'Sandy Beaches, Clear Waters Not All The Dominican Republic Has to Offer; Mine Industry Growing
16 March 2012, 3:20 p.m.
By Alex Létourneau
of Kitco News
kitco.com
(Kitco News) - When people think of the Dominican Republic, tourism and picturesque coasts come to mind. However, the country is developing another reputation--one that involves mining precious and base metals.
Generally thought of as tourism-oriented country, a slew of exploration and mining projects could alter the image of the Dominican Republic. Major gold producers like Barrick Gold Corp. (TSX: ABX)(NYSE: ABX) have looked to begin production in the country.
Barrick expects to begin gold production at the Pueblo Viejo project, located about 100 kilometers northwest of Santo Domingo, in mid-2012. The project is expected to produce over 1 million ounces of gold per year over its first five years of production, making it one of the largest gold-producing mines in the country.
Pueblo Viejo is expected to account for about 15% of the country’s total exports over the next 10 years
The Dominican Republic has also seen nearly $4 billion in foreign investment from Barrick to date, which is the largest foreign investment the country has ever received. In turn, approximately $7 billion in direct revenue is expected to be contributed to the state over its 20-year mine life.
“The government is realizing that mining is becoming one of the main pillars for the economy,” said Julio Espaillat, chief operating officer of Goldquest Mining Corp. (TSX-V: GQC). “And they realize that for 2013 and from then on, mining will account for probably over 20% to 25% of all the country’s exports and very likely will account for 4-5% of the gross domestic product.”
Goldquest currently holds eight properties in the Dominican Republic, as well as a project in Spain, and will be focusing on advancing its Escandalosa gold project and its Las Animas gold, silver, copper and zinc project in 2012.
The Dominican government has shown that it is willing to support and push the country’s growing mining industry.
“They’re very supportive,” said Andrew Cheatle, president and chief executive officer of Unigold Inc. (TSXV: UGD). “We had a recent mine analyst talk and had big investors. For example, Sheldon Inwentash (chief executive officer) from Pine Tree Capital and the director of mines interrupted his two-week private business trip in Miami to come to Santo Domingo to meet with the investors, to meet with the analysts and to go through the governments support of the mining industry in the country.”
Unigold has three properties in the Dominican Republic and will focus on its Los Candelones gold target, located on the southern point of the company’s Neita property in 2012. Cheatle said Unigold would also be focusing on a dozen other areas with identified mineralization.
The company’s three properties hold gold, silver, copper and zinc mineralization.
Mining in the Dominican Republic grew in the 1970s with the inauguration of major gold, silver and ferronickel operations. Mining is the leading sector in the country’s export earnings.
In February, Leonel Fernandez, president of the Dominican Republic, said that the country’s economy expanded on the back of mining as the sector grew 79.7% in 2011. Gross domestic product rose 4.5%.
Unforgiving Weather Can Be An Issue When Building Projects
Located in the Caribbean, the Dominican Republic is subject to tropical storms and hurricanes, usually between August and October, and this can cause problems for developing projects.
Espaillat noted that when he took part in building the Cerro de Maimón mine, the first copper-producing mine in the Dominican Republic, there were some delays in construction due to tropical storms. He said some minor flooding was inevitable in lower levels of the open pits.
“You have different levels of mining,” said Espaillat. “You have upper levels and you have lower levels. You know when the hurricane will come so you know some of your lower levels will fill up with water.”
Controlling the climate is impossible but taking the necessary weather precautions during construction, when projects are at their most vulnerable state, can limit the damage that nature may inflict.
Storms “during construction certainly hurt you more than when you’re in production,” said Espaillat. “You know that you are in hurricane and tropical-storm areas, but if you take the necessary precautions, it shouldn’t affect you that much.”
Location of the project plays a role in the type of effect a tropical storm or a hurricane can have on mining projects.
“There are tropical storms but inland the storms do wane,” said Cheatle. “We’ve able to operate in the country now for 10 years without any injury or loss due to tropical storms.”
“You always have to be prepared, that’s the important point,” he added.
The Need For Stable Electricity In The Dominican Republic
Electricity is a known issue in the Dominican Republic. Blackouts are frequent in the country due to the transmission system being overloaded. This is an issue not only for residents and local businesses, but for mining companies running mills and furnaces.
In some cases, the best way around it is for a company to build its own electric power plant. Barrick is currently planning on building a $300 million 215-megawatt dual-fueled power plant for its Pueblo Viejo project.
“To prevent blackouts, you generate your own electricity,” said Espaillat. “This is really the only way to be really preventative. At Cerro de Maimón when we built it, we knew we couldn’t rely on the grid, so we built our own electric power plant.
“You have to be very careful with the country’s electricity. You cannot rely on the local grid so you have to be able to generate your own,” he added.
Some companies can get by using the grid and their own generators.
“It doesn’t impact our project at this stage. In the area where we work, there is a 34KV line that comes in,” said Cheatle. “Our camp is running off its own generator and we also have access to the grid.”
The Dominican Republic government stated that it intends to provide 95% total access to electricity coverage in the country by 2015. Current distribution networks cover 88%, with allegedly 8% of it considered illegal.'
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