsatisfactory to the Commissioner.

Restoration of area by Small Scale Miners. Approval of restoration and issuance of formal

discharge by the Commissioners.

Preparation and submission of reclamation and

closure plans by all holders of existing prospecting

and mining licenses and permits (large and medium

scales) within 3 months of passing of regulations,

for approval by GGMC.

Provision of form within 3 months of passing of the

regulations, to be filled out by the operator to

satisfy this requirement.

Within one year of passing of regulations,

submission to GGMC of Environmental

Management Plan (EMP) for 3 – 5 years, including

requirements of Codes of Practice. EMP to be

updated annually or as required by GGMC.

Publication or approval of Codes of Practice for

Environmental Mining for Small, Medium and

Large Scale Mining within 18 months after the

passing of the regulations. Annual or periodic

review, approval, monitoring and regulation of

EMP’s.

Submission of Contingency and emergency

response plans to the Commissioners for approval,

within 2 years, by holders of prospecting and

mining licenses and permits. Informing employees

and independent contractors about such plans.

Codes of practice above to include contingency and

emergency response plans. Approval of

contingency and emergency response plans for large

and medium scale operations. Monitoring

contingency emergency response plans for cyanide

operations.

Environmental effects monitoring plans to be

submitted to GGMC for all large and medium scale

mines, including new mines, for approval as part of

the EMP two years after the passing of the

regulations. Environmental effects monitoring to be

conducted for all large and medium scale mines,

three years after the passing of the regulations.

Approval of Environmental effects monitoring plans

for Large and medium Scale mines. Collection and

compilation of background data to facilitate

Environmental Effects monitoring commencing

three years after the passing of the regulations.

- Determination of number of dredges permitted to

mine in any area affected by tailings discharge.

- Determination of acceptable turbidity levels at

affected communities.

No mining in Protected areas. Enforce prohibition of mining in Protected areas.

Inspection of environmentally damaged areas prior

to commencement of mining.

Inspection by the Commissioner or duly appointed

officer. Cost to be met equally by application and

GGMC.

Proper disposal of petroleum products, poisonous

substances and hazardous waste.

Code of Practice to include waste management and

disposal. Monitoring and regulation of waste

disposal.

Source: Karen Livan, Environmental Division, GGMC as summarized in Lowe Table 10. (2008).

52


Arising from discussions on matters raised in this Section of the report, there are a

number of issues challenging the GGDMA, which provide the basis for the main

Recommendations for this Section. Among the most important are:

1. The need to pursue clarity on the scientific basis of the several environmental

issues which have been raised.

2. The formulation of environmental requirements should be in clear, transparent,

and unambiguous language.

3. For purposes of effective regulation, it is necessary for non-discriminatory and

non-discretionary application of all environmental rules and standards so as to

avoid charges now being made of “conflict of interest” or “bias” on the part of the

Regulators.

4. A clear mechanism for resolving conflicts of interpretation and/or challenges to

the regulations/requirements and rulings should accompany this.

5. In particular, a clearly stated and well-defined appeals procedure, which meets the

standards of due process should always be part of any regulatory mechanism.

6. Similarly, the penalty and enforcement mechanism should be transparent, and

objective. It should deal openly and even-handedly with those who are in non-

compliance.

7. The promotion of education, know-how, and awareness of miners of both the pros

and cons of environmental regulations remains a clear priority at this time.

Of course a major concern to miners arising from these efforts to incorporate

environmental management as standard practice into mining operations will be their

impact on costs. Regrettably, I have not found evidence of any studies of mining

operations which engage a “with/without analysis” of mining regulations in terms of

private or social (national) costs and benefits. It has been reported to me that the recent

Mining Regulations still remain unsettled. This it is suggested may be due to the absence

of such items as testing equipment and detailed scientific specifications of the materials

which should be used in small and medium scale gold and diamond mining operations.

53

Other concerns of miners on environmental issues will be addressed in the next Section

(6). This will serve as both an extension of this discussion as well as a prelude to our

consideration of the LCDS and LCDS-related issues pertinent to the small and medium

scale gold and diamond mining industry.

54

Section 6: Public Exchanges on the Environment and the Low Carbon

Development Strategy (LCDS)

Recent Exchanges

In this Section I examine the public exchanges (dialogue) on environmental issues as they

concern the small and medium-scale gold and diamond mining industry and matters

pertinent to the LCDS.

In a Conference Paper, the Manager of the Environmental Division of the GGMC, Karen

Livan (2000) had listed several environmental dangers and risks associated with small

and medium scale gold and diamond mining, including:

─ deforestation

─ mercury use

─ dangerous open pit mine faces

─ stagnant flooded pits becoming a location for vector borne diseases

─ discharge of materials into streams and waterways leading to siltation and

ground water contamination in communicates downstream

She further pointed out that in the face of these environmental issues, “miners likewise

face challenges”. Chief among those she listed are:

─ shortage of skills

─ lack of knowledge and experience in environmental management

─ the additional cost compliance with environmental requirements entail

─ pressures from other stakeholders and competing land users in the mining

areas with different regimes of environmental requirements

In these circumstances she noted that the principal regulatory agencies (GGMC and the

EPA) also faced serious challenges in being able to monitor and regulate the industry.

Included in the challenges she identified were several that we have already referred to in

the previous Section, namely:

─ Standardization of regulations and procedures

─ Capacity building [including human and technical (equipment) capability]

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─ Research and development (R&D)

Written in 2000 that paper continues to frame the main outlines of the dialogue between

miners, the regulators (including the government), stakeholders, competing land users,

and the local and international environmental communities. With the launch of the low-

carbon development strategy (LCDS), this dialogue has been broadened to include LCDS

and LCDS-related concerns.

Many cautions have been expressed by past and present officials and members of the

GGDMA to the effect that the present intense interest in environmental standards in the

small and medium scale gold and diamond mining sector is driven by concerns stemming

from the LCDS. Some have been reported in the media as expressing the belief that if the

present situation is not handled well, as many as 80 to 90 percent of the present miners in

the sector may have to leave because mining could become very unprofitable for them.

There is no clear statement as to whether this void would be permanent, and if not, who

will replace these miners in the future.

The environmental concerns most often raised in the current exchanges on the topic are:

1. The role of compulsory exploration and the acquisition of economic assay results

before mining permits are issued.

2. The banning and substitution of mercury-using mining techniques.

3. The systematic re-vegetation of mined out areas.

4. The reduction in the number of flooded pits as they encourage vector-borne

diseases in mining and surrounding communities.

Faced with miners’ apprehension the President has sought to give assurances that the

LCDS has not been designed with the intent of crowding-out small and medium scale

gold and diamond mining. As reported in Stabroek News (August 17, 2009) the President

had said:

“Moving our national economy into a low-deforestation, low-carbon path

does not mean stopping all activities in our forest”. He then goes on to say

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“mining and forestry will continue but they will have to be done to

standards that are compatible with our international obligations and our

low-carbon development vision”. (ibid)

In the same issue of Stabroek News (August 17, 2009) the Prime Minister is also reported

as saying that with or without the LCDS, small miners should change their “mindset” and

become more formalized in their activities so as to meet existing environmental standards

in the industry.

The GGMC has been reported as being more direct. Reporting on a speech to miners by

the Manager of its Mines Division, earlier in June at Mahdia, Stabroek News attributes

him as stating the GGMC

“will not allow them to cut down trees when they aren’t sure that there

was gold underneath it”. In other words he made clear: “the alternatives to

proper exploration prior to mining is no mining”. (ibid)

The Stabroek News also cited from a GGMC document in their possession “Implications

for Guyana in response to climate change for the small and medium scale diamond

mining sector”, which states:

“It is expected that it will be compulsory for all medium scale operators,

that is mechanized operations typically using excavators and/or dredges

that evacuate or process between 200-1000 cubic metres of materials per

day, to conduct exploration before they are allowed to start mining.” (ibid)

Pertinently, this definition of medium scale mining operations for this environmental

requirement can also apply to small scale claims.

It is worth noting that the Prime Minister who carries mining in his portfolio has stated

that stepped up efforts on the environmental concerns in the sector are only

“accidentally” timed with the LCDS. They are, as he has emphatically stated “needed in

their own right”.

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The gold and diamond mining community has been vigorous in its public responses. A

selection of these is reported on below.

Mr Affonso is reported as stating that while he supports the LCDS if the regulations

requiring an exploration programme and economic assay results before miners are

allowed to continue to mine or cut down trees are applied that as many as 80 percent of

the miners would be “forced” out of the industry. Only the very large miners will remain

because of the excessive costs of complying with these regulations. Stabroek News

(August 17, 2009)

Mr Pereira has also indicated the belief that a very high percentage of miners would be

crowded-out of the industry (90 percent) if environmental management costs rise

exponentially. He has identified the financing of drilling equipment for exploration as

being a particularly critical financing cost for small scale miners. Mr Pereira has also put

forward a number of practical proposals aimed at resolving the existing conundrum.

These will be considered after noting the observations of the Executive Director of the

GGDMA, who has also made a number of proposals.

Of particular note is the issue concerning exploration and economic assay results, the

Executive Director Mr Shields has stated “the association is not aware of such a rule in

any existing mining regulation and has not been made aware if it is to be included in any

proposed mining regulation”. (Stabroek News August 17, 2009). He has also stated that

the GGDMA has not been advised of any specific area targeted to be closed for pollution.

Or, for that matter, no specific technique identified to replace mercury use in mining.

The GGDMA has been at pains to point out officially that miners are business persons

and as such their businesses are very sensitive to costs, prices and profits. As users of

mercury, they themselves are also prime risks for any adverse health effects. With this in

mind they are willing to cooperate in finding measured and sensible solutions to the

problems the industry and the country face.

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This is a good stage to observe three very important statements made by the Executive

Director of the GGDMA, especially in regard to the mercury-use concerns. The

Executive Director GGDMA:

1. “We have no particular attachment to mercury. Miners are no different to (sic)

other people. We will go other ways as long as those ways make business sense”.

He further emphasised: “like any other business those operators who find the

sector unprofitable will go out of business”. (Stabroek News, June 12, 2009)

2. “Banning the use of mercury in the mining sector in Guyana could turn out to be

no more than a legal development. The obvious result will be that the cost of

obtaining mercury will increase because miners will continue to use mercury as

long as there is no viable alternative. Any unilateral action will result in chaos in

the mining industry”. Further he went on and “questioned whether or not the

Authorities had the resources at their disposal to ensure the effective policing of a

ban on mercury use”. The report further goes on to point out: “The reality is that

if we do not, even now, have the resources to prevent delinquent miners from

placing mercury in their sluice boxes, the question arises as to who will police the

effective application of a ban on mercury use”. (Stabroek News, September 25,

2009)

3. Drawing a distinction between “mercury use” in the mining sector and “mercury

pollution”, the Executive Director, has plainly stated the GGDMA “is thoroughly

against what we believe is a practice among some miners to use mercury in

their sluice boxes and their pits. This practice violates the mining regulations”.

(my italics) (Stabroek News, September 25, 2008)

Efforts have been made to draw the GGDMA into a fixed time-table for phasing out

mercury use. However, GGDMA has taken the position: “There cannot be a time frame

because there is no objective marker as to when an acceptable alternative will materialize

… it can happen in a matter of months if an acceptable alternative emerges. The point is

that if you ban the use of a substance that is at the core of an operation you have to have

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an appropriate substitute. Otherwise what you are in fact doing is closing down the

mining sector”. (Stabroek News, September 25, 2009)

The position of the GGDMA could not be clearer. Further, it has been reported that as

proof of its commitment to environmentally-supportive programmes the GGDMA has

recruited two environmental officers focussing on non-mercury mining methods and

reclamation. And, further a manual on non-mercury methods we prepared and published

coming out of the French Guiana observation tour (discussed below).

In my view this is a good position from which to start engagement with the monitoring

and regulatory Authorities. Firstly, because it confirms the status of miners as business

persons. This is the correct starting point for properly locating the issue, that is, in the

context of business development. Second, it avoids placing the miners in artificial

opposition to sound environmental requirements. Thus the GGDA has already committed

against the use of mercury in sluice boxes/pits. It has also further worked cooperatively

with the local and international environmental community, GGMC, and international

agencies in developing environmental management capability. Recently, a joint visit was

made to French Guiana to review their mining practices with a view to seeing if

knowledge from there could be transferred to Guyana.

In perusing the literature on recent environmental exchanges a number of specific

proposals, which should be further examined have been made from time to time. I have

drawn some of these together below:

1. Some limited forest lands should be set aside for small-scale mining, in which

an exploration programme is not mandatory.

2. GGMC should assist with undertaking exploration by qualified geologists and

then reporting their findings in a Mining Industry Bulletin. This practice should

continue until the GGDMA miners can develop as a group their own capability

in geology and reconnaissance.

3. While acknowledging past efforts, there still remains considerable scope for the

improvement in the training and education of miners.

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4. Seven (7) percent of Guyana’s total forested area (over 1 million hectares)

should be reserved for artisanal and small scale mining. As Pereira argues, most

of this should be located in the wet alluvial old river bed flats where the natural

re-growth of trees is fast and furious (Stabroek News September 21, 2009). It

has been claimed as supporting evidence that only about one percent of the total

forested area of Guyana has been mined out and that about 50 percent of this

has since been completely regenerated.

5. There is a generalised call for longer phase-in periods where environmental

regulations are concerned, to match the capacity of miners operating in the

objectively-determined small and medium scale gold and diamond mining

industry to implement these.

6. There have been calls for stepped-up efforts to regularise Brazilian miners (who

are seen as the most serious of the offenders of environmental regulations).

7. The GGDMA has expressed support for state security efforts to monitor the

bona fides of Brazilian miners.

8. It has however, expressed reservations about the security services’ capability to

monitor and enforce environmental regulations more generally.

The Coordinator of the WWF Regional Goldmining Pollution Abatement Office has

observed in regard to the local miners:

“They know that the system will evolve into something more competitive,

more environmentally-accepted. It has to be like any other business where

feasibility studies are done”. (Stabroek News August 17, 2009)

Late last year (November 2008) members of the GGDMA in collaboration with the

World Wildlife Foundation (WWF) visited French Guiana to observe more

environenmtally sound methods of gold mining that rejected mercury-use(because it is

legally banned there) and legally stipulated programmes for reclamation and re-

vegetation attached to all mining permits. The operation visited was the Delfrancky mine.

From reports on the visit three mercury-free mining methods were observed: 1) The

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Shaking Table 2) Centrifugal Concentrators (Knelson) and 3) Shaking Gravimetric Table

(or “long tom”). The visit also observed the detailed procedures for reclamation activity.

Some of the key findings reported were:

1. The per unit price of the Shaking Table processing technique is too high for

Guyanese small and medium scale miners because of the low yield in local

mining areas. The output of miners in French Guiana is substantially higher than

in Guyana. As the Executive Director of the GGDMA observes it is a case of

comparing “kilograms of output per period of time to ounces”. Most of the mining

also occurs in previously mined areas, which because of the ban on mercury use,

means there is no fear of mercury contamination.

2. The Shaking Table equipment requires constant feed, supervision, electrical

power. All of these would pose severe challenges in Guyana’s mining

environment.

3. The Centrifugal Concentrators are cheaper and similar in principle to “panning”

methods in the local small scale mining sector. They process however, greater

volumes of pay material at a faster rate than manual methods and it has an

estimated 80 percent recovery rate at the first attempt, with tailings being used to

enhance recovery rates. The limitations reported for this technique is that like the

Shaking Table it requires a constant (pressure and volume) clean water supply.

4. The reclamation requirement is for a detailed progressive reclamation of the site

during exploration. The miner has to reclaim 500m of the site before moving to

another site. At the mine site visited this operation is fully mechanized and

utilizes a closed circuit system, which results in no discharges of tailings into the

surrounding waterways.

The Report had four basic recommendations.

1. Guyana’s “mining sector will need strategic transformation via the use of optimum

dry-mining methods to replace conventional hydraulicking”.

2. Education and training in advanced mining methods are needed.

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3. A more “positive attitude and awareness” towards environmental issues are also

required in Guyana.

4. An improved legal framework and better enforcement than presently obtain are key

essentials.

All these will affect mining costs, but these issues need to be addressed as a priority. It is in

this context therefore we can conclude discussion of environmental management in the

sector, by noting the direct implications for the small and medium scale gold and diamond

mining industry as stated/implied in the Draft LCDS document. This will be discussed

next.

Recommendations (Section 6 (1))

1. The GGDMA should hold fast to its publicly stated positions that:

i. It is supportive of introducing proven environmentally-friendly techniques,

ii. Subject to their proven cost-effectiveness and further,

iii. Mining is a business, and as such a programme of incentives, a time-frame for

implementation, and protocol of public support should be designed to

facilitate the process of business adaptation.

2. The GGDMA should continue to recognise and promote mining operations as

“businesses”, which in fact they are, leaving the pioneering folklorish image of

the “porknocker” as part of its “glorious past” as it seeks to build a new future of

livelihoods for Guyanese small and artisanal miners.

3. As businesses, it needs to stress the importance of promoting business skills in the

industry, at no less a level of intensity than technical and environmental skills,

which are presently the leading areas of emphasis for skills development.

4. I am confident that, as business skills advance among small and medium scale

miners, the importance of data-mining, R&D, innovation, adaptation and,

technology transfer would be exponentially recognised as key to the industry’s

future. Arising from this the GGDMA should, with expert help, seek to assess the

roles that dedicated public agencies like GGMC, IAST and the University of

Guyana can play in the promotion of this.

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5. From reports received, best practice equipment for testing, monitoring, enforcing

environmental standards are in short supply. However, no hard data could be

provided on the types and specifications of equipment needs, number available,

and their disposition. The GGDMA should demand the production of these.

6. Finally, several specific under-researched scientific issues have been brought to

my attention. These include

i) The scientific study of post-closure mining pits

ii) The study of barren mined out areas

iii) Trace metals analysis as part of the on-going mercury use research; as well

as

iv) The scientific evaluation of the relative contribution of soil erosion and

amalgamation to the mercury problem in mining areas.

This list is by no means exhaustive, but such types of studies, it seems to me, should

guide specific individually targeted solutions to cope with environmental concerns as

they affect Amerindian communities.

The LCDS and Small and Medium Scale Gold and Diamond Mining

It goes without saying that the general thrust of a development/environmental/climate

change adaptation strategy such as the LCDS, which is premised on the promotion and

pursuit of low-carbon economic activities and avoided deforestation as a mode of carbon

sequestration would be, in principle, in strong opposition to economic activities that

utilize high-carbon production techniques and also result in deforestation and forest

degradation. Having observed this however, in reality practical concerns should revolve

around the specific expectations of the LCDS, when placed in the specific context of the

objectively established offending economic activities.

In this sub-Section the environmental concerns highlighted earlier will be examined in

relation to stated positions of the LCDS in respect of the small and medium scale gold

and diamond mining industry. As a preface to this examination we should recall the

statement cited in the previous Section, where the President had specifically indicated, at

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the launch of Consultations on the LCDS that the LCDS is not intended to be in

opposition to mining. Further to this, several other specific pledges have been

subsequently expressed to a similar effect since the LCDS launch. For example: 1) If

Guyana succeeds in Copenhagen the funding obtained would in part go to improve

infrastructure in mining areas and lower duties on mining equipment 2) Changes in

mining methods would have had to come whether or not there is the LCDS. The proposed

changes are not therefore, specifically LCDS-driven and, 3) The impact so far of mining

on the standing forest is limited compared to the overall size of Guyana’s forest area

(Kaieteur News, August 23, 2009). The Geology and Mines Commission is also reported

as stating “the LCDS will enhance the mining industry. It will make us sharper and better

at what we do”. (ibid)

I have examined closely the Draft LCDS document for guidance on these issues and

found six explicit references which are directed to mining. First, the LCDS specifically

states that its aim is to ensure

“Guyana can protect its forest and simultaneously seek a development

path that maximizes the growth of low-carbon economic sectors and

minimizes deforestation and high-carbon economic activity. This will not

stop existing economic activities or threaten the employment of those

already engaged working in the forest, providing these activities are in

accordance with internationally accepted practices”. (my emphasis.

LCDS, P.20)

Second, this fundamental position has been further reinforced with a statement in relation

to the Section on “Building the Foundation for the New Economy” in Phase 2 (2010-

2012) of the LCDS. This states that Guyana will:

“Align all land-use policies with the LCDS – most importantly forestry

and mining policies”. (my emphasis. LCDS, P.18)

In these two statements culled from the LCDS document, the basic thrust of the LCDS is

pinpointed. Additionally, however, specific and unambiguous caveats are made in regard

65

to 1) the mining process meeting international standards and 2) the full incorporation of

all land-use policies affecting mining into LCDS-driven land-use policies.

A third specific reference to the mining sector is incorporated in the calculation of the

Economic Value to the Nation (EVN) of the standing forests in the state forest estate

(SFE). This calculation is based on the expectation of the aggressive private profit

maximizing pursuit of gold mining resources in the SFE, if that were hypothetically

undertaken by an “economically rational deforester”. Such a “deforester” is not

concerned with preserving the standing forests in the SFE. In the economically rational

deforestation path, gold resource exploitation would occur “at the maximum rate

consistent with the constraints of technical feasibility, market dynamics, and legal

commitments.” Technical feasibility would limit mining output as technical

considerations including infrastructure, technology, skills, capital and enterprise would

apply. Market dynamics will be largely guided by price. And, the legal commitments

would run the gamut of local, regional, and international requirements and regulations.

For this process it is projected that the economically rational deforester would reduce

total forest cover on average by 4.3 percent (630,000 ha) per annum. The specific

outcomes in terms of gold and diamond mining would be influenced by location of the

gold and diamond bearing ore and its accessibility. In the LCDS, the EVN calculation

starts with the division of the country’s forest areas into 12 regions (A-L) shown in Map

2. The economically rational deforestation path is shown in Map 3. The forest area

identified for gold mining and the estimated land with gold in the 12 regions are shown in

Table 29 below, along with the identified gold available for extraction.

The LCDS estimates that within 30 years 9.2 million ounces of gold will be extracted

from the SFE. When calculated this yields an average annual output of about 307,000

ozs. This is approximately 7 percent above the level of output achieved in 2008 and

approximately two-thirds of the peak output achieved when Omai was in operation.

Further, by way of comparison, it is budgeted that declared output this year could reach

300,000 tons. Total gold mined over the past 30 years is approximately 5.9 million

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ounces. This is about two-thirds of the projected output over the next 30 years. Gold

mined by the small and medium scale mining sector over the past 30 years was

approximately 2.5 million ounces or about 27 percent of the projected output of 9.2

million ounces. The LCDS is unclear as to whether the projected gold output is supplied

by the small and medium scale sector. Certainly, the hypothetical economically rational

investor focusing on profit optimization would not restrict the choice to one sector of the

industry, particularly when over the past 30 years the large scale sector (Omai) had

produced about 3.3 million ounces, more than one-third of the total over the past thirty

years.

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Map 2: Regions of Gold & Diamond, Forested Areas & Class 1-11 Soils

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Map 3: Economically Rational Deforestation Path

To be sure however, the LCDS is not specific as to whether this projection for mining

output incorporates possible large scale production in the next 30 years. With the recent

advance of the Marudi project and other possible projects, the GGDMA needs to have

this situation urgently clarified. On the whole the LCDS does not present a careful

assessment of the future possibilities of the small and medium scale gold and diamond

mining industry, through the prism of the “economically rational deforester”, which is at

the centre of the underlying model and its logic.

Fourth, the LCDS stresses that, albeit with the development of the small and medium

scale mining industry, Guyana has had:

“a strong track record of sustainable forestry practices, with FAO statistics

demonstrating no net loss of forest cover between 1990 and 2005”.

(LCDS, P.39)

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To all intents and purposes therefore, the official data do not indicate anything near

significant levels of deforestation and forest degradation in Guyana, even if it is claimed

the mining sector is a major driver of what limited deforestation and forest degradation

are occurring.

Information on deforestation and forest degradation since 2005 is patchy (See Forestry

Commission, 2009). What exists does not support evidence of a major departure from

the observations made by the FAO.

Fifth, the LCDS while making the consultative process open to all has specifically

targeted the Mining Business Community for Consultations. It is listed as one of 8

identified groupings singled out for particular attention. (LCDS, P32)

Sixth, the LCDS speaks only to the SFE. The eventual disposition of Amerindian lands is

left to the Amerindian communities.

Finally, Appendix II of the LCDS describes the model applied for estimating the EVN of

mining. The procedure leads to an estimate of 9.2 million ounces of gold produced over

the next 30 years. This comes from the Mineral Economics Group. Gold is the only

mineral for which they could provide estimates. Other minerals are not known. Second,

the model estimates that capital expenditure costs are US$74.77 per ounce based on

figures obtained from small scale gold mining operations. Operating costs are similarly

estimated at US$260 per ounce. Third, it is assumed that capital investments in gold

mining take place over the two years prior to the commencement of mining. Fourth, the

forecasted prices for gold in the model are based on estimates provided by 14 analysts.

The estimated price is US$750 for this year (2009) rising to US$883 in 2010. Thereafter

prices decline and in 2015 will fall to US$681. It is projected to remain constant in real

terms thereafter. The forecasted price data are shown in Table 28 below. Gold output and

mined areas are shown in Table 29.

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Table 28: Projected Gold Prices

2009 – 2018

Year Gold Price

($US)

2009 750

2010 883

2011 838

2012 796

2013 756

2014 717

2015* 681

2016* 681

2017* 681

2018* 681

Note: *Constant 2015 prices

Source: LCDS P.56

Table 29: Projected Gold Output and Mining Area

Region Land with Gold Identified Gold

(ounces)

A 463,480 513,000

B 526,221 470,000

C -

D 1,338,907 4,500,000

E 34,948 592,000

F 303,378 1,297,000

G 5,747 1,748,000

H - -

I - -

J 30,903 48,000

K - -

L - -

Source: LCDS. P.56

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Recommendations (Section 6 (2))

1. The main recommendation I would make is that the GGDMA seeks to ensure the

unclarities identified here in the Draft LCDS Document in relation to the role of

the small and medium scale gold and diamond mining sector in the operations of

the “hypothetical economically rational deforester” are removed in the Final

Document. Under-projection of this sector’s growth directly reduces its share in

the contribution to Economic Value to the Nation (EVN) and therefore any

potential claim to benefits flowing to Guyana’s SFE if preserved as a result of

committed payments to Guyana from the international community.

2. This recommendation should be read in conjunction with those made in regard to

the previous sub-Section where the public exchanges on environmental issues

were considered.

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Section 7: Amerindian Communities and Mining in Guyana

Impacts

The major studies of the impacts on Amerindian communities of mining in Guyana have

treated with the entire mining sector and its regulations and practices, leaving it to be

inferred that the small and medium scale gold and diamond mining sub-sector is no

different, and perhaps worse. This however, is yet to be determined, given the dramatic

impacts of large scale gold mining (Omai) and bauxite. These studies have also focused

on the social, health, environmental, and human rights effects. The issues which they

raise are far ranging and this baseline/scoping study cannot treat with all of these. Instead,

the study will concentrate on highlighting some of the key observations made in these

studies.

A good starting point is Lowe (2008) who sees the main social effects of mining on the

Amerindian communities as stemming from:

1. Disruption of the traditional Amerindian way-of-life

2. The clash of cultures and economic interests created by the juxtaposition of

mining areas to Amerindian communities

3. Directly linked to 2 above is what he terms as the “cavalier” approach to life

typical of hinterland mining camps, and

4. The “perceived and actual wealth of miners”. This attracts deviant social types to

mining areas, particularly commercial sex workers and criminals

Arising from his study he has identified several impacts, including:

─ Promoting stratification in basically communal-structured Amerindian

communities

─ Changes in consumption patterns and expectations among Amerindians

─ The “exodus of Amerindian males from villages to mining camps” in search

of employment

─ Increased political and social consciousness in Amerindian communities

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─ Following on the above greater Amerindian demands in regards to their legal,

political and human rights, and finally

─ The emergence of serious health and social pathologies: HIV/AIDS and

STDs; and crime and violence

The International Human Rights Program, Harvard (2007) also identified a number of

human rights and environmental abuses in Amerindian communities. The Programme

attributed much of this to structural impediments including:

1) The preponderance of Amerindians living in hinterland areas where most of the

gold mining takes place

2) What they have described as “the prevalence of corruption”

3) Five leading large scale environmental and health effects of mining

[sedimentation in the waterways; mercury pollution; alteration of river beds and

sand bars; deforestation and land degradation; and, vector borne infestation

(malaria)]

4) Weaknesses in the legal and property rights regime

5) Weak legal and regulatory design and enforcement and

6) Too many “politically driven divisions”.

The Report stresses the importance of Guyana’s obligations under international law,

pointing out:

“Guyana’s action and inaction in the field of mining constitute possible

violations of the rights of its citizens in general and its indigenous

inhabitants in particular under international treaty law”.

The report (2007) ends up with fourteen (14) recommendations to the Government of

Guyana and six (6) to the international community. Its assessment of the situation is

stated in the very first paragraph of the Executive Summary:

“This report documents the failure of Guyanese mining regulations to

prevent severe human rights abuses and devastating damage to the natural

environment and the communities in which Amerindians live. Analysis of

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mining laws and regulations, administrative structures established to

oversee mining activities, and the way small and medium scale mining

operations are conducted in Guyana’s interior demonstrate that the laws

leave large gaps in regulation, deprive people of critical rights over the

lands they occupy, and misallocate resources and responsibilities.

Weaknesses in the Guyanese political and judicial systems as well as

resource constraints and geographical difficulties further tilt the playing

field against effective regulation of mining. Guyana’s continued neglect of

the serious human rights issues surrounding mining activities gives rise to

violations of international law, including the special human rights

protections owed to Amerindian communities as indigenous peoples. This

report proposes a series of reforms that Guyana can and should implement

to protect the rights of Amerindians, preserve its natural resources, and

meet its international legal obligations.” (Harvard Law School 2007, P.IV

of the Executive Summary)

Recommendations

1. These Reports and others (Colchester, M. et al. 2002) raise a number of fundamental

issues, for which the GGMA does not have the scope, coverage or authority to

satisfactorily resolve through its own efforts. There are many other stakeholders in

these issues and my principal recommendation would be to work towards the

promotion of a Stakeholders Forum that would be inclusive of all, including those not

traditionally considered in relation to small and medium scale gold and diamond

mining: jewellers, eco-tourism, non-timber forest products (NTFP) producers, as well

as interested organisations and citizens to consider this issue as well as to develop a

designated policy document for the sector, as earlier recommended.

2. The specific studies mentioned in the Recommendations of Section 6 (1) should

target Amerindian communities as priority.

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Section 8: Concluding Remarks

After a short introduction, this scoping study examines 1) the performance 2)

organisation and operations 3) legal and regulatory framework 4) environmental concerns

5) the possible impact of the low-carbon development strategy and, 6) relations between

surrounding Amerindian Communities and the small and medium scale gold and

diamond mining sub-sector. As indicated, a principal aim of the study is to contribute to

the design of future scientific and in-depth studies, which are needed to guide 1) the

positions advanced on behalf of the GGDMA and its members and 2) the transparent

design of a Policy Document for the industry.

The study has established, beyond doubt, both the strong performance and the

indispensable contributions of the sub-sector to Guyana's economy. By any measure, the

sub-sector is clearly, "too big to be allowed to fail". By 2010 it is expected that, spurred

by rising prices for gold in the world market, the sub-sector will be incentivised to

declare production in the region of 300,000 ounces of gold. This output as we saw, is

close to that projected for the "hypothetical rational economic deforester" seeking to

maximize private benefit at the uncaring expense of the standing forests. Contrarily,

however, such a level of gold output has not, by the LCDS' own admission, led to any

significant deforestation or forest degradation in the standing forest estate (SFE) of

Guyana. Further, no indication has been given in the LCDS as to the relative

contributions expected for the large, as against the small and medium scale businesses to

the indicated output of the “rational deforester”.

By 2010 I expect, with the growing pressures on the other main exporting sectors and in

particular the residual effects of the global crisis, the small and medium scale gold and

diamond sector could be contributing about one-third to Guyana’s total export earnings.

Over the six-year period 2004-2008, export earnings from the sector were in excess of

one billion US dollars (US$1 billion). Value-added by the sub-sector was already 7.4 of

Guyana current GDP in 2008, with a projected growth of 9.7 percent for 2008. The sub-

sector’s share in current GDP could therefore, well rise to 8 percent or more by 2010. In

addition, the GGMC data provided in Section 2 indicate that a six percent change in

76

declared output from the sector led to a 20 percent change in expected employment ― a

ratio of 1:3.3. Applying this ratio to a declared output of 300,000 ounces annually, yields

an increase in output of approximately 15 percent and therefore of projected employment

of 49 percent. This seems very high as it assumes a constant function of output to

employment. Assuming that function is halved, the suggested increase in output is still

quite significant.

The small and medium scale gold and diamond mining sub-sector also has numerous

strong backward and forward linkages. As shown in this Report, its inputs place a

substantial demand on the domestic supply of air services; river transport; basic

infrastructure (roads, bridges, water control networks); basic social services (health,

education and welfare); communications (postal, packaging and telephone); security and

protection (a raft of retail services supplying food, clothing, pharmaceuticals, toiletries,

entertainment); banking (finance and credit) as well as industrial suppliers of fuel,

lubricants, repair, fabricating and metallurgy. It is the major supplier to the jewellery

industry which as we noted is growing. The main value added to the industry comes from

the fact that it is the main supplier of inputs into the jewellery industry. While the current

size of this industry is not fully known, the number of establishments has been estimated

at 400 operations. Many of these are small enterprises that produce and sell jewellery to

individual consumers informally. Larger establishments however, exist and it appears

account for the bulk of the sales by value, through the formal retail sector. Tracing the

economic dimension of these linkages or the input-output structure of the industry has

been identified in the study as a priority area for future research.

The industry also basically finances the operations of two major government

organisations: the GGMC and the Guyana Gold Board. Over the five years 2004-2008 it

has paid over G$8 billion in royalties and taxes on gold sales not to mention payments of

fees, rental income, fines etc., to the GGMC.

For convenience the Schedule (3) below summarizes the key recommendations in the

Report.

77

Schedule 3: Summary of Key Recommendations

Sections Recommendations

1: Introduction ● Raising industry profile through public awareness and

education

● Professional/expert guided; well-targeted

2: Performance ● Make data-reporting standard, regular, timely

● Confine irregular studies exclusively to in-depth,

science-based areas as resources permit

● Professionalize data acquisition, storage and

dissemination

● Build strategic alliances with key institutions outside the

industry

3: Organization and Operations ● Promote beneficial occupation/resist landlordism

● Actively seek resolution of the concerns over Brazilian

miners

● Promote feasibility studies as standard industry practice

● Regularize calculations of costing of business operations

● Complete study of the input-output structure of the sub-

sector

4: Legal and Regulatory Framework ● Promote the production of a Policy Document

● Promote GGMC review/re-evaluation

● Promote electronic/computer usage

● Expert review of pricing and marketing relations

5: Environmental Concerns ● Clarifications of the science basis of environmental

concerns – translation of these into regulations emphasizing

unambiguity and precision

● Support non-discrimination/non-discretionary

application of regulations to avoid charges of “bias” or

“conflict of interests”

● Conflict resolution-mechanisms plus appeals/procedure

plus transparent/objective enforcement mechanisms

● Continue to promote education, know-how and

awareness

6: Environmental Exchange sand LCDS ● Hold fast to already committed public position on the

environment

● Promote mining operations as “businesses”

● In light of the above, the crucial role of development of

business skills

● Alongside this data-mining, R&D, innovation, adaptation,

opportunities for technology transfer, and productivity

● Institutional networking in support of above

● Specific under-researched scientific studies to be promoted: post-

closure mining pits, trace metals analysis, soil studies for mercury

● Seek to remove unclarities in the LCDS as they pertain to the

sub-sector

7: Amerindian Communities ● Direct above-mentioned under-researched scientific studies to

Amerindian areas

● Policy Document

78

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APPENDIX I: LETTER OF TRANSMITTAL

gold and diamond mining study guyana.pdf

Documents