May 09, 2018 News
…GGDMA President says they deserve same fiscal concessions granted to foreign companies
By Kiana Wilburg
The Coalition Administration is worried about the shortfall in gold production for the first quarter and the implications this would have on 2018 growth figures. It has turned to the Guyana Gold and Diamond Miners Association (GGDMA) to urge its members to increase 2018 production.
But in order for there to be a boost in gold production, the fiscal conditions must first exist. GGDMA President, Terrence Adams, wrote to the Natural Resources Minister, Raphael Trotman, on Monday imploring him to make a direct intervention.
Adams noted that several months ago, the GGDMA on the basis of the collective wisdom of its management committee, called upon the government, in general, the Guyana Geology and Mines Commission (GGMC) and the Natural Resources Ministry, to take urgent action so that gold production could increase to one million ounces by 2020.
The GGDMA President said, “Unfortunately, since then, the local gold miners have not been able to access the key fiscal incentives promised by the government in a timely manner. In addition, the physical infrastructural works for the mining areas are moving much slower than projected.
“On top of all that, mining policy uncertainties in crucial matters are not encouraging robust expansion in by the local miners. As a result, there has been a contraction in mining activities by the large local miners…”
He added, “We need urgent action to be taken now by government, the Ministry of Natural Resources and the GGMC so that the local gold miners can increase gold production if we are the projected national targets…
“It is evident that Government has, unwittingly perhaps, undervalued, and under supported the aggregate efforts of the local miners at a time when the fiscal and other incentives offered to foreign direct investment are well known, and clearly are way beyond what local investors in the gold mining sector are accorded.”
The GGDMA President told Trotman that the key technical inputs for continued growth of local gold miners are well known: earth moving equipment, fuel, mine transportation, improved processing equipment such as mechanical and hydraulic concentrators and technical support from GGMC.
Adams expressed that the Association’s position is straightforward; fuel, excavators’ equipment, processing equipment and transportation equipment must attract the same fiscal incentives for large scale and mechanized medium and small scale miners.
On an annual basis, foreign companies are granted billions of dollars in tax breaks while locals are made to pay the full cost of duties charged on equipment, vehicles and fuel needed to support their operations.
For example, a 4×4 four-door Toyota Land Cruiser normally costs $14M. It attracts duty of $32M. Foreign entities like Aurora Gold Mine and Troy Resources Limited would only pay $14M but locals must pay an additional $32M duty.
Furthermore, if a small mining company hopes to get at least one duty free concession, he or she must satisfy 13 benchmarks. One of these includes producing over 5000 ounces of gold. This is equivalent to more than U$5M. Only five Guyanese have the potential to do this.
Significantly, while billions of dollars worth in concessions are given to these foreign entities, little is known about how many indigenous companies are used to provide them with goods and services in contrast to the foreign conglomerates contracted to provide same.
Commissioner General of the Guyana Geology and Mines Commission, Newell Dennison, shared his views on the matter. Dennison said that he unequivocally agrees that there is an imbalance between the concessions granted to foreign companies and those granted to locals.
Dennison was asked to say if there has been any monitoring of local content in the mining sector by the Commission. He noted however that this is not done.
The Commissioner General said, “In their (Troy Resources and Aurora) reporting, there is a section that speaks to employment; how many are Guyanese etc. But I don’t recall seeing that for this quarter, the company has expended X dollars using local companies versus foreign companies.
“Part of the reason I suppose, is that in the context of the mining sector, it has been considered easier to integrate oneself into the value chain…”
He added, “But I agree with the point that you are making. There is no evaluation in this regard. I would have to check back with the reporting format again to see if this is done at the level you are speaking of…
I don’t recall ever seeing that Troy or Aurora said that they used about 40 companies for the year to provide so and so but it is worth investigating. I am sure that is something that can be evaluated. And I do agree that this is something we should be doing on a more immediate basis…”
Chairman of the Guyana Gold Board, GHK Lall told Kaieteur News that the Guyana Gold Board is also unaware of the details regarding local content efforts by foreign companies in the mining sector.
He said that it is indeed a matter, which needs more attention, especially when one considers the magnitude of the concessions, which are granted on an annual basis.
Commissioner General of the Guyana Revenue Authority (GRA) Godfrey Statia also bemoaned the fact that there continues to be gross distortions between the concessions granted to local mining companies as opposed to foreign ones.
The Tax Chief said that he has considered time and again, just how much the nation is benefitting from the billions of dollars in concessions granted yearly.
He said, “There is a distortion of big miners versus small miners…But the story of gold is a web of problems and many unknowns which I agree should be highlighted.”
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