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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Bobby Yellin who wrote (43870)	10/26/1999 8:18:00 AM
From: Alex	Read Replies (1) \| Respond to of 116753

More Gold from Guyana than the Stats Show And more money laundering blah blah. The managers of Guyana's gold industry, which has been growing steadily over the past 10 years, say production figures do not give the true story about the country's output. An estimated one fifth of the country's production, about 120,000 ounces per year, is being siphoned off. "There is extensive smuggling across the border into Surinam, Venezuela and Brazil," said Satkumar Hemraj, general manager of the Guyana Gold Board, the agency authorised to trade in gold in the English-speaking republic in northern South America. "There is also a very vibrant informal domestic market in which gold is used to make jewellery." There is also evidence that some of the gold is being used in money laundering operations, say government officials. "The US authorities are very keen about investigating some of these suspected operations, and we are dealing with the situation as it is not good for the country," said one. Retrieving what is being siphoned illegally would significantly lift Guyana's gold output above the 447,218 oz of last year. But in addition to the smuggling and the suspected money laundering, the industry faces other problems. Guyana's gold deposits are low-grade and the industry operates at high production costs. Except for the Canadian-operated Omai mine, which produces three-quarters of the country's gold, Guyana's miners have little technical sophistication. The Gold Board estimates there are 10,000 miners using dredges and suctions in alluvial mining. "The recovery rate by these miners is very low," says Mr Hemraj. "The ore is low-grade and the miners produce 1.7 grammes per tonne." Omai Mine's reserves have been predicated on a yield of 1.63 grammes per tonne. Last year, the company's yield was 1.44 grams per tonne. "By international standards, Omai is a low-grade/high-volume ore body," the company says. "A high-grade mine such as the Ashanti mine in Ghana has a high-grade operation of 10 grammes per tonne. Omai is considered a high-cost producer." Costs are kept high because of the long distances materials and equipment have to be transported from the populated coast to the interior. There are few roads to where the deposits are located. With the low price of gold, many of the smaller miners were under threat. Rising prices have brought some relief, says Mr Hemraj. Omai Mines is a US$300m venture in which Cambior and Golden Star Resources, both of Canada, own 65 per cent and 30 per cent, respectively, with the Guyana government owning 5 per cent. Located 160km south of Georgetown, Guyana's capital, Omai is the single largest investment in the country, and one of the largest open-pit mines in South America. Last year it produced 327,500 oz after completing a $53m expansion a year earlier. The company's production this year is forecast at 306,000 oz. Increased production is expected when the company begins to exploit new deposits. The government has awarded Omai Mines exploration licences for two concessions. The company's reserves are currently estimated at 54m tonnes of ore, against 41m tonnes when the mine was opened in 1993. With the recent increase in prices, prospects have brightened. Omai's direct mining costs last year averaged $239 per ounce. "We had some protection from low prices because we hedged our sales at $300 per ounce," said Seeta Mohamed, public communications co-ordinator for Omai. The industry and the government are concerned at Venezuela's recent renewal of a century-old claim on Guyana's Essequibo region in which most of the gold deposits are located. Recent bellicose statements from Venezuela about its claim on the 54,000 sq mile region have been mollified by an agreement with Guyana to seek international mediation on the dispute. Despite the low quality of the ore, depressed prices and the long-standing Venezuelan claim, several companies have been searching for more gold in Guyana. Among the foreign companies that have received concessions for prospecting are Broken Hill Proprietary of Australia and Golden Star Resources, which are exploring 2.5m acres in north-western and eastern Guyana. Zamuteba of Brazil has exploration rights for areas close to the border with Surinam. The government has also given a permit to Vanessa Ventura, a Canadian company, to conduct geological surveys for gold over 5.1m acres for two years. Guyana's gold output is expected to reach 434,000 oz this year, says Mr Hemraj. Higher production in the future is expected if any of the concessions prove economically feasible, and if the Gold Board can recover the production which is being smuggled. Financial Times, October 26, 1999