May 21, 2021 News
Kaieteur News– Guyanese are currently paying three and a half times as much on fuel taxes than foreign owned company, Aurora Gold Mines (AGM) according to provisions of the company’s contract, originally signed by the Canadian parent company ten years ago before it sold out to a Chinese company.
Guyanese, including local miners, are subjected to a standard excise rate of 50 percent on fuel one that was last revised downwards to 35 percent on February 18, in order to cushion against the higher fuel prices on the world market to be reverted again when prices rebound. In contrast, AGM, according to a provision in their contract pays only 10 percent. The excise duties on petroleum products are charged on items such diesel, gas, lubricants and other oils, all of which are required in gold mining operations presently.
Under the provisions of AGM contract, the company is provided with the reprieve where it shall “pay a partial Excise tax of 10% on fuel (diesel, gasoline, lubricants and other oils) from the date of the commencement of production by the company.”
This means that fuel and other petroleum products imported by Guyanese currently attract a rate three and a half times higher than their foreign counterparts. The Zijin Mining Group last year acquired the mine for US$238M from Canadian-owned Guyana Goldfields – which had acquired the licence for Aurora Gold Mines in November, 2011 – and as such enjoys provisions that were enshrined in the contract for the operations in the operation’s Cuyuni-Mazaruni location.
Additional provisions provided as incentives for the foreign based company includes waivers on imports for other machinery, equipment and other personal items. This is in addition to there being a sliding scale for the payments to be made—five percent royalty when gold is sold for US$1,000 and below, or eight percent when sold from one cent above that price.
This publication reported yesterday that according to the contract, the percentage of applicable royalty charged for gold produced would be applied to the sale price actually realised from a smelter, refinery or other arms-length third party purchaser. It provides further clarity to state that revenues shall be calculated based on actual price realised in relation to the transaction utilised and not on the basis of world market price for those minerals.
Notably, Guyanese miners are also required to sell their gold at the Guyana Gold Board where that entity determines the price to be paid and applicable royalty. That contract also illustrates that when it comes to imports, the company also enjoys a wide range of waivers.
The company, under the provisions in the contract, is entitled to import into the country or purchase domestically, free of import duties, Value Added Tax and any other direct or indirect taxes on all equipment, supplies and materials for the project. It is also provided under the contract that “for greater certainty,” the company or any local or foreign contractor retained for the project purposes shall not be required to pay any licence fees, duties or other charges related to importing or purchasing materials in Guyana for the purpose of the project.
Additionally, the company shall also be entitled to import free of customs duties, VAT and other direct or indirect taxes on necessary personal items, including electronic and household effects. This, in addition to paying US$5 or G$1,000 rental for every acre of land it has in its claim. The Aurora gold project was first developed by Guyana Goldfields, located in Cuyuni-Mazaruni, as an open-pit and underground mining operation spread across an area of 12 kilometres squared or 2,965 acres. Under the terms of the contract, upon the granting of the licence, the company would pay in advance the Guyanese equivalent to US$5 per acre for each acre included in the licence, and should the Government reduce those fees, then the company’s obligation to pay the rent would be similarly reduced. It would mean that the company pays just about G$3M in rent to exercise its right over, and mine for gold from, just about 3,000 acres of land.
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