Mining Sector Profile

Guyana Office for Investment Research Department 2020-11-17

THE COOPERATE REPUBLIC OF GUYANA

MINING AND MINERALS SECTOR

THE COUNTRY Situated on the mineral rich Guyana Shield, Guyana has attracted international interest from the largest mining companies in the world. While the mining sector is primarily focused on gold, bauxite and diamonds, Guyana also contains deposits of semi-precious stones, laterite, manganese, kaolin, sand resources, radioactive minerals, copper, molybdenum, tungsten, iron, and nickel among others. Guyana produces high-value refractory-A grade bauxite, which is produced nowhere else except China.

Guyana is a small, open, trade-dependent country richly endowed with natural nonrenewable resources, including gold, bauxite, diamonds, uranium, manganese, oil, rare earth metals, and fine-grain sands. 2 Its economy relies primarily on mineral extraction (gold, bauxite, manganese, diamonds, and quarrying of sand and stone), and services. Since the 1990s, the mining sector has emerged as the main source of economic growth and the leading earner of foreign exchange as sugar has declined.

Guyana has a long history and tradition of mining. Over the last 100 years, gold, diamond and bauxite mining has placed Guyana as a favorable location for mining. Guyana attained international recognition as a world class mineral producer of bauxite, gold and diamonds while manganese was also mined from 1960 to 1969 and alumina was produced from 1961 to 1982. Kaolin, rutile, columbite-tantalite and amethyst were also mined. Today sand, stone and loam are also produced but mainly for local consumption.

Mining in Guyana is managed by the Geology and Mines Commission (GGMC) under the mining act of 1989. Under the act the State is the owner of all subsurface mineral rights in Guyana and authorizes the GGMC to manage these resources. The GGMC is a semi-autonomous state agency which reports to a board of directors and a Minister of Mines (Minister of Natural Resources and the Environment).

MINING SECTOR OVERVIEW Situated on the mineral rich Guyana Shield, Guyana has attracted international interest from the largest mining companies in the world. While the mining sector is primarily focused on gold, bauxite and diamonds, Guyana also contains deposits of semi-precious stones, laterite, manganese, kaolin, sand resources, radioactive minerals, copper, molybdenum, tungsten, iron, and nickel among others. Guyana produces high-value refractory-A grade bauxite, which is produced nowhere else except China.

The mining and quarrying sector employs an estimated 12 -18,000 Guyanese (approx. 4 – 6 percent of Guyana’s total workforce). With the large-scale bauxite sub-sector, several hundred legally incorporated and other operations in the small and medium scale gold and diamond mining sub-sector, two large scale scale gold operators (who commenced production in the last quarter of 2015) and the quarry sector, Guyana remains one of South America’s largest mineral producers and exporters.

In 2019, value of output from the mining sector was approximately G$211.1 billion. About 99% of the Metals and Industrial minerals and 10% of Structural materials were exported. The mining industry contributed 16% of the GDP and 56.4% (US$1,017.1 million) of Guyana’s export earnings.

According to the Ministry of Finance’s End of Year Outcome report, the mining and quarrying sector’s contribution to GDP was 15 percent in 2019. The sector recorded growth of 26.4 percent at the end of 2019. Known as “El Dorado” for its gold, Guyana also exports bauxite and diamonds. Guyana’s mineral heritage includes deposits of semi-precious stones, kaolin, silica sand, soapstone, kyanite, feldspar, mica, ilmenite, laterite, manganese radioactive minerals, copper, molybdenum, tungsten, iron, and nickel, among others. Opportunities within the mining sector in Guyana include prospecting, provision of mining equipment and value-added processing, the latter especially if electricity rates decline. The country does not have a smelting facility. Mining is a trenchant sector of the Guyanese economy, with well-established rules of the game and a safe operating environment that offers investors flexibility in establishing the infrastructure and operations necessary for them to be successful.

As in other areas of the economy, the Government has looked to private industry—and international investors in particular—to expand opportunities for the bauxite sector. In February 2007, Government gave its consent for China’s Bosai Minerals Group to acquire the 70% share in the Linden bauxite operations that were previously held by Canadian based IAMGOLD, which is the parent company of Omai Bauxite Mining Inc. Bosai paid US$46M for this acquisition with Government retaining its 30% share. The Berbice bauxite plant, Aroaima Mining Company, was also privatized. The Russian aluminum giant RUSAL, acquired a 90% stake in the Berbice operations at a cost of US$20M. The remaining 10% is owned by Government.

Investment Projects Incentives

Mineral • Gold • Diamond • Bauxite (Tarakulli and Bonasika

deposit) • Quarry Stone • Sand and Loam

The Mining and value added production of semi-precious stones:

• Laterite • Amethyst • Green Quartz • Black Pearl • Agate • Jasper • Manganese • kaolin • sand resources • radioactive minerals • copper • molybdenum • tungsten • iron • nickel among others

Industrial Minerals

• Koalin • Silica Sand • Kyanite • Feldspar • Mica • Ilmenite • Columbite-tantalite • Manganese • Soapstone

Base Metal

• Copper • Lead • Zinc

• Removal of VAT on machinery and equipment

• Concessions on ATV • Removal of VAT on hinterland travels • Removal of police clearance

requirements for miners to transport fuels in their own vehicles

Fiscal incentives for the mining industry General incentives

• Exemption from customs duty on most plant machinery and equipment

• Exemption from customs duty on raw materials and packaging materials used in the production of goods by manufacturers

• Exemption from customs Duty and zero rate of Value-Added-Tax on raw materials and packaging for manufacturers who export 50% or more of their products

• Unlimited carryover of losses from previous years

• Accelerated depreciation on plant and machinery for approved activities

• Full and unrestricted repatriation of capital, profits and dividends

• Benefits of double taxation treaties with the UK, Canada, Kuwait and Caricom countries

• Exemption from Customs Duty and zero rate of Value-Added-Tax on items approved under an Investment Agreement between the Government and the business

• Exemption from Excise Tax on items approved under an Investment

• Agreement between the Government and the business

• Molybdentie • Tungsten • Nickel

Ferrous Metal

• Iron as magnetite and laterite

Energy Materials

• Uranium

Petroleum and Gas

• Energy • Renewable Energy

Support Services:

• Processing labs • Drilling companies

• Zero rate of Value-Added-Tax on exports

Tax Holidays for projects that meet the requirements specified in the In-Aid of Industry Act Sector Incentives

• Exemption from Customs Duty on a wide range of mining equipment – for sorting, screening, separating, washing, crushing, grinding, mixing or kneading earth, stone, ores or other mineral substances; rock drilling or earth boring tools; furnaces and ovens for roasting, melting or heat treatment of ores, pyrites or of metals.

• Exemptions from duties and taxes for items covered under an Investment Agreement.

• Tax exemptions are normally granted with specific conditions that cannot be breached. In instances where these conditions are breached then the Guyana Revenue Authority is legally authorized to undertake seizure of the equipment/machinery/vehicle and request payment of all duties and taxes that were waived.

The normal primary conditions that are applied to tax exemptions on vehicles/machinery/equipment are:

• The tax exemption must be utilized for the purpose that the waiver was granted for.

• It must NOT be rented; therefore, only used for the operations of the applicant.

• It must NOT be sold/transferred/gifted to any other party within three years

GUYANA’s MINERALS Guyana produces 5 mineral commodities of which 4 are exported. These commodities are gold, diamond, bauxite, quarry stone, sand and loam. As of 2020, gold, diamond, bauxite and sand are the minerals exported.

Guyana’s mineral wealth extends beyond the well-known traditional gold, diamond and bauxite. It includes occurrences of:

1. Industrial Minerals: Kaolin, silica sand, kyanite, feldspar, mica, ilmenite, columbite-tantalite, manganese, soapstone.

2. Base metals: Copper, lead, zinc, molybdenite, tungsten, nickel. 3. Ferrous metals: Iron as magnetite and laterite. 4. Energy materials: Uranium 5. Semi-precious stones: Amethyst, green quartz, black pearl, agate, jasper. 6. Petroleum and gas: Petroleum exploration has occurred in three areas, Offshore Guyana

basin, Onshore coastal section of the Guyana basin and the Takutu basin inland in the Rupununi district. Prior to the discovery offshore in deep water by Exxon, the Takutu basin was the only area where petroleum had been indisputably discovered and bought to the surface.

Bauxite

In 2016 Guyana produced 1,479,090 tonnes of Bauxite, which represented 88 percent of the targeted amount of 1,680,747 tonnes for the said year.

Gold and Diamonds

Notably in 2016, total gold declaration increased by 58.1 percent to 712,706 ounces or 109.6 percent of the targeted amount of 650,000 ounces. The expansion in gold declarations was on account of contributions from small and medium scale miners of 67.7 percent of the total output or 482,612 ounces and from two foreign gold mining companies – Guyana Goldfields and Troy Resources – of 32.3 percent or 230,094 ounces. The improvement in gold prices by 9.6 percent to US$1,225.6 from US$1,118.0 in 2015, coupled with low fuel costs, and granting of concessions were catalysts for greater declarations. Additionally, the diamond industry experienced a hike in declarations by 18.1 percent to139,890 mt. ct. on account of favourable demand

Quarry Stone Guyana’s history in quarry stone stretches back decades with the industry providing the materials for buildings, the distinctive sea defence structures, roads, bridges and other infrastructure. Currently Guyana’s quarry stone production comes from seven active quarries (six operators), five in the Bartica assemblage, one in Berbice and one at the former Omai Gold Mines site in the Potaro. The largest known quarry stone deposits are found in the area south of Bartica ranging up the Mazaruni and the Essequibo Rivers, historically known as the quarry area of Guyana. The lower Mazaruni River area is situated in a geological setting where rocks of mostly granitic composition occur. Quarry stone in Guyana comes mainly from this assemblage. The physical and chemical properties of the rocks found in this assemblage make them ideally suited for aggregate production for road and building construction as well as sea defence construction. These aggregates are of the highest quality and possess the requisite specifications required for construction. Sand and Loam pits Guyana possesses an abundance of white sand which is mainly used in the construction sector as fill and in the preparation of mortar for domestic, commercial and industrial purposes. A substantial amount is exported regionally for beach restoration and water filtration, among other uses. Extraction rates in the last five years averaged around 1.6 million tonnes annually, save for 2014 when over 4 million metric tonnes were extracted and 2018 with an extraction of over 6 million tonnes. Loam is used mainly as fill material for road bases. There are only a few loam pits, since this material is mostly used for road infrastructure. Output has varied over the years but has not exceeded 100,000 metric tonnes.

In Guyana mineral properties are managed and assessed by the scale of the operations; they fall into one of three distinct categories. The Mining Act of 1989 allows for three scales of operation:

1. Small Scale: A land claim which covers an area of 1500 feet by 800 feet or a river claim which covers one mile of a navigable river.

2. Medium Scale: Prospecting and mining permits. These cover an area between 150 and 1200 acres each.

3. Large Scale: Prospecting licenses cover and area between 500 and 12,800 acres.

Mining in Guyana is administered via the six established mining districts.

1. Berbice Mining District 2. Potaro Mining District 3. Mazaruni Mining District 4. Cuyuni Mining District 5. North West Mining District 6. Rupununi Mining District

KEY INDICATORS

LEADING MARKET INDICATOR

PARTICIPANT 2018 ACTUAL PRODUCTION (OUNCES)

2019 ACTUAL PRODUCTION (OUNCES)

GUYANA GOLDFIELDS 163,568 141,316

TROY RESOURCES 90,684 45,268

SMALL AND MEDIUM SIZED MINERS

361,971 448,321

TOTAL 616,223 634,905

• Contributed 16 %to the GDP.GDP

• Export earnings contributed 56.4%(US$ 1,01701 million). EXPORT

• Value of the output was approximatelt G$211.1 billion.

VALUE OF OUTPUT

• Employs an estimated 12-18,000 Guyanese.• Approximately 4-6%.JOB CREATION

MINING OVERALL STRATEGY Government will implement measures to:

1. Reinvigorate, energize and incentivize the sector 2. Improve Infrastructure 3. Work with miners and their organization to remove obstacles for their development 4. Establish a fairer and more transparent system for allocation mining concessions 5. Protect the rights and conditions of service for workers in large mining communities 6. Job creation & provide training

COMPARATIVE ADVANTAGE 1. Richly endowed with natural nonrenewable resources 2. A world class mineral producer of bauxite 3. Guyana’s unique geographic positioning and its socio-political heritage put it at the

gateway of South America and the Caribbean. 4. Duty Free Market Access 5. Guyana is the only English-speaking nation in South America. 6. Openness to Investment 7. Affordable Labour 8. Attractive Incentives

WHY INVEST? 1. Land based Assets. 2. Attractive Incentives. 3. Growing Domestic and Export Markets. 4. Pro ‐ mining Government. 5. Perfect geological environment for large deposits. 6. Westminster -style parliamentary democracy. 7. English language and British Law. 8. Government has followed a free-market model for development with a policy for

economic liberalization and promotion of direct foreign investment. 9. Right Geological Environment for discovering large new deposits such as Columbite

‐Tantalite, Uranium, Copper, Nickel and PGM in the Precambrian Granite ‐ Greenstone Belts, etc.

10. Long history of bauxite, gold and diamond production. 11. Three current major bauxite mines (Rusal, Bosai and GINMIN). 12. Historical Omai Gold Mine produced approx. 3.6 million ounces (closed in 2005). 13. Stable Mining Act. 14. Security of Title and Property Rights with 100% Foreign Ownership of PL's & ML's 15. Ease of doing business.

16. Highly prospective, yet under-explored region. Gold proterozoic belt spanning from Venezuela through the Guianas to Ivory Coast and Ghana.

17. Relatively low risk on community/environmental issues. 18. Real GDP growth in excess of 3% annually in average in recent years. Significant

part of GDP is based on the extractive industries. 19. Mineral exploration: 25+ Canadian, American and Australian companies. 20. Current Large Scale Producing Mines: Aurora Gold Mine (Guyana Goldfields) &

Karouni Gold Mine (Troy Resources).

SUBSECTOR BEST PROSPECT Large Scale Gold Mining According to the Ministry of Finance’s end of year report, gold mining grew by 3 percent in 2019, bauxite 1.7 percent and other mining 7.3 percent. The two large mining companies in the gold subsector recorded lower production in 2019, largely as a result of operational setbacks that included the suspension of one company’s activities for almost three months. There are ongoing efforts to transition operations to mercury-free mining with Conservation International, executed jointly by the Guyana Geology and Mines Commission (GGMC) and the Guyana Gold and Diamond Miners Association. Key hurdles facing potential investors includes elevated health and safety concerns. At the end of 2019, a mining pit collapsed and this led to increased scrutiny by the former government. Guyana’s gold royalty stands at 8 percent and corporate entities are taxed at a rate of 25 percent. Applications for prospecting and mining licenses are sent to the GGMC. The approval of a mining license paves the way for arrangements to be made with the Guyana Office for Investment to allow for the free importation of equipment, supplies and materials to be used for gold production. The Office of the Presidency has oversight of Guyana’s natural resources. COVID-19 restricted some mining operations, as many labourers contracted the virus.

SOCIOECONOMIC IMPORTANCE OF ARTISANAL, SMALL, AND MEDIUM-SIZED GOLD MINING SUBSECTOR IN GUYANA The mining sector plays an important role in the social and economic development of Guyana. Estimates suggest that the sector directly employed (figure) people in 2020 , % percent of whom are employed by small and medium-scale operations involved in gold and diamond extraction.

The sector supported the livelihood of approximately Figure citizens in 2020. Since the sector employs residents from hinterland communities where poverty is more pronounced, mining plays a significant role in national efforts aimed at reducing poverty in Guyana. Indigenous communities tied to gold mining tend to have higher living standards and incomes than communities not tied to gold mining.

The mining sector also contributes significantly to the country’s GDP and is a major source of foreign exchange. Gold is the leading subsector within the extractive industry. This subsector accounted for more than 50 percent of the value created by the extractive industry between 1994 and 2013

Bauxite is the second most important subsector within the mining industry. Over the past decade, the output level and export earnings from bauxite fluctuated largely due to the variation in global demand for bauxite and mixed impact of investments in the bauxite subsector. Additionally, the bauxite industry’s contribution to the mining sector has contracted continuously from 39.7 percent in 1994 to 14.9 percent in 2013.

SUBSECTOR BEST PRODUCT GOLD

2016 Highlights

• Largest gold declaration in Guyana’s history- 713,000 ounces

• Small miners accounted for 70% of declaration

• 235 Blocks given out to small miners

2017 Plans

• Creation of syndicates

• Mining Regulations Review

• Strategic Plan update

• Environmental Management in mining

• Mines Safety

• Mining School

• Improved Recovery Techniques

• Exploration and Geological activities

BAUXITE

2016 Highlights

• Celebrated 100 years of Bauxite Mining in Guyana.

• Commenced review of the Bauxite Industry

2017 Plans

• Bauxite sector review

• Feasibility assessment of Alumina plant

SAND

2016 Declaration

• 601,459 Tonnes

2017 Declaration January to March

• 304,348 Tonnes

MANGANESE

Highlights

• Agreement reached between Bosai Minerals Group and Reunion Manganese for the transfer of four (4) prospecting licenses at Mathews Ridge NWD

• Preparatory works have commenced. Mining expected to begin before 2020.

• Mine has an average life of 20 years and 350,000 tonnes of manganese to be shipped yearly.

• Neighboring communities will benefit

• Construction and upgrading of roads, wharf and power generation facilities

• Employment for approximately 1,200 persons during the peak of construction and 300 – 400 during normal operations.

STAGES IN THE MINING PROCESS 1. Mineral exploration is the search for mineral deposits and the first step in the mining

process. This is the start of any mine and the main aim is to determine if there are mineral deposits worth mining. Every mine starts at this stage and many also end at this stage, not all explorations prove positive and lucrative enough to warrant further investment.

2. Mine development is the second phase of the mining cycle. The purpose of this phase is to learn about the potential value of a mineral deposit, determine if it can be mined profitably and if it can, construct a mine.

3. Mine operation is the third stage in the mining cycle. It is the process of actually extracting and processing of the deposits for the benefit of society, stakeholders and shareholders. A mine is considered operational when material is removed from the surface/ground and is processed into a saleable product.

4. Mine closure is the last phase in the mining cycle. All minerals, regardless of how large a mine or deposit, will eventually run out. Mining is considered a temporary use of land and at the end of the cycle the mine has to be closed.

OPPORTUNITIES WITHIN THE MINING SECTOR The Government is interested in securing large-scale investors for the mining industry, especially in the areas of:

1. Gold and Bauxite, for exploration purposes and to improve the efficiency and productivity of operations. The licensing regime established for this sector embraces a royalties and fiscal

system, which provides investors with attractive terms for exploration and production projects. It should be noted, however, that foreign investors cannot hold small or medium scale properties (up to 1,200 acres) except in partnership with Guyanese firms.

2. The Mining and value added production of semi-precious stones, laterite, manganese, kaolin, sand resources, radioactive minerals, copper, molybdenum, tungsten, iron, and nickel among others.

3. On the support services end, there is need for processing labs and drilling companies 4. Communities can experience huge increases in employment during the mine development

stage. A number of jobs are often available from the entry level to the highly skilled professional. Employment at this stage is typically done by the developer and the contracting firm hired to develop the mine. There are also a number of indirect jobs that also become available through the service providers and suppliers to the mine development operation.

5. A number of economic opportunities for communities include infrastructure development, the provision of utilities.

POLICY, LEGAL, AND REGULATORY ENVIRONMENT The mining industry is not guided by any sector-specific policy. Rather, it is governed by several laws and regulations, which have evolved over the years. The laws and regulations are focused on five basic issues, namely:

1. ownership and authority over mineral resources; 2. protection of private property, claims and capital; 3. regulation of labor, Amerindian (Indigenous) rights, and environmental impact; 4. revenue and other economic considerations; 5. dispute resolution (Mars, 1998).

Lowe (2003) provides a detailed historical perspective of the evolution of the legal and regulatory framework. Currently, the main legislation governing the sector is the Geology and Mines Commission Act 1989. Under this Act, the GGMC is vested with the power to exercise rights over all minerals on state lands. The Act empowers the GGMC to issue permits and entrusts the authority with the responsibility to supervise and regulate mineral exploration in accordance 29 with the Mining Act 1989; Guyana Geology and Mines Commission Act 1969; Geological Surveys Act 1997; Environmental Protection Act 1996; and Industrial Aid and Encouragement Act 1951.

OR Mining in Guyana is governed by the Mining Act of 1989 but is also affected by the Amerindian Act of 2006 and the Environmental Protection Act of 1996. These three acts are the main legal documents which regulate the industry. All mining in Guyana is managed by the Guyana Geology and Mines Commission (GGMC). During the exploration stage several aspects of these three acts determine where and how exploration can proceed.

The Mining Act

Under the mining act the GGMC is the guardian all minerals in Guyana. Permission must be received, from the GGMC, before any exploration activity can begin. In addition, the applicant for a prospecting license must demonstrate that they have the adequate financial resources, technical competence and experience, and must also submit an adequate programme of operations. A performance bond is required for the large scale prospecting license.

The Amerindian Act

Under the Amerindian Act of 2006 a miner who wishes to carry out mining on Amerindian lands must obtain permission from the council of that particular village. During the initial stages and prior to exploration, negotiations between the Village Council and the miner have to be concluded.

GOVERNMENT INCENTIVES Fiscal Incentives for the mining sector

General Incentives:

1. Exemption from Customs Duty on most plant machinery and equipment 2. Exemption from Customs Duty on raw materials and packaging materials used in the

production of goods by manufacturers 3. Exemption from Customs Duty and zero rate of Value-Added-Tax on raw materials and

packaging for manufactures who export 50 percent or more of their products 4. Unlimited carryover of losses from previous years 5. Accelerated depreciation on plant and machinery for approved activities 6. Full and unrestricted repatriation of capital, profits and dividends 7. Benefits of double taxation treaties with the UK, Canada, Kuwait and CARICOM

countries 8. Exemption from Customs Duty and zero rate of Value-Added-Tax on items approved

under an Investment Agreement between the Government and the business 9. Exemption from Excise Tax on items approved under an Investment Agreement between

the Government and the business 10. Zero rate of Value-Added-Tax on exports

Tax holidays for projects that meet the requirements specified in the In-Aid of Industry Act

Sector Incentives (provided in addition to general incentives):

Mining

1. Exemption from Customs Duty on a wide range of mining equipment – for sorting, screening, separating, washing, crushing, grinding, mixing or kneading earth, stone,

ores or other mineral substances; rock drilling or earth boring tools; furnaces and ovens for roasting, melting or heat treatment of ores, pyrites or of metals

2. Exemptions from duties and taxes for items covered under an Investment Agreement

Tax exemptions are normally granted with specific conditions that cannot be breached. In instances where these conditions are breached then the Guyana Revenue Authority is legally authorized to undertake seizure of the equipment/machinery/vehicle and request payment of all duties and taxes that were waived.

The normal primary conditions that are applied to tax exemptions on vehicles/machinery/equipment are:

1. The tax exemption must be utilized for the purpose that the waiver was granted for. 2. It must NOT be rented; therefore, only used for the operations of the applicant. 3. It must NOT be sold/transferred/gifted to any other party within three years.

Mining will benefit from the:

1. removal of VAT on machinery and equipment 2. provision of tax concessions on ATVs 3. removal of vat on hinterland travels 4. the industry will benefit from the removal of police clearance requirement for miners to

transport fuel in their own vehicles

BIILIOGRAPHY

1. Web Resources Guyana Office for Investment: http://goinvest.gov.gy/sectors/mining/ 2. Inter Development Bank: University of Guyana.

https://www.ceintelligence.com/files/documents/Toward-the-Greening-of-the-Gold-Mining-Sector-of-Guyana-Transition-Issues-and-Challenges.PDF

3. Office of the President: https://motp.gov.gy/

4. Guyana Geology and Mines Commission: https://www.ggmc.gov.gy/ 5. Ministry of Natural Resources and the Environment: https://nre.gov.gy/