DRAFT FOR DISCUSSION ONLY

TOO BIG TO FAIL: A Scoping Study of The Small and Medium Scale Gold and Diamond Mining Industry in Guyana

By

Clive Y. Thomas
Distinguished Professor and Director Institute of Development Studies Faculty of Social Sciences University of Guyana

November 2009

CONTENTS Page Preface List of Acronyms List of Tables List of Schedules List of Graphs List of Maps Section 1: Introduction
Historical Background Recommendations iii iv v vii vii vii 1 1 3 4 5 8 9 12 12 13 15 15 16 16 20 21 23 27 27 30 31 31 32 33 35 37

Section 2: Performance
Output Exports Prices and Sales Royalties and Taxes GDP and Employment Dredges and Claims Investment Recommendation

Section 3: Organization and Operations

Structure The Fiscal Framework Technology Cost of Production Backward and Forward Linkages Jewellery Manufacture Recommendations

Section 4: Legal, Policy and Regulatory Framework

Legal Policy Guyana Geology and Mines Commission (GGMC) Guyana Gold Board (GGB) Recommendations

Section 5: Environmental Concerns

Land Degradation Water Degradation Hazardous Materials (Mercury Usage and Contamination) Integrated Environmental Management and GGMCs Environmental Division Recommendations

39 39 44 46 48 52

Section 6: Recent Exchanges on Environment Issues and the Low-Carbon Development Strategy (LCDS)
Recent Exchanges Recommendations (1) The LCDS and Small and Medium Scale Gold and Diamond Mining Recommendations (2)

54 54 62 63 71

Section 7: Amerindian Communities and Mining in Guyana

Impacts Recommendations

72 72 74 75 78 81

Section 8: Concluding Remarks References Appendix I: Letter of Transmittal

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PREFACE
This Scoping Study analyses and maps the main features of the current situation of the Small and Medium Scale Gold and Diamond Mining Industry. Its aims are: To bring together in a single document a concise situational analysis/baseline scenario of the sub-sector that can be made widely available. To make Recommendations, which hopefully the GGDMA would consider and, if found to be useful, promote on behalf of its membership. To identify areas for future in-depth studies (involving surveys, field visits, and other direct methods). This would include scientific analyses of some still unresolved scientific issues.

The main methodology used consists of: The study of reports, other studies and documents. Internet research and, Interviews/discussions with knowledgeable persons.

For these purposes the GGDMA covered the cost of temporary research assistance (for 3 months). We were able to recruit Marciano Glasgow, Development Policy and Management Consultants for this purpose.

The next stage envisioned is that, on the basis of this Draft Report, and after joint consideration with the GGDMA, a proposal for further research could be developed by the GGDMA in partnership with the University of Guyana and funding sought for this purpose.

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List of Acronyms
DPMC EDA EDD ERC EVN GENCAPD GFC GGB GGDMA GGMC GLSC GoG IDS LCDS NDS SFE UNDP UNIDO WTO WWF Development Policy and Management Consultants Environmental Development Agency Environmental Development Division Ethnic Relations Commission Economic Value to the Nation Guyana Environmental Capacity Development Mining Project Guyana Forestry Commission Guyana Gold Board Guyana Gold and Diamond Miners Association Guyana Geology and Mines Commission Guyana Lands and Surveys Commission Government of Guyana Institute of Development Studies Low Carbon Development Strategy National Development Strategy Standing Forest Estate (Guyana) United Nations Development Programme United Nations Industrial Development Organisation World Trade Organisation World Wildlife Foundation

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List of Tables Page

Table 1: Gold Output (ozs) 1880s Table 2: Value of Gold Output (1890s) Table 3: Tenure Arrangements (Small and Medium Scale Gold and Diamond Mining) 2007 2008 Table 4: Guyana Mineral Production Declared 1979 2008 Table 5: Gold and Diamond Exports (US$ million) Table 6: Indexes of Gold and Diamond Output and Export (Constant prices) Table 7: Average Prices paid by the Guyana Gold Board (1999-2008) (US$) Table 8: % Distribution of Gold and Diamond Declarations by Mining District (2008) Table 9: Royalties and Taxes Collected by the Guyana Gold Board (G$ million) Table 10: Guyana: Real GDP Growth Rates (1999 2008) Table 11: Registered Dredges 2001 2008 Table 12: Breakdown of Dredge sizes by Mining District, 2008 Table 13: Small and Medium Scale Mining Activity, 2008 Table 14: Mining Operations Sampled and Operating Costs Table15: Weighted Average Operating Cost by Mining Method Table 16: Fuel and Lubricants, Wages and Transportation contribution to Operating Costs Table 17: Estimated Mobilization Costs by Mining District Table 18: Average Productivity per dredge (m3/week) 2005 Table 19: Gold Board Purchases Table 20: Area Available for Mining in Guyana 2 2 5 6 8 9 10

11 12 13 14 14 14 24 25

26 26 27 36 40

Table 21: Licenced Dredges: Distribution by Mining District (2005-2008) Table 22: Status of Soil and Biological Degradation in Mining Districts Table 23: Land Degradation from Mining Table 24: Status of Water Degradation in Mining Districts Table 25: Estimated Annual Land area Degraded from Mining in Guyana Table 26: Mercury use practices among miners Table 27: Comparative responsibilities for GGMC and miners under the new mining environmental regulations Table 28: Projected Gold Prices 2009 2018 Table 29: Projected Gold Output and Mining Area

41 42 43 44 46 48

50 70 70

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List of Schedules Page

Schedule 1: Constraints/Weaknesses in Artisanal (Pork-knockers) Operations Schedule 2: GGMC: Functions, Roles, and Areas of Responsibility (FRAR) Schedule 3: Summary of Recommendations 3 34 77

List of Graphs

Graph 1: Guyana Mineral Production Declared 1979-2008 (Gold (ozs)) Graph 2: Diamond Prices (average annual), 2000-2008

7 11

List of Maps

Map 1: Activity in the Mining Districts in 2008 Map 2: Regions of Gold and Diamond, Forested Areas and Class I-II Soils Map 3: Economically Rational Deforestation Path

17 67 68

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Section I: Introduction
Historical Background Gold and diamonds have numerous industrial and commercial uses worldwide, as well as being considered as a preferred store-of-value. At times of economic uncertainty and with the prospect of inflation this is particularly true for gold. Gold has also been an investment instrument that several Central Banks use as a store-of-value for part of their international reserves holdings. The demand for gold and diamond is a function of all these properties, but as a store-of-value, this ensures that there will always be a significant speculative content to its demand, which creates fluctuations in price.

Despite these fluctuations however, in periods of strong bull-markets, as at present, there is a strong expectation that over the long term there will be a growing persistent demand for these precious metals. Price declines are treated, more often than not, as deviations, aberrations and distortions produced by prevailing speculative conditions in the market. Given their rate of formation over geological time these precious metals are in finite supply subject to their discovery. Because of this the costs of exploration, development, and mining trend upward as easily accessible resource material is used up. Advances in technology cannot fully negate the upward pressures on costs and prices.

Guyana recorded its first commercial gold and diamond exploration and production more than a century ago. Indeed the first recorded systematic efforts were made approximately 12 decades ago, starting in the early to mid 1880s. Despite this long lineage, the industry is perceived today as it were, the proverbial step-child in the Guyana family of major commodities produced and exported.

The historical data show the first systematic gold production as taking place in the Potaro area in 1884. This was preceded by earlier exploration recorded as far back as 1720 when a gold seeking expedition took place in Berbice, but found nothing (Harrison, 1908; Swain 1980). A later expedition to the Mazaruni/Cuyuni districts, sponsored by the Dutch West India Company also found nothing. In 1743 a third expedition to Essequibo

mounted by the then Governor (Storm Van Gravesande) also failed. In 1863, the British Guiana Gold Company led an expedition, which discovered gold bearing quartz in the Cuyuni River (Wariri) but operations had to be halted because of the Venezuela boundary dispute (Harrison 1908).

Two years after the first recorded production the first set of mining regulations were enacted (1886). By 1895, it was being reported that Guyana was one of ten most prolific gold-bearing regions in the world (Harrison, 1908; Swain, 1980). The data in Tables 1 and 2 below indicate the magnitude and rapid growth of the industry in that period. Table 1: Gold Output (ozs) 1880s Year Ounces 1884 250 1885 939 1886 6,518 1887 10,986 1893 138,527

Source: D. Canterbury (1998).

Table 2: Value of Gold Output (1890s) Year G$ million 1889 0.1 1890 1.1 1891 1.8 1892-89 (average) 2.3

Source: D. Canterbury (1998).

While some foreign companies were involved in these early operations, small artisanal operators (pork-knockers) formed the bulk of the domestic contribution to national output (Dunn, 1912). It has been estimated that in the 1880s that about 61,000 ounces of gold altogether were produced on operations in the area that Omai subsequently mined as a large-scale foreign owned enterprise (Omai, 1984; Thomas, 1998). In 1896 a German syndicate acquired this Omai property but let it go to Anaconda in 1947 who later abandoned it in 1950 (Thomas, 1998).

The pork-knockers worked as individuals or in small groups using basic tools and equipment and employing traditional technology in gold recovery from near surface or soil deposits. Thomas (1998) reports that rates of recovery were low (about 20 percent). This type of mining operation has a romantic folk-lorish appeal attached to it. It certainly 2

marked an adventurist entrepreneurial and innovative approach to developing livelihoods in Guyana, but as business-outfits these artisanal operations suffered from several critical constraints/weaknesses including those listed in Schedule 1 below.

Careful note should be made of this formidable list of constraints and weaknesses. These point to basic policy, legal and regulatory failures. As we shall see since the hey-day of the pork-knockers, efforts have been made to address these constraints starting in the 1970s and focussed on in the Mining Act of 1989.
Schedule 1: Constraints/Weaknesses in Artisanal (Pork-knockers) Operations Number Constraints/Weaknesses

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Manual Labour (low or non-existent mechanisation) No enforced health and safety standards Lack of training Poor pay (where labour employed) Poor productivity Capital deficient Insecure property rights Environmental damage (pollution, land and water degradation, mercury use) Weak, poorly organised markets (inputs and output) Security Poor infrastructure High dependency ratio Weak/non-existent basic services Weak/non-existent economic support institutions (especially credit) Policy failures Tragedy of the Commons and Poverty Trap situations (Too many miners, chasing too little resources)

Recommendation (Section 1). The clear recommendation from this brief historical review is that the Guyana Gold and Diamond Miners Association needs to pay careful attention to raising the profile of the gold and diamond industry in the country. More attention should be placed on education and public awareness, publication and dissemination of the seminal issues in the development of the industry. These efforts should be carefully tailored to the heterogeneous economic, social and political groups that make up the country. Professional/expert support should be obtained for this task. It cannot continue to be left to well-intentioned but occasional amateur attention.

Section 2: Performance
In this Section the main features of the industrys performance over the past three decades will be indicated (output, exports, price and sales, distribution of output by mining district, royalties and taxes, GDP, employment, dredges and investment). Like the previous Section, it concludes with the Recommendation(s).

A century later, after small scale gold and diamond mining began, beginning in the 1980s, gold and diamond mining has developed and is now organised around four basic types of operations, including a residual artisanal (pork-knocker) component from the earlier years. Based on the Mining Act 1989 these are: i) small scale (including artisanal claims) 500 x 800 feet [2.7 acres for land claims and for river claims one mile (0.6 km) of navigable river] ii) medium scale properties and mining permits of 150 1,200 acres iii) large scale prospecting licences 500-12,800 acres; and, iv) permission for geological and geophysical surveys (reconnaissance surveys are to be done with the objective of applying for prospecting licences after the aerial and/or land reconnaissance results are obtained).

Categories i) and ii) are restricted to Guyanese, but joint-ventures with foreigners are allowed to jointly develop properties on the basis of a strictly private contract between the parties.

Recent data on claims, prospecting licences and permits, mining permits and reconnaissance are shown in Table 3 below. These illustrate the current state of tenure arrangements in the small and medium scale gold and diamond mining industry.

Table 3: Tenure Arrangements (Small and Medium Scale Gold and Diamond Mining) 2007 2008 Tenure 2007 2008 Claims (small scale) Prospecting Licences (small scale) Prospecting Permits (small scale) Prospecting Permits (medium scale) Mining Permits (medium scale) Mining Licences Reconnaissance 10,563 12,582 65 2,001 3,594 373 10 13 107 859 5,413 550 10 13

Source: Guyana Geology and Mines Commission.

Foreign companies may apply for category iv) listed above. It should be noted here that, as we shall see later, for purposes of the mining environmental regulations, claims are also classified by volume of material excavated/processed. In these regulations large scale refers to the processing of more than 1000m3 of material (including overburden) excavated or otherwise processed in 24 hours. Medium scale refers to a minimum of 200 to 1,000m3; and, small scale a minimum of 20 to 200m3.

Because of issues in the production and marketing of gold and diamonds, the amounts declared to the Authorities are used as the standard proxy for actual output. Over the years there have been widely varying estimates of the gap between the two amounts, ranging from 20 to 80 percent. The consensus however, seems to be that this gap has been narrowing in recent years.

Output Table 4 and Graph 1 show gold and diamond production declared for the three decades (1979-2008). The data displayed separate the contributions of the large-scale producer (Omai) for the years it was in operation 1993-2005. Declared gold output for the threeyear period 1979-1981, averaged 13.6 thousand ounces. For the next three-year period 1982-84 the average was reduced by one-half to 8.3 thousand ounces. For the next three 5

successive three-year periods (1985-87; 1998-90; 1991-93) declared output grew rapidly reaching an average of 75.3 thousand ounces by 1991-1993.

Table 4: Guyana Mineral Production Declared 1979 - 2008

MINERALS Units Year 1979 1980 1981 1992 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total 10,592 11,003 19,263 8,655 5,039 11,132 10,328 14,036 21,415 18,803 17,343 38,717 59,296 79,581 87,100 99,095 91,451 110,135 98,051 110,047 110,684 105,289 101,849 117,240 105,747 116,236 162,527 205,970 246,200 260,387 2,453,211 -202,229.96 251,848.46 178,356.15 253,442.49 333,567.81 324,245.31 312,089.79 329,603.37 354,068.59 319,431.00 270,693.00 242,192.00 100,001.00 3,269,539 10,592.00 11,003.00 19,263.00 8,655.00 5,039.00 11,132.00 10,328.00 14,036.00 21,415.00 18,803.00 17,343.00 38,717.00 59,296.00 79,581.00 289,329.96 350,943.64 269,807.15 363,577.49 431,618.81 434,292.31 422,773.79 434,892.37 455,917.59 436,671.00 376,440.00 358,428.00 262,528.00 205,970.00 246,200.00 260,387.00 5,924,980 15,410.29 9,968.07 9,289.98 11,191.84 12,043.45 7,236.23 11,569.91 9,237.54 7,460.21 4,240.43 7,846.01 14,877.31 22,524.09 43,649.83 48,773.52 36,443.30 51,049.35 44,304.51 34,675.63 32,614.12 44,246.19 79,557.94 174,745.00 241,905.22 401,691.33 433,242.45 347,565.72 331,590.00 261,933.00 277,026.60 3,012,499 GOLD/(ASM)* Ozs GOLD OMAI Ozs GRAND TOTAL Ozs DIAMONDS Ozs

Source: Note: *Artisanal, small and medium-scale producers With the coming on stream of Omais contribution to total gold output, declared total output grew from about 80,000 ounces in 1992 to 289,000 ounces in 1993. Overall declared output peaked at 456,000 ounces in 2001. When Omai closed down in 2005 total output fell to 263,000 ounces. Producing on their own, the small and medium scale

producers continued to increase their declared output, reaching over 260,000 ounces for the year 2008. This declared output is about two and one-half times the declaration at the turn of the last century. This year (2009) there is the expectation that the small and medium scale producers will be declaring output at or above 300,000 ounces, because of the huge price incentives currently facing the industry.

Graph 1 illustrates the trends in declared gold and diamond production over the three decades. From lows averaging approximately 10,000 metric carats in the 1980s, declared diamond output increased steadily reaching 82,000 metric carats by 2000. This climbed to 445 thousand metric carats by 2004. After successive years of decline this total was down to 169,000 metric carats by 2008. Some of this decline has been attributed to miners switching output from diamonds to gold because of the price attractiveness of the latter.

Graph 1: Guyana Mineral Production Declared 1979-2008.

Guyana Mineral Production Declared 1979-2008 (GOLD (Ozs))
500,000 450,000 400,000 350,000

Annual Gold (Ozs)

300,000 250,000 200,000 150,000 100,000 50,000 0

19 79 19 80 19 81 19 92 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08
End of Period GOLD/(ASM) (Ozs) GOLD-OMAI (Ozs) Grand Total (Ozs)

Guyana Mineral Production Declared 1979-2008 (DIAMONDS (Ozs))

500,000 450,000 400,000 350,000

Annual Diamond (Ozs)

300,000 250,000 200,000 150,000 100,000 50,000 0

Exports The total value of gold exports in 2008 was approximately US$203.7 million, and diamond exports US$31.7 million, for a combined total of about US$235.4, which is about 30 percent of Guyanas total exports for that year. Table 5 below shows recent gold and diamond exports (2003-2008). Table 5: Gold and Diamond Exports (US$ million) Year 2003 2004 2005 2006 2007 2008 Gold (US$ m) 130.9 145.1 111.9 114.4 153.1 203.7 % of total 19.7 18.4 15.0 14.0 20.2 25.6 Diamond (US$ m) 29.7 48.8 43.6 44.9 35.5 31.2 Diamond % of total 4.5 6.2 5.8 5.5 4.7 3.9 Source: GoG official statistics, GGMC, Bank of Guyana Reports and the Bureau of Statistics. Constant price indexes of gold and diamond output and exports are shown in Table 6 for the period 1998-2008, with 1998 as the base year (100).

19 79 19 80 19 81 19 92 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08
End of Period DIAMONDS (Ozs)

Table 6: Indexes of Gold and Diamond Output and Export (Constant prices) Year Output Exports Gold Diamond Gold Diamond 1998 100 100 100 100 1999 101 136 95 126 2000 96 244 96 216 2001 93 536 93 515 2002 107 742 108 819 2003 96 1232 96 1340 2004 106 1328 109 1529 2005 148 1066 155 1130 2006 187 1017 188 1187 2007 224 803 223 907 2008 237 504 234 645 Source: W. Abrams, Guyana Geology and Mines Commission, 2008. The data show far stronger fluctuations in declared output and exports for diamond than for gold. While gold output and exports peaked at about 2.3 to 2.4 times that of the base year for 2008, in the case of diamonds the peak reached was over 13 times for output and fifteen-fold for exports in 2004. This underscores the recent decline in declared diamond output indicated above.

Prices and Sales Much of the recent prosperity of the gold and diamond mining sector has depended on rising prices. Data on prices paid by the Guyana Gold Board support this (see Table 7). An examination of the Boards pricing arrangement is presented later.

Table 7: Average Prices paid by the Guyana Gold Board (1999-2008) (US$) Year $US 1999 281.16 2000 279.77 2001 272.88 2002 310.29 2003 368.28 2004 411.49 2005 446.00 2006 608.32 2007 702.81 2008 876.62 Source: Guyana Gold Board. These prices are daily averages for the year. This means that in a good year like 2008, prices would fluctuate considerably. As a case in point, in that year it fluctuated from a low of US$692.50 to a high of US$1052.50 for a yearly average of US$876.62

Graph 2 indicates the behaviour of diamond prices over the past decade. From a low of less than US$80, at the beginning of the period the average annual price had more than doubled to over US$160 during the period. As we shall see gold and diamonds are legally required to be sold to the Authorities [Guyana Gold Board (GGB) and the Guyana Geology and Mines Commission (GGMC)]. Almost all the purchases by the local Authorities are re-sold overseas. Thus for example, in recent years it is only between 0.1 and 0.3 percent of the gold purchased by the GGB from miners that is resold locally.

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Graph 2: Diamond Prices (average annual), 2000-2008

Diamond Prices (average annual), 2000-2008

Source: Guyana Geology and Mines Commission. The distribution of gold and diamond declaration by the six Mining Districts of Guyana for 2008 is shown in Table 8 below. The four Mining Districts (2-5) account for the vast majority of the declared output with Mining District 3 the largest, accounting for over 40 percent and 56 percent of the gold and diamond declarations respectively.

Table 8: % Distribution of Gold and Diamond Declarations by Mining District (2008) Mining District Gold (%) Diamond (%) 1 Berbice 2 Potaro 19.0 28.1 3 Mazaruni 40.2 56.3 4 Cuyuni 17.8 15.3 5 North West 19.8 6 Rupununi 2.4 0.2 Source: W. Abrams, Geology and Mines Commission, 2008. Note: Gold sales to licenced dealers account for about one percent of gold declarations.

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Royalties and Taxes Royalties and taxes are collected by the Gold Board on local purchases. These funds form the bulk of the incomes received by both the GGB and the GGMC. In the case of the latter, other items like fines and rentals of properties also contribute to income. The main point is that the industry finances this complex framework of public organisations linked to the industry. The details will be introduced later when the GoB and the GGMC are considered. However, it should be noted that collections since 1998 have grown by more than nine-fold. Reflecting the rapidly increasing trend of declared output of gold in recent years, most of this increase has occurred during the years 2005-2008. Indeed in the early period 1998-2001 collections fell. Details are shown in Table 9. Table 9: Royalties and Taxes Collected by the Guyana Gold Board (G$ million) Year Collections (G$ million) 1998 306.1 1999 346.7 2000 284.8 2001 271.1 2002 422.5 2003 478.8 2004 603.5 2005 997.5 2006 1,557.4 2007 2,205.6 2008 2,882.7 Source: Guyana Gold Board.

GDP and Employment Gold and diamond production contributes about 7.4 percent to Guyanas current GDP. The growth rate for value added of the gold sub-sector in 2007 was 15.7 percent and 9.7 percent in 2008, based on Government of Guyana statistics. Value added in the diamond sub-sector has declined over the two years by -21.0 percent and -37.2 percent respectively. The 2009 Budget has projected sub-sectoral growth in 2009 of -1.5 percent for gold -2.3 percent for diamonds. These figures should be looked at in the context of the optimism now being expressed by leading figures in the industry and real GDP growth rates for Guyana over the period 1999-2008 (see Table 10).

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Table 10: Guyana: Real GDP Growth Rates (1999 2008) Year Real GDP Growth Rate (%) 1999 2.6 2000 (-0.7) 2001 1.6 2002 1.1 2003 (-0.6) 2004 1.6 2005 (-1.9) 2006 5.1 2007 5.4 2008 3.1 Budget 2009 4.7 Source: Government of Guyana Statistics (various years).

Various estimates of employment in the sector have been made, but to the best of my knowledge no direct estimation has been attempted. A recent (2009) GGMC estimate is that 11,200 persons were employed in 2007 and 14,130 in 2008. Applying the same ratio of dependents to employees used to estimate total employment in the mining sector this gives a figure of approximately 90,412 persons directly and indirectly dependent on the fortunes of the industry.

Dredges and Claims As we shall see when we come to discuss technology and methods of production registered dredges are at the heart of the expansion of the small and medium scale gold and diamond mining operations in Guyana. Table 11 below shows the rapid expansion in the number of registered dredges in recent years. The number has more than doubled since 2001 but most of the increase has occurred between the end of 2004 and 2008, as approximately 900 new dredges were registered as compared to about 260 registrations between 2001 and end 2004. Data on dredges by size and mining district are shown below in Table 12. When we examine the cost of production later, these data will be of further use. It is important to note here the heavy concentration in dredge sizes 4" - 6" and in mining districts 3, 2, 4 and 5 in that order.

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Table 11: Registered Dredges 2001 2008 Year No. of Registered Dredges 2001 927 2002 1,022 2003 1,092 2004 1,188 2005 1,504 2006 1,617 2007 1,774 2008 2,072 Source: Guyana Geology and Mines Commission

Table 12:Breakdown of Dredge sizes by Mining District, 2008 Size MD #1 MD #2 MD#3 MD #4 MD #5 MD #6 2" 3" 1 1 1 4" 1 118 290 89 32 19 5" 1 109 174 58 21 14 6" 2 291 283 249 123 35 8" 11 22 6 4 2 10" 6 14 19 1 12" 1 9 26 26 1 14" 6 1 5 Total 5 551 811 453 181 71 Source: Guyana Geology & Mines Commission

Total 0 3 549 377 983 45 40 63 12 2,072

A composite Table 13 showing dredge registrations and prospecting permits is also presented below. Table 13: Small and Medium Scale Mining Activity, 2008
Activity/District Dredge Registration Dredge Renewals Dredge Licensed Prospecting Permits (Small Scale) Land Claims River Claims Specified Machinery Berbice 4 2 5 Potaro 200 351 551 Mazaruni 211 600 811 Cuyuni 167 286 453 N.W.D 54 127 181 Rupununi 29 42 71
@

Other -

Total 665 1,408 2,072

0 38 201 0

77 2,675 493 38

205 2,689 1,263 45

0 1,034 287 16

0 2,446 384 27

0 446 626 3

577 -

859 9,328 3,254 129

Source: Guyana Geology & Mines Commission @ Issued in Georgetown.

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Investment (Changes in Capital Stock) The World Trade Organisations (WTO) Trade Policy Review of Guyana (WT/TPR/ S/218) has reported: no figures are available on investment in the mining sector (P63). However, the GGMC has subsequently estimated capital expenditure in the sector at approximately G$10.7 billion for 2007. This estimate was 17 percent up on the estimate for 2006 (G$8.3 billion) mainly for dredges. The capital expenditure was measured at book value and related to dredges G$10.2 billion plus specified equipment: excavators, bulldozers, washplants, crushers, sluice boxes, gravel pumps (G$0.3 billion).

An unspecified, but significant portion of this investment comes out of joint ventures with companies/individuals in other countries, principally Brazil, Canada and the United States.

Recommendations (Section 2) 1. The industry will continue to operate largely in the dark as it has been for decades if it remains dependent on irregular studies and reports. A standard package of data reporting on the industry in a timely manner should be on the Website, where it can be readily and timely accessed. 2. This does not rule out irregular studies, which focus in-depth on areas of particular concern. Many of these types of studies will be science-based and survey-based. 3. Data acquisition, storage and dissemination among miners and the wider public should be given much more attention and professionalized. Plans for these activities should be set in place as soon as practicable. 4. Finally, build strategic alliances/working relations with key institutions outside the industry, which can help with data gathering. The Bureau of Statistics is an obvious priority, but so should the research departments of the Bank of Guyana, Government Ministries like, finance and trade and the University of Guyana.

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Section 3: Organization and Operations

In this Section we shall examine the broader structural and organizational features of the gold and diamond sector. This sets the stage for an assessment of the legal and regulatory framework, which follows in the next Section. Its operations are also evaluated in the context of production and mobilization costs. Finally, backward and forward linkages of the industry are examined.

Structure According to the GGMC gold and diamonds are mined in the Guyana Shield with the potential concentrated in the areas of greenstone belts. Placer deposits are found in the main rivers draining the greenstone area. Lode gold is found in the greenstone belts in the Precambrian terrain in quartz veins. Diamonds are located in placer deposits in the main rivers of the North West and are believed to be largely derived from the Pakaraima Mountains. According to the GGMC (2009): the primary source of the diamonds is unclear.

Guyana is divided into six mining districts as shown in the Map overleaf. The Mining Act, which regulates all mining including gold and diamond vests ownership of all mineral rights in the State. Under the Amerindian Act, however, Amerindian lands before they can be exploited for minerals, are subject to the consent of their respective communities. Further, under any agreement between a mining operator and an Amerindian Community, residents of that community must be first offered employment at market rates for any position, for which they have the requisite skills. Outside nonresident employment is only permitted where the required skills are unavailable.

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17

Legally the term miner covers three broad categories of persons. First, property or licence holders who have legal property to the mining area. Second, tributors or persons working for the owner(s) for a share of mineral output. And, thirdly, any person(s) employed to work on the mine. The first category is regulated by the GGMC. The second category of miners is regulated by both the GGMC under the Mining Act (who grants permission to mine) and private contract law (which regulates the relation between the tributor and the mining property owner). The third category is governed by the labour and employment laws of Guyana.

As a group most miners are relatively young males. Survey estimates show that most of them have a basic primary education (95 percent) as well as secondary education (62 percent). If the technically trained are added to those with a secondary education the ratio goes up to above two-thirds. As a result it is fair to say that the miners as a group have a strong basic education (Lowe, P.18). But having said that, reports also indicate there is much to learn about mining and modern business methods. Miners as a group are highly mobile and transient. Most come from outside the areas where they are currently operating. Maintaining their livelihoods require them to remain on the constant look-out for mining areas with greater results potential to which they would seek to move.

A significant number of Brazilian miners, estimated at over 1,000 are said to be operating in the industry, often with local partners, as ownership for small and medium scale miners is reserved for Guyanese. The Brazilians however, are reported at all levels of the industry: equipment suppliers, shop owners and traders. it is claimed that they own about one-sixth of all dredges (17 percent) and a similar share of the small scale gold and diamond mining operations in partnership with locals. They have been attributed with some of the renewed vigour being exhibited in the industry in recent years as well as some of the new equipment (lavadoras), and mining methods introduced. It is also the view that they are disproportionately responsible for much of the undeclared mineral production in Guyana, and the environmental abuses reported in the industry.

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Two structural considerations flow from the structure of small and medium scale gold and diamond mining described so far. One is landlordism. Industry observers (Lowe 2008) have identified landlordism as a key constraint. The practice of accumulating mining territory through claims, then holding on to them while seeking renters, is estimated to be very high. As much as eighty percent of mining is alleged to be taking place under some form of landlordism. If this is true, the problem has to be addressed at its root.

The traditional share allegedly given by miners to tributors is said to be around 10 percent. The arrangements between tributors and the mining property owner(s) are monitored by the rangers that the owners employ. Some tributors resent this resort to private monitors and enforcers. Their concern is that owners are using them for exploration. That is, as a means of discovering where the potential is on a particular claim and afterwards seeking to revoke the contract at that stage so the owner can cash in on the value in the property without going through the exploration expenses.

To what extent this occurs is unclear to this researcher, but the more fundamental concern must be that such arrangements 1) encourage speculation in properties 2) yield a highturnover 3) yield under-production, from properties 4) sustain the usurious abuse of the property-less tributors who carry the costs and risks attached to mineral exploration. This last item is considered widely to be socially unacceptable.

Indeed, this is both an economically and socially expensive way to seek to identify the best and most worthwhile claims. It is also unscientific and based on a hit or miss approach. The Recommendation is that the GGDMA should join in efforts to devise a rental mechanism or system of disincentives to prevent this type of hoarding and the keeping of mining properties idle. Means should be found to promote beneficial occupation of mining properties.

The other related issue is the role and status of the Brazilian small and medium scale miners in the industry. While the estimates of their number and location vary, all

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observers agree their number is significant. The GGDMA has to lead the search for a just solution through the development of a proposed policy framework to govern the operations of this sub-sector. There are some very important criticisms of Brazilian miners as a group. These include: environmental abuse in their mining methods tax evasion and illegal export of gold and diamonds for whatever reason, a noticeable reluctance to employ Guyanese nationals the language barrier reinforces social barriers their lack of exposure to local training and public awareness campaigns, largely due to the above security and related concerns their continued undocumentation and resistance to regularization

The Fiscal Framework The taxes and incentives regime for small and medium scale mining is a major factor defining its structure and operations. As matters stand royalty payments are charged on gold varying between 3 and 5 percent of gross proceeds depending on the world price of gold prevailing. Five percent is paid when the world price is above US$285/ounce; four percent when the world price is between US$260 US$285/ounce; and three percent when the price is below US$260/ounce. For diamonds, small and medium scale miners pay three percent of gross proceeds.

Incentives given to the small and medium scale mining sector derive both from the general across-the-board programmes and incentives offered by the Government and those specific to the group. The former therefore constitutes the floor of the incentive regime. The general incentives on offer are: 1) custom duty relief (zero rating for items of plant, machinery and equipment and input raw materials for goods produced for export) 2) loss carryover (unlimited) from previous years 3) accelerated depreciation 4) full unrestricted repatriation of capital, profits and dividends for corporate bodies. There are also double taxation treaties with some countries for foreign interests.

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In addition those incentives specific to small and medium scale mining are: 1. Exemption of VAT and Excise Tax for all-terrain vehicles (ATVs), pumps, matting, dredge flaxes and expanding metal 2. Withholding tax is waived 3. Special incentives for pioneering investments and investments in selected communities, e.g., Linden 4. In the case of gold, 2 percent of gross proceeds on all declared gold is taxed. There is no further income taxation.

Technology Broadly speaking the operational, mobilization, and efficiency costs for small and medium scale miners are a function of several crucial variables, not all of which can be isolated for careful measurement, given the prevailing state of the data on the industry. Among the important ones are: 1. Mining location, including both geological and geographical features 2. Mining techniques used, as these affect the volume (as through-put, recovery rates and productivity) 3. Business skills (entrepreneurship generally, as well as skills specific to the industry) 4. Key inputs and their cost (especially transport, fuel and lubricants, wages, infrastructure and rentals) 5. Security and stability, as these affect expectations, prices and supply of inputs 6. The legal and regulatory environment/framework 7. The policy environment 8. The market environment 9. Other factors, including weather, health conditions, and support institutions

Starting with mining methods we find that overall, dredging operations constitute the principal method of small and medium scale gold and diamond mining in the six mining districts. These operations follow two basic forms: land and river dredging. The former is further sub-divided into two categories: hydraulicking and dry mining.

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Hydraulicking has become over the past two decades the most frequently used type of dredge operation. It utilizes high pressure water jets to break up the ground into a slurry. This works well with loose material like sand, loam, clay and gravel. Gravel pumps are then employed to suck-up the slurry onto the processing unit (sluice boxes). Processing involves a washing cycle to sort out the slurry and then amalgamation, which involves the use of mercury to separate out the gold.

Some observers consider this method to be low productivity because of three technical considerations, namely i) the difficulty in getting water jets to fluidize clayey soils ii) excessive dilution with unwelcome overburden during water jetting iii) the excessive rehandling of the material in order to increase yield (See Lowe, 2008, Pages 20-24).

River dredges are housed on pontoons in the rivers, which allow changes in the location of operations on the river. This method uses suction (gravel) pumps to vacuum the dredged material from the riverbed. With mining regulations permitting river dredging up to 20 metres on both riverbanks, missile dredging has, as we shall see, raised concerns about the turbidity of rivers that are being mined and the damage (disfigurement) of river channels. The suctioned material is put in a sluice box located on the barge for processing where the washing cycle and then amalgamation take place to remove the gold particles. For diamonds a lavador is used.

The GGMC reports underground shaft mining operations in several locations in the North West mining district. Lowe reports that hammer milling is the preferred option for deposits that have gold bearing quartz stringers and veins. (ibid, P23) The crushed material is processed in a conventional manner in a sluice box with a similar amalgamation process or utilizing centrifugal equipment to obtain the concentrate which is then massaged with mercury and the amalgam burnt to obtain the gold.

In some instances a more basic method is employed, ground sluicing. This involves utilizing the ground as a sluice box. Dry mining is relatively rare. It is called dry because of the use of excavators to excavate and transport the mining material to the

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processing unit. The processing unit has a grizzly above the sluice box. The material is fed into the grizzly where it is water-jetted and the slurry flow into the sluice box where it is further processed in the usual way.

The choice of mining method depends on multiple factors including geology, location/geography/accessibility, as well as characteristics of the ore body. In turn these are major determinants of mine efficiency and the cost of production.

Artisanal/porknocker-type mining operations are on a relative decline in terms of contribution to output. These operations are individual/small group based, utilizing nonmechanised production methods. Relying on their knowledge of the local terrain tools such as batels, trowels and pick axes are used to exploit alluvial deposits, which are conveyed to sluice boxes, where mercury is used for gold separation.

Above this size small scale operations combine manual labour and dredges. The dredges are calibrated in inches but there are two main groupings: land based dredges which have 3-8" diameter suction pumps and river based dredges which utilize 8-14 suction pumps.

Cost of Production There is no regular tracking of the cost of mining operations in the small and medium scale sector. The Guyana Gold Board has reported an estimate that the cost of producing gold in Guyana is between US$240 to US$300/ounce. That apart, the only systematic detailed effort I know of, aimed at estimating the costs and mobilization of mining operations in Guyana has been produced by the Economist (Wycliffe Abrams) at the GGMC for the year 2005. More studies need to be conducted on a regular basis in order to monitor trends in the industry and inform policies. The cost items identified in the GGMC study includes wages, fuel and lubricants, transportation, maintenance, royalties and taxes, tribute, licences, medical expenses, consumable items, and depreciation (non cash charges).

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The key findings of the 2005 study are summarized below. The study covered 69 operations in the top four mining districts. These accounted for approximately 100 percent of gold declared in 2005 and 97 percent of the diamonds. The study sought to determine average total production costs, based on a discounted cash flow rate-ofreturn method using constant prices at the breakeven (0%) cost of production. Key assumptions are: 1) 100 percent utilisation of mine capacity throughout its life 2) capital investments that are incurred more than 5 years prior to 2005 are treated as sunk costs 3) investments incurred less than 5 years prior to 2005 have their undepreciated balances entered as capital investment in 2005 4) the Guyana dollar is the standard of value. Altogether, the 69 operations represent a little less than three percent of the total number of operations at the time. The number of sampled operations is shown below and the weighted average weekly cost of mining operations the study arrived at (See Table 14). Table 14: Mining Operations Sampled and Operating Costs
Mining Districts 1) (Berbice) 2) (Potaro) 3) (Mazaruni) 4) (Cuyuni) 5) (North West) 6) (Rupununi) Total/Average Sampled Operations 28 13 10 18 69 Weighted Average Weekly Operating Cost ($G) 259,500 370,425 763,000 518,733 477,914

Source: W. Abrams, 2005. Guyana Geology and Mines Commission. Operating costs for dredges are significantly affected by factors such as: site location, ore body, and overburden. The study identified the land based 5" suction dredge in the Potaro mining district as the lowest cost dredge type operation (G$256,000 weekly). The operating costs of dry mining at G$380,000 is lower than that for hydraulicking, but its capital and mobilization costs are higher mainly on account of its utilization of earth moving equipment. In the study hydraulicking was observed to be the most frequently used type of dredging operation. Its weekly operations costs averaged G$395,800, with

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those in the Potaro mining district having the lowest and those in the North West mining district the highest.

In general also, the costs for river-dredging are significantly higher (21 percent) than those for land dredging, mainly due to higher transport costs. The study estimated the weighted average weekly operating cost for river dredging at G$820,000.

Underground mining operations, which occur mainly in the North West, had a relatively high weighted average weekly cost of G$563,000. Underground mining is relatively labour intensive.

Quartz mining had an average weekly operating cost of G$400,000. These results are shown in Table 15. Labour and fuel and lubricants costs were found to be quite high in the study. Table15: Weighted Average Operating Cost by Mining Method Method Weighted Average Weekly Operating Cost (G$) Land Dredging 380,000 Dry Mining 395,000 Hydraulic 820,000 River Dredging 563,000 Underground (Shift) Mining 400,000 Quartz Mining 387,900 Source: W. Abrams, 2005. Guyana Geology and Mines Commission, The study found that the major cost elements in mining operations are transportation, fuel and lubricants, and wages. These on average accounted for just over 57 percent of weekly operating cost, with fuel and lubricants contributing 24 percent, wages 18 percent and transport 15 percent. This varied in the mining districts as the data Table 16 below show.

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Table 16: Fuel and Lubricants, Wages and Transportation contribution to Operating Costs Mining Districts Percentage Contribution to Estimated Average Weekly Operating Costs Fuel and Wages Transportation Total Lubricants 22.83% 18.3% 15.13% 56.26% 25.8% 21.67% 9.7% 57.17% 27.8% 11.9% 27.6% 67.3% 18.9% 21.5% 7.6% 48%

Mazaruni N.W.D Cuyuni Potaro Weighted average 23.83% 18.4% 15% 57.18% Source: W. Abrams, 2005. Guyana Geology and Mines Commission.

Mobilization cost (prospecting, exploration and development) were estimated in the study at 30 percent of the monthly operating cost. The estimated average mobilisation cost was G$573,498. This varied from G$311,400 in the Potaro mining district to G$915,600 in Cuyuni (See table 17 below). This is indeed a very wide variation.

Table 17: Estimated Mobilization Costs by Mining District Mining District Average Weekly Mobilization Costs (G$) 1 (Berbice) 2 (Potaro) 311,400 3 (Mazaruni) 444,510 4 (Cuyuni) 915,600 5 (North West) 622,480 6 (Rupununi) 573,498 Average Source: W. Abrams, 2005: Guyana Geology and Mines Commission. The study reported on dredge production and productivity (m3/week) based on the size of dredges. The 6" dredge had the highest production and accounted for the largest number of dredges. This was followed by the 5" and 4" dredge size. These data are shown in the Table 18 below. Generally, however, one can observe that as might be expected the output of the dredges varied directly with their size.

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Table 18: Average Productivity per dredge (m3/week) 2005 Dredge Size # of Dredges m3/week Productivity (week) 3" 5 295 1,475 4" 434 520 225,680 5" 337 675 227,475 6" 649 1,365 885,885 8" 17 1,635 27,795 10" 29 4,200 121,800 12" 25 6,050 151,250 14" 7 8,235 57,605 1,503 Total Productivity 1,699,005 (m3) Total Dredges Source: W. Abrams, 2005. Guyana Geology and Mines Commission.

Background and Forward Linkages The small and medium scale gold and diamond mining industry has numerous strong linkages. Its inputs place a substantial demand on the supply of air services, river transport, basic infrastructure (roads, bridges, water control networks), basic social services (health, education and welfare), communications (postal, packaging and telephone), security and protection (a raft of retail services in supplying food, clothing, pharmaceuticals, toiletries, entertainment), banking (finance and credit) as well as industrial suppliers of fuel, lubricants, repair, fabricating and metallurgy. It is the major supplier to the jewellery industry and also basically finances the operations of two major government organisations: the GGMC and the Guyana Gold Board.

Jewellery Manufacture Tracing the economic dimension of these linkages or the input-output structure of the industry is clearly a priority area for future research. The main value added to the industry comes from the fact that it is the main supplier of inputs into the jewellery industry. The current size of this industry is not known, but the number of registered establishments was given as 350 in 2004. There are an estimated 400 operations, many of them small enterprises that produce and sell jewellery to individual consumers as well as larger establishments. One estimate is a total of 1050-1200 persons are dependent on the jewellery industry, both in the fabricating and retail sectors.

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The last survey of the industry I could find in the literature was that done by the GGMC and the Caribbean Development Bank in 1993. That survey noted several deficiencies and constraints in the sector. As a result of that study the Guyana National Association of Goldsmiths and Jewellers was established in 1994 to deal with the problems affecting the sector. In 2002 a Training Institute was established to improve design and manufacturing skills of jewellers. Local sales of gold by the Gold Board was only G$47.2 million (US$236,000) in 2008, compared to double that amount in 2007 (G$93.6 million or US$468,000). It is estimated though that the jewellery industry as a whole makes most of its purchases from other than the Guyana Gold Board, given its apparent size and vibrancy in the country.

Guyana has had a long tradition of Creole hand-made jewellery, mostly gold. These producers have often manufactured and retailed the items they produce themselves. Reportedly, these items have not been of a high standard. However, this has been changing over the period since the mid-1990s as higher-standard outfits have emerged, and still combining manufacturing and retailing. A few of these firms have expanded enough to set up retail offices in population centres outside of Georgetown (their main headquarters) as well as in CARICOM (Trinidad and Tobago and The Bahamas) and New York, USA.

Much of the initial impetus for the expansion has been due to the formation of the National Association of Goldsmiths and Jewellers in 1994. This has not been active in recent years. In collaboration with the GGMC, the Guyana Jewellery Training Institute was established in 2002 with the goal of seeking to enhance jewellery-making through skills training and improved quality. The Guyana Bureau of Standards has also played an important role in quality improvement. Some of the well established local firms (for example, Kings Jewellery Ltd and Topaz Jewellers) have had employees trained overseas. Thus Kings Jewellers presently employs several graduate gemmologists, diamond graders, jewellery designers and accredited jewellery professionals.

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Although both gold and diamond jewellery is produced, the concentration is mainly on gold items: rings, brooches, pendants, chains, necklaces, bracelets, and cut shaped and polished diamonds. New technologies have been introduced by these establishments such as: computer aided design (CAD), lasers, powder metallurgy processing, and rapid prototyping. This new technology has reduced scrap wastage and lowered inventory requirements thereby lowering costs and allowing for more competitive pricing.

There are now three main methods of jewellery manufacture coexisting in establishments in Guyana. These are 1) the traditional Creole hand-made methods 2) machine production where components are cut and stamped with dies manufactured for each component of each item of jewellery and 3) casting (lost wax) where items are made from pre-shaped moulds. Most of the firms however, remain basically as family owned enterprises. This might have aided marketing of their products as family reputation for jewellery design, quality and honesty plays an important role in highly competitive markets.

The question arises as to whether the industry, despite its own evolution to more professional outfits, might not be contributing to the overall informalisation of the small and medium scale gold and diamond industry. For one, most of its exports are assumed to be undeclared. While if its inputs are not purchased from the Guyana Gold Board or the Authorised Dealers, this is another instance of informalisation.

LEAP in one of its Business Opportunity Profiles has estimated that an investment of G$4 million would allow for the establishment of an effective jewellery manufacturing operation. For a more elaborate enterprise it estimates the investment costs at G$5 million.

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Recommendations (Section 3) Two earlier Recommendations were made in regard to efforts by the GGDMA to contribute to the resolution of: 1. The problem of landlordism and the promotion of the beneficial occupation of mining properties as a solution. 2. The status of Brazilian miners.

Further to these: 3. The GGDMA should support feasibility studies to guide its members about the possibilities for profitable forward linkages and other spin-off domestic business opportunities linked to gold and diamond mining. 4. The provision of regular quantitative studies, which measure operating costs, mobilisation costs, as well as the technical and economic efficiency of various mining techniques used in the industry. These should be done in intervals of no longer than 2 to 3 years, in order to encourage their updatedness and to ensure close attention is paid to these variables by miners in recognition of their major contributions to profitable business operations.

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Section 4: Legal and Regulatory Framework

Legal The legal framework for small and medium scale gold and diamond mining in Guyana is provided by the Mining Act of 1989, which was signed into force in 1991. This Act deals with all vital areas of mining including: the delineation of Mining Districts, the size of mining operations, the categorisation of persons as miners, prospecting, surveying, mining operations and the licensing of mining equipment and machinery, licensing and registration of mining operations, environmental regulation, health and safety practices and the regulation of mining on Amerindian lands. All mineral rights are vested in the State and administered by the GGMC.

Since the 1989 Mining Act, no comprehensive mining regulations have been enacted to replace those of 1972. Regulations governing environmental protection were enacted in 2005 and Lowe (2008) reports that regulations have been drafted to cover 1) occupational health and safety, and 2) financial and administrative issues. As matters stand therefore there is no single unified document that contains all the countrys mining regulations. (WTO, Second Trade Policy Review)

The Mining Act, 1989 has to be read in conjunction with three other pieces of major legislation impacting on the small and medium scale gold and diamond mining sector. These are the Environmental Protection Act (1996), The Guyana Gold Board Act (1981) and the Amerindian Act (2006). These will be addressed in later Sections of this Report, but it should be noted that, in regard to the first, the GGMC had entered into a Memorandum of Understanding with the Environmental Protection Agency (EPA) in 1997 concerning cooperation and collaboration between the two agencies. As we shall see below the second Act regulates the sale and purchase of gold mined in Guyana, making the Government the sole purchaser and exporter other than authorised dealers, which it had been licensing since 1997.

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Policy The Mining Act is not a mining policy. It cannot also, substitute for a mining policy. Policy responsibility for small and medium scale gold and diamond rests with the Prime Minister, who has the Ministerial portfolio responsibility for making policy for the sector. Modern best-practice, however, supports the view that effective and efficient policy for any significant sector of activity in a country should be formulated as the product of a sustained, transparent and open process of consultations with all the sectors key operators, major stakeholders, interested persons and organizations, as well as interested participants from the wider society to the extent that they express an interest in so doing. This Policy Document should be documented and made widely available, within and outside of the industry. Without such a procedure, the result is likely to be insufficient buy-in and ownership of the policy, which is promulgated, from both the operators in the sector and wider stakeholders in the industry.

Stakeholders in the small and medium scale gold and diamond mining sector constitute a growing list, particularly with the present emphasis on a low carbon development strategy. At present it includes a range of local, regional and international environmental or environmental-related bodies, as well as traditional stakeholders like Amerindian communities, jewellers, and those engaged in forestry. Increasingly eco-tourism and those persons producing non-timber forest products (NTFPs) like wildlife, fruits, medicines, resins, dyes, spices, nuts, vegetables and so on have become important stakeholders.

Notwithstanding this general observation there exist documents and decisions referring to the sector, which make reference to features of mining policy. By construction, these documents will be clearly limited in their usefulness although they will provide indicators of what present policy is. These documents would include for example, the National Development Strategy (NDS) 1996 and 2001, and a reported Policy Paper entitled: Mineral Policy and Fiscal Regime in Guyana produced in 1997. This latter has not been widely circulated. In practice, policy is now set by the Prime Minister (who has portfolio

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responsibility) and the Board of Directors of the Guyana Geology and Mines Commission. There is however, no over-arching Policy Document to guide these persons.

Guyana Geology and Mines Commission (GGMC) The principal responsibility for implementing and administering policy in regard to mining activity for the small and medium scale gold and diamond sector in Guyana falls on the GGMC. The GGMC was established three decades ago in1979. It is intended to be a semi-autonomous body and it has its own Board of Directors. Organisationally, under the Board, the bodys Chief Executive Officer is the Commissioner, who along with Managers of four core divisions, three of which affect the small and medium scale gold and diamond mining sector: Geological Services, Mines, and Environment, are responsible for the administration and execution of the Governments responsibilities under the Mining Act. The GGMC is not simply an omnibus organisation as it is often described. Over the years it has accumulated a large and extraordinary range of responsibilities in fulfilling its functions and roles. I have identified twenty (20) of these, each of which is very crucial to the future of small and medium scale gold and diamond mining, but not all of which have been separately identified as simultaneous and concurrent areas of operation for the organisation. For convenience these are listed in Schedule 2 below:

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Schedule 2: GGMC: Functions, Roles, and Areas of Responsibility (FRAR)

Number 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. FRAR Regulatory: Oversight, inspectorate, institutional-incentive framework Rule-setting, Adjudication and Enforcement: rules, regulations, penalties, fees etc. Promotional: Public awareness, education, training, communication. Productivity Enhancement: Of all productive factor inputs: land, labour, enterprise, capital and management. Capacity Building: Training, demonstration projects, tours, conferences etc. Standards-Setting: Quality control, compliance with industry norms. Research and Development (R&D): Research, technology transfer and development. Informational: Creation of database, means of storage, retrieval, management and dissemination Fiscal Agent: As designated by the State. The GGMC itself requires lots of resources to function effectively MRV: Continuous monitoring, review and verification of industry operations. Policy Formulation: Board of Directors and as key player and stakeholder. Legal Framework: As specified in the present and future laws of Guyana and regulations Change Agent: Transformational role/innovator/conduit for best-practices outside of Guyana Land Management: Based on Mining Act and the vesting of mineral rights in the GGMC Direct Producer: The Mining Act does not prohibit GGMC from direct production. Earlier failure in this regard is to be noted. Geological Depository: The GGMC is the national depository for all geological and mineral resources. Advisory: To governments, miners, mining communities, other players and stakeholders. Networking/Interface and International Compliance: Particularly in regard to external bodies, rules, regulations, obligations, agreements, standards compliance. Environment/Amerindian Communities. Other Mining: These other areas of mining are specified in the Act and covers sectors like bauxite, quarrying and petroleum.

In conclusion I should point out that given the resources required by GGMC it would be very useful for the GGDMA to consider whether its present structure and mode of operation are as cost-effective and fair as they could be, given its responsibility for the administration of so many far-reaching and complex responsibilities implicit, if not explicit, to its existence in its present form. Members/Executive of the GGDMA may want to ponder on this. All parties should recognize and expect that the purpose of the GGMC is to serve the industry and not the other way around, even if unintendedly.

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I have not attempted in any way to undertake a scientific evaluation of the GGMC. I am however impressed by what it has done and is continuing to do. But like all organisations some questions which should be addressed after a considerable period of time has elapsed are: Is the structure and modus operandi of the organisation still the most efficient and effective? If yes, then how can it be strengthened? If no, then what form should reform and renovation take? The GGMCs annual income of G$3.5 billion in 2008 is derived from payments made by the mining sector to it. The largest source of its income comes from Royalties collected by the Gold Board. Between 2006 and 2008 income grew by about two-thirds. Royalties as a proportion of its income ranged between 55 and 60 percent for these years. Next in importance was rental income, which averaged about 30 percent of total income. This amounted to G$904 million in 2008. Other sources of income (fees and fines, permits and licences, drilling charges and so on) were not nearly as significant.

Guyana Gold Board (GGB) The Guyana Gold Board (GGB) was established by the Gold Board Act in 1981 and commenced operations a year later by Order No 24 of 1982. The Act regulates the sale and purchase of gold mined in Guyana investing the Board as Agent of the Government to be the sole purchaser and exporter of gold mined in Guyana. Since 1997, Amendments to the Act allow for licenced dealers to buy and export gold. The GGB remains the overwhelmingly dominant purchaser of declared gold output accounting for about 99 percent in 2008. Purchases of gold by the Gold Board since 1989 are shown in the Table 19 below. The data reflect the trend already observed in declared production of gold in Section 2.

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Table19: Gold Board Purchases Year Purchases Year (troy ounces) 1989 17,290 1999 1990 38,536 2000 1991 55,296 2001 1992 79,582 2002 1993 87,101 2003 1994 99,081 2004 1995 91,461 2005 1996 110,131 2006 1997 92,146 2007 1998 110,048 2008 Source: Guyana Gold Board.

Purchases (troy ounces) 110,160 104,493 101,849 116,617 103,438 115,086 161,683 200,241 238,298 257,827

Increasing purchases by the GGB over the years reflect an element of the reducing gap between miners gold declarations to the Board and actual production. In its 2005 Annual Report the Board had estimated that about one-third of actual production is not officially declared. The GGB believes that its efficiency has improved however, and this is a principal factor in the increase in annual purchases. This increased efficiency is attributed to 1) its opening of a branch Office in 2006 to cater for miners in the Cuyuni/Mazaruni Mining Districts 2) higher prices leading to increased profitability and investment in gold mining 3) a shift from diamond to gold production and 4) the improved method for fixing local gold prices.

The gold price paid by the GGB is based on the London Bullion Market daily fixes. Local sales are made principally to jewellers. External sales are made through the Royal Canadian Mint where it is sent to be refined and then marketed through the Boards overseas agent, Mitsui and Company Precious Metals Inc. While sales of the refined gold can be made in the spot, forward and options market the Board overwhelmingly focuses on spot transactions. It did however, indicate in its Annual Report for 2008 that the Board had three short-term call options during the year.

For accounting purposes the Board recognises revenue when the customer takes possession of the gold in the local market based on the gold price at the London fix at the

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time of sale. For foreign sales the revenue is recognised when the Bank of Guyana acknowledges receipt of the funds due from the overseas agent.

The purchase formula used is: [London Price Fix] x [Raw weight x % purity] x [Rate of Exchange].

The rate of exchange used is the average United States dollar exchange rate of the commercial banks cambios less a deduction of G$4.25 since November 2005. Formerly the reduction was G$3.00 Added to this the Board makes two fiscal adjustments as required by law. Royalties based on the gross proceeds are collected and paid over to the GGMC. A withholding tax is also collected from individual sales, in lieu of income tax and paid over to the Revenue Authority. In the case of corporate entities, taxes are paid on net income as provided for in the Companies Act. Details on prices paid by the GGB, royalties and taxes have already been examined in Section 2.

Recommendations (Section 4) 1. The joint-production of a Policy Document for the sector reflecting two basic features in its formulation, namely (i) it is the product of a transparent process, which fully engages the GGDMA and its members, in keeping with best-practices aimed at producing designated policy documents and (ii) it secures widespread recognition and support for the fact that the government fully appreciates that it cannot be a neutral observer in relation to the sub-sector. Instead, jointly with the GGMA, Government seeks to encourage and support affirmative programmes, policies and incentives for the artisanal, small and medium scale gold and diamond mining businesses. 2. A review/re-evaluation of the GGMC in light of trends in the mineral industry and the intimidating number of functions/roles it is presently required to perform, with limited human and other resources. 3. A more pro-active role for the GGDMA in electronic data-gathering, review, analysis, dissemination and information usage among its members.

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4. The GGDMA should push for an expert review of the pricing and marketing arrangements for gold with a view to exploring the possibilities for more forward sales/hedges, while minimizing risk through the adoption of modern risk assessment/management methods. Previous large scale suppliers of Guyana gold to the world gold market (Omai) had explored and in some instances utilized these possibilities. Small and medium scale miners may wish, based on their costs, to consider these options. It should be observed that a number of analysts believe that there are strong underlying pressures in favour of a long-term bull market for gold. And that, in real terms, even at present price levels of over US$1,000 per ounce gold has still not done as well as other commodities over the long haul.

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Section 5: Environmental Concerns

Presently, environmental management issues constitute, by any reasonable measure, some of the most critical and controversial concerns facing the small and medium scale gold and diamond mining industry. Of these, LCDS-related concerns are the most paramount over the medium to long-term. The LCDS-related concerns will be addressed separately in the next Section (6). Of the many remaining concerns, this Section will address five: i. Land and forest degradation ii. Water degradation iii. The use of hazardous materials and related pollution effects iv. The full and systematic integration of environmental management into standard operating mining methods, and v. Related to all the above, relations with the Environmental Division of the GGMC

Land Degradation The total acreage in the six Mining Districts is approximately 46 million acres (16.6 million Ha). Of this, GGMC has reported Closed Areas as approximately 3 million acres and acreage available for mining at approximately 34 million acres or about threequarters of the total. Acreage available for mining ranges from a low of 6 percent in the North West Mining District to 98 percent in the Berbice Mining District (see Table 20). It is estimated that about 20 percent of this area was being mined in 2008 and that about 28 percent and 9 percent of it are available for medium and small scale mining respectively. (Development Policy and Management Consultants, 2008)

It has also been the practice for miners to re-work mining areas abandoned decades ago, particularly in the Potaro, Mazaruni, and Cuyuni districts when improved mining equipment becomes available. Such practices could obviously have an aggravating effect on the environment in these areas.

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Table 20: Area Available for Mining in Guyana

Mining District Total Acreage GGMC Closed Areas in Acreage 96,608.68 1,002,557.32 347,331.8 511,053 871,020.44 86,681.16 2,915,252.47 Acreage for Mining 8,474,267.63 2,088,144.95 6,608,960.27 3,712,402.69 2,292,139.73 11,034,615.03 34,210,530.30 %Area of Mining District Total 98 59.5 85 85 6 63 74.5

Berbice Potaro Mazaruni Cuyuni North West Rupununi Total

8,680,376.3 3,511,109.42 7,780.723.3 4,388,713.7 3,873,683.5 17,607,344.1 45,841,950.32

Source: Development Policy and Management Consultants, 2008 and GGMC Table 7.

Judging from studies in this area the main causes of land degradation in small and medium gold and diamond mining sector are: Destructive land clearance practices Poor production planning and excavation Limited post-mining reclamation Weak monitoring, review and verification (MRV) of mining operations Weak enforcement of the prescribed environmental regulations The presence of highly mobile/transient features in many mining operations The low monetary value of the environmental bond required from practising miners Inadequate inter-agency collaboration to deal effectively with the competing land uses in the mining communities.

In actuality, these environmental effects manifest themselves unequally over the various mining localities. A useful proxy for the potential intensity and extent of land degradation impacts in exposed mining areas is the number and location of licensed dredges. As we saw in Table 11 there were 2,072 licensed dredges across the six Mining Districts in 2008. This can be compared with the average for the years 2005-07, to gauge the rising intensity and distribution of these environmental effects across Mining Districts as revealed in Table 21 below. The increase in the total number between the two periods has been approximately 24 percent. As we noted earlier the main concentrations are in Mining Districts 3, 2, 4 and 5 in descending order.

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Table 21: Licenced Dredges: Distribution by Mining District (2005-2008) Mining District Average 2008 (2005-07) 1 Berbice 7 5 2 Potaro 363 551 3 Mazaruni 759 811 4 Cuyuni 337 453 5 North West 169 181 6 Rupununi 35 71 Total 1670 2,072 Source: Guyana Geology and Mines Commission. The Development Policy and Management Consultants (2008) has reported, based on a flyover survey, that their assessment: validates that degraded lands are more visible in localized areas along the Mazaruni. Potaro and Cuyuni districts where there are visible signs of soil, biological, and water degradation. The degree of degradation varies from moderate to severe across and even within districts. (ibid, P.53)

Table 22 below summarizes their data in regard to the status of soil and biological degradation.

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Table 22: Status of Soil and Biological Degradation in Mining Districts

Mining District No. 1 1 Mining District Berbice Berbice Example of Area in District Aroaima Kwakwani Presence of Mining Active Mined-out Degree of Degradation Severe Medium Types of Degradation Comments

Vegetation/Biological Soil Degradation Water Degradation

Secondary Forest Cover observed in Kwakwani

Potaro

Mahdia

Active

Severe

Vegetation/Biological Soil Degradation Water Degradation Vegetation/Biological Soil Degradation Water Degradation Vegetation/Biological Soil Degradation Water Degradation Vegetation/Biological

Secondary Forest Cover observed in some areas

3 3

Mazaruni Mazaruni

Teperu Okuma

Active/Quar ry Active

Severe Severe

Secondary Forest Cover observed in some areas

Cuyuni

Aranka

Active

Severe

Secondary Forest Cover observed in some areas

5 5 5 5

Northwest Northwest Northwest Northwest

Soil Degradation Severe Water Degradation Potentially Vulnerable Source: Development Policy and Management Consultants Flyover Survey Table 8 (2008) Active Active

Mazawini Matthews Ridge Arakaka Aruka

Mined-out

Mild

Secondary Forest Cover observed in some areas

The flyover survey observed signs of secondary forest growth in some mining areas indicating a reduced trend towards further severe degradation. (ibid, P.53) The Consultants were however, also careful to point out current degraded areas are not likely to recover the reason being that there is little if any reclamation by miners with modern mining technologies. (ibid, P.53) Table 23 highlights the key features in the assessment of land degradation from mining in the Consultants report.

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Table 23: Land Degradation from Mining

Land Degradation Mining Extent Degree Rate Direct Causes Rank Description 3.66% of Guyanas land mass or 5.6% of the area available for mining 5 Degradation apparent; control and full rehabilitation of land is possible Positive relationship between industrys expansion and increased rate of degradation Improper waste disposal & hazardous chemicals Improper tailing storage/management Abandoned mined sites/no reclamation of excavated pits Erosion fro mining on steeply sloping lands Lack of prospecting before mining commences high level of mobility of miners Poor enforcement of mining/environmental regulations Low fee charged for environmental bonds Fragmented jurisdiction, poor inter agency collaboration and competing land use on same land use units Unregulated activities among small scale miners Productive, ecological and socio-cultural and human well-being Soil removal and loss into creeks and rivers Soil contamination & compaction water quality depletion and biological degradation/depletion Conflicts with and impacts on livelihood of local communities land-use conflicts For prevention, mitigation and rehabilitation: EMP for large and medium scale operations, capacity building, revegetation activities, and provision of technical assistance for miners, proper environmental planning, and increasing enforcements of mining regulations by GGMC.

Negligible Moderate - severe Moderately Increasing

Indirect Causes

Impacts

Response

Source: Note:

Development Policy and Management Consultants Flyover Survey, Table 10 (2008).

5

As large scale mining operations are being subjected to more stringent environmental regulations that seek to ensure reclamation, the area mined by large scale operation is not included in this estimate.

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Water Degradation High levels of water degradation have been observed in various mining districts. Sedimentation, discolouration, and alterations in the flow of streams have become quite visible in some mining areas. River-dredging has declined as the rivers have become less productive. In the land mined areas in the absence of complete removal and storage of top soils for re-use in reclamation, studies have found that the practice of washing top soils into rivers and creeks (particularly where the topography supports this practice) has led to the degradation of waterways. (ibid, P.56) Table 24 below shows the status of water degradation as reported in the Flyover Survey of the Development Policy and Management Consultants (2008). Breaches in the water turbidity regulations are reported. Direct disposal of tailings into waterways was observed. Overall, they concluded: findings from the flyover survey revealed medium to severe level of water pollution, particularly in mining districts Mazaruni, Cuyuni and North West . (ibid, P.56) Table 24: Status of Water Degradation in Mining Districts Mining Mining Example of Presence of Degree of District District Area in Mining Degradation No. District 1 Berbice Aroaima Active 1 2 3 3 4 5 5 5 5 Berbice Potaro Mazaruni Mazaruni Cuyuni Northwest Northwest Northwest Northwest Kwakwani Mahdia Teperu Okuma Aranka Mazawini Matthews Ridge Arakaka Aruka Mined-out Active Active Active Active Mined-out Active Medium Medium to Severe Severe Severe Sedimentation Discoloured waters Sedimentation Presence of plumes Discoloured waters Sedimentation Discoloured waters Sedimentation Discoloured waters

Types of Degradation -

Active Potentially Vulnerable Source: Development Policy and Management Consultants Flyover Survey, Table 8. (2008).

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It should be stressed here that the negative impacts of mining are not only significant to Guyanas freshwater ecosystems, but they also pose severe public health hazards. The increased turbidity of the water, which accompanies the practice of poor tailings management in the mines, affects downstream communities adversely. The degraded water quality conveys water-borne infections/diseases, provides breeding grounds for infectious insects, and more often than not conveys dangerous levels of mercury to those using water from the affected streams and the fish inhabiting them.

The Development Policy and Management Consultants have estimated the land areas that may be degraded annually by small scale miners could reach over 26 thousand Ha over the next 5 years for a total of 132 thousand Ha over the period. (See Table 25). The main drivers of degradation have been attributed to both policy-related and market-related failures. The former would include: the absence of a national land use policy and plan; regulatory weaknesses; inadequate data-management; insufficient monitoring and enforcement; inadequate inter-agency cooperation/collaboration; and population pressure, poverty and poor infrastructure in the mining areas. The latter principally includes: illdefined property rights; inequality; a failure in market valuation of the non-market benefits of land; and, the public goods dilemma in private-sector driven economic systems face the ever present potential for a tragedy of the commons. To these we could add the availability of adequate resources to the responsible public agencies as a key constraint.

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Table 25: Estimated Annual Land area Degraded from Mining in Guyana Assumption Description Total Expected Expected total degradation from Annual (Small scale) in degradation (total hectares divided by 5 years) in hectares There is an annual Each small scale average8 of 8,461 claim has a size of mining land claims 11.13 hectare 94,201.4 18,840.1

Comments

There is an annual average of 1,524 mining river claims Total estimated area degraded (land and river)

24.29 hectares

37,378.7

15,133.1

Assuming that there are no reclamation activities after mining Assuming that turbidity exceeds 50 NTU This area could be degraded if there are no reclamation of lands after mining or reduction of turbidity levels during mining

131,530

26,307.2

Source: Development Policy and Management Consultants. Table 25. (2008). Note: 8Based on the average area allocated for small scale mining claims in 2006 and 2007.

Hazardous Materials (Mercury Usage and Contamination) Mercury contamination is both a critical environmental issue and a pressing health concern in small and medium scale gold and diamond mining communities. These arise at a number of points along the mining process, including 1) the handling/storing/ distribution of mercury in the country 2) the escape of mercury fumes in uncontrolled processing environments 3) the discharge and spillage of mercury contaminated materials into waterways and 4) the use of mercury as an amalgam massaged into concentrates in order to exploit them for their gold content.

It is widely acknowledged that mercury usage is a preferred technique for miners in Guyana, largely because of 1) their accumulated knowledge of its application 2) the ease of its application and, 3) its relative cost effectiveness. While it is reported that most miners apply mercury to the concentrates collected from the mats in the jig box after the processing of the slurry in sluice boxes, unlike practice in other countries, other practices have also been observed. Thus some miners (allegedly in the main Brazilians) are said to apply mercury to the ground during water-jetting or into the slurry sump or sluice box 46

(Lowe, 2008). It is also claimed that in some instances the mercury is applied in the gold pan directly into some creeks. The negative environmental impacts of these latter practices are notorious. Lowe (2008) reports top Government officials however, are convinced that this practice is on the decline as a result of rigorous enforcement efforts. To the extent that this is in fact true, then the negative environmental and health impacts of mercury use in gold mining in Guyana would be reducing.

The technique of massaging concentrates with mercury leads to the placing of the amalgam in cotton afterwards to squeeze out the excess mercury for recycling by way of burning the amalgam in the open air. Unsuccessful efforts have been made to make the use of retorts standard at this stage. Miners have resisted retorts because it has been found to prolong the process of separating the gold from the concentrates.

There are few longitudinal scientific/systematic studies on the negative impacts of mercury usage on the environment and health in mining communities. One of these is a decade-old and was based on field surveys conducted by the Environmental Division of GGMC. The data from that survey are summarized in Table 26 below. These confirm several of the observations noted above: the limited use of retorts, discharge of hazardous material into waterways, and applying mercury to the ground.

Another study conducted by the Institute of Applied Science and Technology (IAST) (2000) sought to identify the sources of mercury contamination in two mining communities in the Mazaruni Basin so as to address them (Kurupung and Isseneru). The results show serious mercury contamination due to the mining techniques employed. The study makes the point that to the average person the health effects are not immediately discernible, but shows up in human hair and urine samples. It also shows up in food (especially fish) caught in the affected waterways.

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Table 26: Mercury use practices among miners Area of Study/Year/Number of Operations Visited Mahdia, 1998 Mahdia, 1999 Tiger Creek, 1999 Arakaka, 2000 (11 operations) (21 operations) (4 operations) (22 operations) Good (adding mercury placed in jig-box, bucket or drum with covered hands; pumping and spin-out in jig-box only; using a retort and gas mask when burning amalgam.) Satisfactory 27.3% Moderately satisfactory 18.2% 62% 50% 27.3% Marginally satisfactory 50% 27.3% Unsatisfactory (massaging concentrate with mercury in the sluice box; no jig-box; 72.7% 14% pumping and spin-out of concentrate in pond, creek or river; burning amalgam in the kitchen) Very unsatisfactory (using mercury on the ground; no jig9.1% box; burning amalgam in the kitchen) Unknown 24% 18.1% Source: Lowe Table 4. (2008). Information extracted from paper, titled Mercury use in Placer Mining in Guyana, presented by Ronald Glasgow, Mining Engineer in the Environmental Division, at Workshop on Mercury Use in the Mining Industry in Guyana, Georgetown, Guyana. May 17, 2000.

Integrating Environmental Management and GGMCs Environmental Division Two environmental challenges facing the small and medium scale gold and diamond industry, namely: integrating environmental management into standard operating practices and relations with the GGMCs Environmental Division can be considered together as they are directly and inextricably linked. While miners have legal and other compunctions for compliance with environmental practices, the development, application, monitoring and enforcement of these practices fall principally on the Environmental Division of the GGMC. Its obligations and responsibilities are to be seen in the broader context of the all-Guyana environmental management framework. The declared role of the Environmental Research and Development Department (ERDD) of the GGMC is to coordinate, promote and oversee the implementation of efficient mineral processing and environmentally sound mining technologies across the entire spectrum of the mineral industry. (GGMC, Website, 2009)

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In order to fulfil this aim the functions of the ERDD in collaboration with other departments are: The generation and development of environmental regulations, procedures, standards and guidelines The preparation and review of 1) monitoring and management programmes, 2) emergency and contingency plans, and 3) mine-site rehabilitation The development of an open database of environmental information for purposes of analysis and information-sharing The preparation of environmental strategies The promotion of public awareness and education The separate development of a database on mineral processing The conduct of R&D activities in mineral processing and environmental management

The Environmental Division of the GGMC was established in 1995. The Environmental Protection Act was passed in 1996 establishing the Environmental Protection Agency (EPA). By October 1997 a Memorandum of Understanding was reached between the two bodies and this outlines the environmental management responsibilities specific to mining, which have been delegated to the Unit, the role and responsibilities of the EPA, as well as those areas targeted for joint inter-agency action. In furtherance of inter-agency collaboration and capacity building for both organisations, the Guyana Environmental Capacity Development Mining Project was formulated for the period 1998-2004. The project had a number of goals directed at removing constraints facing environmental management in Guyana including the capacity of their respective organisations, the provision of resources (including technical), the absence of standards and guidelines in the industry, weaknesses in baseline data, the weak monitoring and enforcement capacity, and the lack of awareness, training and education of miners and their related communities/ stakeholders on environmental issues.

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After a number of training exercises for miners and staff of the two bodies, field studies, and demonstration exercises, the project had built up capacity in the two organisations and achieved a high-profile (both nationally and locally among miners and their communities). The object was to highlight the crucial importance of integrating bestpractice environmental management methods into mining operations. Of particular note, draft environmental mining regulations were completed and enacted into law (Mining Regulations 2005) as well as Codes of Practice (2003) for implementation in the areas of major environmental concern (mercury use, mine reclamation, mine discharges/waste management/tailings management, and contingency and response plans). Table 27 below reproduces Lowes (2008) summary of the respective responsibilities of the GGMC and the miners under the new environmental regulations.

Table 27: Comparative responsibilities for GGMC and miners under the new mining environmental regulations Miners GGMC Register of poisons at mine site, with separate Public Register on Cyanide Permits in records for each poisonous substance. Register to Commissions Office Inspection of registers of be open for inspection. poison at mine sites. EIA to be done by independent consultant for Participation in EIA Scoping: Review of EIA and projects that are likely to have significant EIS reports for EPA. environmental impact. Mandatory use of approved retorts, gloves and Approval and registration of mercury retorts for protective gear when burning or handling mercury Small and Medium Scale Placer mining. or amalgam by Small and Medium Scale placer miners. Creation and use of setting ponds or devices. Provision or facilitation of technical assistance and Tailings dams > 16ft/3 meters high to be inspected research. Review of engineers report on annual annually by a qualified, registered and approved inspection of tailings dams > 16ft/3 meters high. engineer. Settling ponds with < 2hrs minimum Monitoring and regulation of settling ponds and water residence time storage to discharge. discharge limits. Discharges to be within effluent limits. Application for Cyanide Permit for Large, Medium Issuance, suspension, cancellation, transfer and and Small Scale Operations. Satisfactory monitoring and regulation of Cyanide Permits. completion of the questionnaire provided by GGMC Questionnaire for Small Scale Miners (individually by Small Miners shall fulfil the requirements. or as a syndicate) to be provided by the Commission. Completion of the questionnaire shall fulfil the requirements. Training on the proper use of mercury and cyanide. Approval of curricula and provision of training and certification of Miners (together with EPA, Mining Associations, and Educational training Institutions). Progressive rehabilitation and restoration of the Provision or facilitation of technical assistance and environment. research. Backfilling placer mines, where applicable; sealing Monitoring and Inspection. shafts at closed mines. Stripping and stocking topsoil; restoration of water Provision or facilitation of technical assistance and courses. research.

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Environmental Bond or Reclamation Fee/Bond

For large and medium Scale operations, rehabilitation of sites when these works are judge as unsatisfactory to the Commissioner. Approval of restoration and issuance of formal discharge by the Commissioners. Provision of form within 3 months of passing of the regulations, to be filled out by the operator to satisfy this requirement.

Restoration of area by Small Scale Miners.

Preparation and submission of reclamation and closure plans by all holders of existing prospecting and mining licenses and permits (large and medium scales) within 3 months of passing of regulations, for approval by GGMC. Within one year of passing of regulations, submission to GGMC of Environmental Management Plan (EMP) for 3 5 years, including requirements of Codes of Practice. EMP to be updated annually or as required by GGMC. Submission of Contingency and emergency response plans to the Commissioners for approval, within 2 years, by holders of prospecting and mining licenses and permits. Informing employees and independent contractors about such plans. Environmental effects monitoring plans to be submitted to GGMC for all large and medium scale mines, including new mines, for approval as part of the EMP two years after the passing of the regulations. Environmental effects monitoring to be conducted for all large and medium scale mines, three years after the passing of the regulations. -

Publication or approval of Codes of Practice for Environmental Mining for Small, Medium and Large Scale Mining within 18 months after the passing of the regulations. Annual or periodic review, approval, monitoring and regulation of EMPs. Codes of practice above to include contingency and emergency response plans. Approval of contingency and emergency response plans for large and medium scale operations. Monitoring contingency emergency response plans for cyanide operations. Approval of Environmental effects monitoring plans for Large and medium Scale mines. Collection and compilation of background data to facilitate Environmental Effects monitoring commencing three years after the passing of the regulations.

Determination of number of dredges permitted to mine in any area affected by tailings discharge. Determination of acceptable turbidity levels at affected communities. No mining in Protected areas. Enforce prohibition of mining in Protected areas. Inspection of environmentally damaged areas prior Inspection by the Commissioner or duly appointed to commencement of mining. officer. Cost to be met equally by application and GGMC. Proper disposal of petroleum products, poisonous Code of Practice to include waste management and substances and hazardous waste. disposal. Monitoring and regulation of waste disposal. Source: Karen Livan, Environmental Division, GGMC as summarized in Lowe Table 10. (2008).

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Recommendations (Section 5) Arising from discussions on matters raised in this Section of the report, there are a number of issues challenging the GGDMA, which provide the basis for the main Recommendations for this Section. Among the most important are: 1. The need to pursue clarity on the scientific basis of the several environmental issues which have been raised. 2. The formulation of environmental requirements should be in clear, transparent, and unambiguous language. 3. For purposes of effective regulation, it is necessary for non-discriminatory and non-discretionary application of all environmental rules and standards so as to avoid charges now being made of conflict of interest or bias on the part of the Regulators. 4. A clear mechanism for resolving conflicts of interpretation and/or challenges to the regulations/requirements and rulings should accompany this. 5. In particular, a clearly stated and well-defined appeals procedure, which meets the standards of due process should always be part of any regulatory mechanism. 6. Similarly, the penalty and enforcement mechanism should be transparent, and objective. It should deal openly and even-handedly with those who are in noncompliance. 7. The promotion of education, know-how, and awareness of miners of both the pros and cons of environmental regulations remains a clear priority at this time.

Of course a major concern to miners arising from these efforts to incorporate environmental management as standard practice into mining operations will be their impact on costs. Regrettably, I have not found evidence of any studies of mining operations which engage a with/without analysis of mining regulations in terms of private or social (national) costs and benefits. It has been reported to me that the recent Mining Regulations still remain unsettled. This it is suggested may be due to the absence of such items as testing equipment and detailed scientific specifications of the materials which should be used in small and medium scale gold and diamond mining operations.

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Other concerns of miners on environmental issues will be addressed in the next Section (6). This will serve as both an extension of this discussion as well as a prelude to our consideration of the LCDS and LCDS-related issues pertinent to the small and medium scale gold and diamond mining industry.

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Section 6: Public Exchanges on the Environment and the Low Carbon Development Strategy (LCDS)
Recent Exchanges In this Section I examine the public exchanges (dialogue) on environmental issues as they concern the small and medium-scale gold and diamond mining industry and matters pertinent to the LCDS.

In a Conference Paper, the Manager of the Environmental Division of the GGMC, Karen Livan (2000) had listed several environmental dangers and risks associated with small and medium scale gold and diamond mining, including: deforestation mercury use dangerous open pit mine faces stagnant flooded pits becoming a location for vector borne diseases discharge of materials into streams and waterways leading to siltation and ground water contamination in communicates downstream She further pointed out that in the face of these environmental issues, miners likewise face challenges. Chief among those she listed are: shortage of skills lack of knowledge and experience in environmental management the additional cost compliance with environmental requirements entail pressures from other stakeholders and competing land users in the mining areas with different regimes of environmental requirements

In these circumstances she noted that the principal regulatory agencies (GGMC and the EPA) also faced serious challenges in being able to monitor and regulate the industry. Included in the challenges she identified were several that we have already referred to in the previous Section, namely: Standardization of regulations and procedures Capacity building [including human and technical (equipment) capability]

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 Research and development (R&D)

Written in 2000 that paper continues to frame the main outlines of the dialogue between miners, the regulators (including the government), stakeholders, competing land users, and the local and international environmental communities. With the launch of the lowcarbon development strategy (LCDS), this dialogue has been broadened to include LCDS and LCDS-related concerns.

Many cautions have been expressed by past and present officials and members of the GGDMA to the effect that the present intense interest in environmental standards in the small and medium scale gold and diamond mining sector is driven by concerns stemming from the LCDS. Some have been reported in the media as expressing the belief that if the present situation is not handled well, as many as 80 to 90 percent of the present miners in the sector may have to leave because mining could become very unprofitable for them. There is no clear statement as to whether this void would be permanent, and if not, who will replace these miners in the future.

The environmental concerns most often raised in the current exchanges on the topic are: 1. The role of compulsory exploration and the acquisition of economic assay results before mining permits are issued. 2. The banning and substitution of mercury-using mining techniques. 3. The systematic re-vegetation of mined out areas. 4. The reduction in the number of flooded pits as they encourage vector-borne diseases in mining and surrounding communities. Faced with miners apprehension the President has sought to give assurances that the LCDS has not been designed with the intent of crowding-out small and medium scale gold and diamond mining. As reported in Stabroek News (August 17, 2009) the President had said: Moving our national economy into a low-deforestation, low-carbon path does not mean stopping all activities in our forest. He then goes on to say

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mining and forestry will continue but they will have to be done to standards that are compatible with our international obligations and our low-carbon development vision. (ibid)

In the same issue of Stabroek News (August 17, 2009) the Prime Minister is also reported as saying that with or without the LCDS, small miners should change their mindset and become more formalized in their activities so as to meet existing environmental standards in the industry.

The GGMC has been reported as being more direct. Reporting on a speech to miners by the Manager of its Mines Division, earlier in June at Mahdia, Stabroek News attributes him as stating the GGMC will not allow them to cut down trees when they arent sure that there was gold underneath it. In other words he made clear: the alternatives to proper exploration prior to mining is no mining. (ibid) The Stabroek News also cited from a GGMC document in their possession Implications for Guyana in response to climate change for the small and medium scale diamond mining sector, which states: It is expected that it will be compulsory for all medium scale operators, that is mechanized operations typically using excavators and/or dredges that evacuate or process between 200-1000 cubic metres of materials per day, to conduct exploration before they are allowed to start mining. (ibid)

Pertinently, this definition of medium scale mining operations for this environmental requirement can also apply to small scale claims.

It is worth noting that the Prime Minister who carries mining in his portfolio has stated that stepped up efforts on the environmental concerns in the sector are only accidentally timed with the LCDS. They are, as he has emphatically stated needed in their own right.

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The gold and diamond mining community has been vigorous in its public responses. A selection of these is reported on below.

Mr Affonso is reported as stating that while he supports the LCDS if the regulations requiring an exploration programme and economic assay results before miners are allowed to continue to mine or cut down trees are applied that as many as 80 percent of the miners would be forced out of the industry. Only the very large miners will remain because of the excessive costs of complying with these regulations. Stabroek News (August 17, 2009)

Mr Pereira has also indicated the belief that a very high percentage of miners would be crowded-out of the industry (90 percent) if environmental management costs rise exponentially. He has identified the financing of drilling equipment for exploration as being a particularly critical financing cost for small scale miners. Mr Pereira has also put forward a number of practical proposals aimed at resolving the existing conundrum. These will be considered after noting the observations of the Executive Director of the GGDMA, who has also made a number of proposals.

Of particular note is the issue concerning exploration and economic assay results, the Executive Director Mr Shields has stated the association is not aware of such a rule in any existing mining regulation and has not been made aware if it is to be included in any proposed mining regulation. (Stabroek News August 17, 2009). He has also stated that the GGDMA has not been advised of any specific area targeted to be closed for pollution. Or, for that matter, no specific technique identified to replace mercury use in mining.

The GGDMA has been at pains to point out officially that miners are business persons and as such their businesses are very sensitive to costs, prices and profits. As users of mercury, they themselves are also prime risks for any adverse health effects. With this in mind they are willing to cooperate in finding measured and sensible solutions to the problems the industry and the country face.

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This is a good stage to observe three very important statements made by the Executive Director of the GGDMA, especially in regard to the mercury-use concerns. The Executive Director GGDMA: 1. We have no particular attachment to mercury. Miners are no different to (sic) other people. We will go other ways as long as those ways make business sense. He further emphasised: like any other business those operators who find the sector unprofitable will go out of business. (Stabroek News, June 12, 2009) 2. Banning the use of mercury in the mining sector in Guyana could turn out to be no more than a legal development. The obvious result will be that the cost of obtaining mercury will increase because miners will continue to use mercury as long as there is no viable alternative. Any unilateral action will result in chaos in the mining industry. Further he went on and questioned whether or not the Authorities had the resources at their disposal to ensure the effective policing of a ban on mercury use. The report further goes on to point out: The reality is that if we do not, even now, have the resources to prevent delinquent miners from placing mercury in their sluice boxes, the question arises as to who will police the effective application of a ban on mercury use. (Stabroek News, September 25, 2009) 3. Drawing a distinction between mercury use in the mining sector and mercury pollution, the Executive Director, has plainly stated the GGDMA is thoroughly against what we believe is a practice among some miners to use mercury in their sluice boxes and their pits. This practice violates the mining regulations. (my italics) (Stabroek News, September 25, 2008)

Efforts have been made to draw the GGDMA into a fixed time-table for phasing out mercury use. However, GGDMA has taken the position: There cannot be a time frame because there is no objective marker as to when an acceptable alternative will materialize it can happen in a matter of months if an acceptable alternative emerges. The point is that if you ban the use of a substance that is at the core of an operation you have to have

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an appropriate substitute. Otherwise what you are in fact doing is closing down the mining sector. (Stabroek News, September 25, 2009)

The position of the GGDMA could not be clearer. Further, it has been reported that as proof of its commitment to environmentally-supportive programmes the GGDMA has recruited two environmental officers focussing on non-mercury mining methods and reclamation. And, further a manual on non-mercury methods we prepared and published coming out of the French Guiana observation tour (discussed below).

In my view this is a good position from which to start engagement with the monitoring and regulatory Authorities. Firstly, because it confirms the status of miners as business persons. This is the correct starting point for properly locating the issue, that is, in the context of business development. Second, it avoids placing the miners in artificial opposition to sound environmental requirements. Thus the GGDA has already committed against the use of mercury in sluice boxes/pits. It has also further worked cooperatively with the local and international environmental community, GGMC, and international agencies in developing environmental management capability. Recently, a joint visit was made to French Guiana to review their mining practices with a view to seeing if knowledge from there could be transferred to Guyana.

In perusing the literature on recent environmental exchanges a number of specific proposals, which should be further examined have been made from time to time. I have drawn some of these together below: 1. Some limited forest lands should be set aside for small-scale mining, in which an exploration programme is not mandatory. 2. GGMC should assist with undertaking exploration by qualified geologists and then reporting their findings in a Mining Industry Bulletin. This practice should continue until the GGDMA miners can develop as a group their own capability in geology and reconnaissance. 3. While acknowledging past efforts, there still remains considerable scope for the improvement in the training and education of miners.

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4. Seven (7) percent of Guyanas total forested area (over 1 million hectares) should be reserved for artisanal and small scale mining. As Pereira argues, most of this should be located in the wet alluvial old river bed flats where the natural re-growth of trees is fast and furious (Stabroek News September 21, 2009). It has been claimed as supporting evidence that only about one percent of the total forested area of Guyana has been mined out and that about 50 percent of this has since been completely regenerated. 5. There is a generalised call for longer phase-in periods where environmental regulations are concerned, to match the capacity of miners operating in the objectively-determined small and medium scale gold and diamond mining industry to implement these. 6. There have been calls for stepped-up efforts to regularise Brazilian miners (who are seen as the most serious of the offenders of environmental regulations). 7. The GGDMA has expressed support for state security efforts to monitor the bona fides of Brazilian miners. 8. It has however, expressed reservations about the security services capability to monitor and enforce environmental regulations more generally.

The Coordinator of the WWF Regional Goldmining Pollution Abatement Office has observed in regard to the local miners: They know that the system will evolve into something more competitive, more environmentally-accepted. It has to be like any other business where feasibility studies are done. (Stabroek News August 17, 2009)

Late last year (November 2008) members of the GGDMA in collaboration with the World Wildlife Foundation (WWF) visited French Guiana to observe more environenmtally sound methods of gold mining that rejected mercury-use(because it is legally banned there) and legally stipulated programmes for reclamation and revegetation attached to all mining permits. The operation visited was the Delfrancky mine. From reports on the visit three mercury-free mining methods were observed: 1) The

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Shaking Table 2) Centrifugal Concentrators (Knelson) and 3) Shaking Gravimetric Table (or long tom). The visit also observed the detailed procedures for reclamation activity.

Some of the key findings reported were: 1. The per unit price of the Shaking Table processing technique is too high for Guyanese small and medium scale miners because of the low yield in local mining areas. The output of miners in French Guiana is substantially higher than in Guyana. As the Executive Director of the GGDMA observes it is a case of comparing kilograms of output per period of time to ounces. Most of the mining also occurs in previously mined areas, which because of the ban on mercury use, means there is no fear of mercury contamination. 2. The Shaking Table equipment requires constant feed, supervision, electrical power. All of these would pose severe challenges in Guyanas mining environment. 3. The Centrifugal Concentrators are cheaper and similar in principle to panning methods in the local small scale mining sector. They process however, greater volumes of pay material at a faster rate than manual methods and it has an estimated 80 percent recovery rate at the first attempt, with tailings being used to enhance recovery rates. The limitations reported for this technique is that like the Shaking Table it requires a constant (pressure and volume) clean water supply. 4. The reclamation requirement is for a detailed progressive reclamation of the site during exploration. The miner has to reclaim 500m of the site before moving to another site. At the mine site visited this operation is fully mechanized and utilizes a closed circuit system, which results in no discharges of tailings into the surrounding waterways.

The Report had four basic recommendations. 1. Guyanas mining sector will need strategic transformation via the use of optimum dry-mining methods to replace conventional hydraulicking. 2. Education and training in advanced mining methods are needed.

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3. A more positive attitude and awareness towards environmental issues are also required in Guyana. 4. An improved legal framework and better enforcement than presently obtain are key essentials.

All these will affect mining costs, but these issues need to be addressed as a priority. It is in this context therefore we can conclude discussion of environmental management in the sector, by noting the direct implications for the small and medium scale gold and diamond mining industry as stated/implied in the Draft LCDS document. This will be discussed next.

Recommendations (Section 6 (1)) 1. The GGDMA should hold fast to its publicly stated positions that: i. It is supportive of introducing proven environmentally-friendly techniques, ii. Subject to their proven cost-effectiveness and further, iii. Mining is a business, and as such a programme of incentives, a time-frame for implementation, and protocol of public support should be designed to facilitate the process of business adaptation. 2. The GGDMA should continue to recognise and promote mining operations as businesses, which in fact they are, leaving the pioneering folklorish image of the porknocker as part of its glorious past as it seeks to build a new future of livelihoods for Guyanese small and artisanal miners. 3. As businesses, it needs to stress the importance of promoting business skills in the industry, at no less a level of intensity than technical and environmental skills, which are presently the leading areas of emphasis for skills development. 4. I am confident that, as business skills advance among small and medium scale miners, the importance of data-mining, R&D, innovation, adaptation and, technology transfer would be exponentially recognised as key to the industrys future. Arising from this the GGDMA should, with expert help, seek to assess the roles that dedicated public agencies like GGMC, IAST and the University of Guyana can play in the promotion of this.

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5. From reports received, best practice equipment for testing, monitoring, enforcing environmental standards are in short supply. However, no hard data could be provided on the types and specifications of equipment needs, number available, and their disposition. The GGDMA should demand the production of these. 6. Finally, several specific under-researched scientific issues have been brought to my attention. These include i) ii) iii) The scientific study of post-closure mining pits The study of barren mined out areas Trace metals analysis as part of the on-going mercury use research; as well as iv) The scientific evaluation of the relative contribution of soil erosion and amalgamation to the mercury problem in mining areas.

This list is by no means exhaustive, but such types of studies, it seems to me, should guide specific individually targeted solutions to cope with environmental concerns as they affect Amerindian communities.

The LCDS and Small and Medium Scale Gold and Diamond Mining It goes without saying that the general thrust of a development/environmental/climate change adaptation strategy such as the LCDS, which is premised on the promotion and pursuit of low-carbon economic activities and avoided deforestation as a mode of carbon sequestration would be, in principle, in strong opposition to economic activities that utilize high-carbon production techniques and also result in deforestation and forest degradation. Having observed this however, in reality practical concerns should revolve around the specific expectations of the LCDS, when placed in the specific context of the objectively established offending economic activities.

In this sub-Section the environmental concerns highlighted earlier will be examined in relation to stated positions of the LCDS in respect of the small and medium scale gold and diamond mining industry. As a preface to this examination we should recall the statement cited in the previous Section, where the President had specifically indicated, at

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the launch of Consultations on the LCDS that the LCDS is not intended to be in opposition to mining. Further to this, several other specific pledges have been subsequently expressed to a similar effect since the LCDS launch. For example: 1) If Guyana succeeds in Copenhagen the funding obtained would in part go to improve infrastructure in mining areas and lower duties on mining equipment 2) Changes in mining methods would have had to come whether or not there is the LCDS. The proposed changes are not therefore, specifically LCDS-driven and, 3) The impact so far of mining on the standing forest is limited compared to the overall size of Guyanas forest area (Kaieteur News, August 23, 2009). The Geology and Mines Commission is also reported as stating the LCDS will enhance the mining industry. It will make us sharper and better at what we do. (ibid)

I have examined closely the Draft LCDS document for guidance on these issues and found six explicit references which are directed to mining. First, the LCDS specifically states that its aim is to ensure Guyana can protect its forest and simultaneously seek a development path that maximizes the growth of low-carbon economic sectors and minimizes deforestation and high-carbon economic activity. This will not stop existing economic activities or threaten the employment of those already engaged working in the forest, providing these activities are in accordance with internationally accepted practices. (my emphasis. LCDS, P.20)

Second, this fundamental position has been further reinforced with a statement in relation to the Section on Building the Foundation for the New Economy in Phase 2 (20102012) of the LCDS. This states that Guyana will: Align all land-use policies with the LCDS most importantly forestry and mining policies. (my emphasis. LCDS, P.18)

In these two statements culled from the LCDS document, the basic thrust of the LCDS is pinpointed. Additionally, however, specific and unambiguous caveats are made in regard

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to 1) the mining process meeting international standards and 2) the full incorporation of all land-use policies affecting mining into LCDS-driven land-use policies.

A third specific reference to the mining sector is incorporated in the calculation of the Economic Value to the Nation (EVN) of the standing forests in the state forest estate (SFE). This calculation is based on the expectation of the aggressive private profit maximizing pursuit of gold mining resources in the SFE, if that were hypothetically undertaken by an economically rational deforester. Such a deforester is not concerned with preserving the standing forests in the SFE. In the economically rational deforestation path, gold resource exploitation would occur at the maximum rate consistent with the constraints of technical feasibility, market dynamics, and legal commitments. Technical feasibility would limit mining output as technical considerations including infrastructure, technology, skills, capital and enterprise would apply. Market dynamics will be largely guided by price. And, the legal commitments would run the gamut of local, regional, and international requirements and regulations.

For this process it is projected that the economically rational deforester would reduce total forest cover on average by 4.3 percent (630,000 ha) per annum. The specific outcomes in terms of gold and diamond mining would be influenced by location of the gold and diamond bearing ore and its accessibility. In the LCDS, the EVN calculation starts with the division of the countrys forest areas into 12 regions (A-L) shown in Map 2. The economically rational deforestation path is shown in Map 3. The forest area identified for gold mining and the estimated land with gold in the 12 regions are shown in Table 29 below, along with the identified gold available for extraction.

The LCDS estimates that within 30 years 9.2 million ounces of gold will be extracted from the SFE. When calculated this yields an average annual output of about 307,000 ozs. This is approximately 7 percent above the level of output achieved in 2008 and approximately two-thirds of the peak output achieved when Omai was in operation. Further, by way of comparison, it is budgeted that declared output this year could reach 300,000 tons. Total gold mined over the past 30 years is approximately 5.9 million

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ounces. This is about two-thirds of the projected output over the next 30 years. Gold mined by the small and medium scale mining sector over the past 30 years was approximately 2.5 million ounces or about 27 percent of the projected output of 9.2 million ounces. The LCDS is unclear as to whether the projected gold output is supplied by the small and medium scale sector. Certainly, the hypothetical economically rational investor focusing on profit optimization would not restrict the choice to one sector of the industry, particularly when over the past 30 years the large scale sector (Omai) had produced about 3.3 million ounces, more than one-third of the total over the past thirty years.

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Map 2: Regions of Gold & Diamond, Forested Areas & Class 1-11 Soils

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Map 3: Economically Rational Deforestation Path

To be sure however, the LCDS is not specific as to whether this projection for mining output incorporates possible large scale production in the next 30 years. With the recent advance of the Marudi project and other possible projects, the GGDMA needs to have this situation urgently clarified. On the whole the LCDS does not present a careful assessment of the future possibilities of the small and medium scale gold and diamond mining industry, through the prism of the economically rational deforester, which is at the centre of the underlying model and its logic.

Fourth, the LCDS stresses that, albeit with the development of the small and medium scale mining industry, Guyana has had: a strong track record of sustainable forestry practices, with FAO statistics demonstrating no net loss of forest cover between 1990 and 2005. (LCDS, P.39)

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To all intents and purposes therefore, the official data do not indicate anything near significant levels of deforestation and forest degradation in Guyana, even if it is claimed the mining sector is a major driver of what limited deforestation and forest degradation are occurring.

Information on deforestation and forest degradation since 2005 is patchy (See Forestry Commission, 2009). What exists does not support evidence of a major departure from the observations made by the FAO.

Fifth, the LCDS while making the consultative process open to all has specifically targeted the Mining Business Community for Consultations. It is listed as one of 8 identified groupings singled out for particular attention. (LCDS, P32)

Sixth, the LCDS speaks only to the SFE. The eventual disposition of Amerindian lands is left to the Amerindian communities.

Finally, Appendix II of the LCDS describes the model applied for estimating the EVN of mining. The procedure leads to an estimate of 9.2 million ounces of gold produced over the next 30 years. This comes from the Mineral Economics Group. Gold is the only mineral for which they could provide estimates. Other minerals are not known. Second, the model estimates that capital expenditure costs are US$74.77 per ounce based on figures obtained from small scale gold mining operations. Operating costs are similarly estimated at US$260 per ounce. Third, it is assumed that capital investments in gold mining take place over the two years prior to the commencement of mining. Fourth, the forecasted prices for gold in the model are based on estimates provided by 14 analysts. The estimated price is US$750 for this year (2009) rising to US$883 in 2010. Thereafter prices decline and in 2015 will fall to US$681. It is projected to remain constant in real terms thereafter. The forecasted price data are shown in Table 28 below. Gold output and mined areas are shown in Table 29.

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Table 28: Projected Gold Prices 2009 2018 Gold Price ($US) 2009 750 2010 883 2011 838 2012 796 2013 756 2014 717 2015* 681 2016* 681 2017* 681 2018* 681 Note: *Constant 2015 prices Source: LCDS P.56 Table 29: Projected Gold Output and Mining Area Region Land with Gold Identified Gold (ounces) A 463,480 513,000 B 526,221 470,000 C D 1,338,907 4,500,000 E 34,948 592,000 F 303,378 1,297,000 G 5,747 1,748,000 H I J 30,903 48,000 K L Source: LCDS. P.56 Year

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Recommendations (Section 6 (2)) 1. The main recommendation I would make is that the GGDMA seeks to ensure the unclarities identified here in the Draft LCDS Document in relation to the role of the small and medium scale gold and diamond mining sector in the operations of the hypothetical economically rational deforester are removed in the Final Document. Under-projection of this sectors growth directly reduces its share in the contribution to Economic Value to the Nation (EVN) and therefore any potential claim to benefits flowing to Guyanas SFE if preserved as a result of committed payments to Guyana from the international community.

2. This recommendation should be read in conjunction with those made in regard to the previous sub-Section where the public exchanges on environmental issues were considered.

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Section 7: Amerindian Communities and Mining in Guyana

Impacts The major studies of the impacts on Amerindian communities of mining in Guyana have treated with the entire mining sector and its regulations and practices, leaving it to be inferred that the small and medium scale gold and diamond mining sub-sector is no different, and perhaps worse. This however, is yet to be determined, given the dramatic impacts of large scale gold mining (Omai) and bauxite. These studies have also focused on the social, health, environmental, and human rights effects. The issues which they raise are far ranging and this baseline/scoping study cannot treat with all of these. Instead, the study will concentrate on highlighting some of the key observations made in these studies.

A good starting point is Lowe (2008) who sees the main social effects of mining on the Amerindian communities as stemming from: 1. Disruption of the traditional Amerindian way-of-life 2. The clash of cultures and economic interests created by the juxtaposition of mining areas to Amerindian communities 3. Directly linked to 2 above is what he terms as the cavalier approach to life typical of hinterland mining camps, and 4. The perceived and actual wealth of miners. This attracts deviant social types to mining areas, particularly commercial sex workers and criminals

Arising from his study he has identified several impacts, including: Promoting stratification in basically communal-structured Amerindian communities Changes in consumption patterns and expectations among Amerindians The exodus of Amerindian males from villages to mining camps in search of employment Increased political and social consciousness in Amerindian communities

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 Following on the above greater Amerindian demands in regards to their legal, political and human rights, and finally The emergence of serious health and social pathologies: HIV/AIDS and STDs; and crime and violence

The International Human Rights Program, Harvard (2007) also identified a number of human rights and environmental abuses in Amerindian communities. The Programme attributed much of this to structural impediments including: 1) The preponderance of Amerindians living in hinterland areas where most of the gold mining takes place 2) 3) What they have described as the prevalence of corruption Five leading large scale environmental and health effects of mining [sedimentation in the waterways; mercury pollution; alteration of river beds and sand bars; deforestation and land degradation; and, vector borne infestation (malaria)] 4) 5) 6) Weaknesses in the legal and property rights regime Weak legal and regulatory design and enforcement and Too many politically driven divisions.

The Report stresses the importance of Guyanas obligations under international law, pointing out: Guyanas action and inaction in the field of mining constitute possible violations of the rights of its citizens in general and its indigenous inhabitants in particular under international treaty law.

The report (2007) ends up with fourteen (14) recommendations to the Government of Guyana and six (6) to the international community. Its assessment of the situation is stated in the very first paragraph of the Executive Summary: This report documents the failure of Guyanese mining regulations to prevent severe human rights abuses and devastating damage to the natural environment and the communities in which Amerindians live. Analysis of

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mining laws and regulations, administrative structures established to oversee mining activities, and the way small and medium scale mining operations are conducted in Guyanas interior demonstrate that the laws leave large gaps in regulation, deprive people of critical rights over the lands they occupy, and misallocate resources and responsibilities. Weaknesses in the Guyanese political and judicial systems as well as resource constraints and geographical difficulties further tilt the playing field against effective regulation of mining. Gu yanas continued neglect of the serious human rights issues surrounding mining activities gives rise to violations of international law, including the special human rights protections owed to Amerindian communities as indigenous peoples. This report proposes a series of reforms that Guyana can and should implement to protect the rights of Amerindians, preserve its natural resources, and meet its international legal obligations. (Harvard Law School 2007, P.IV of the Executive Summary)

Recommendations 1. These Reports and others (Colchester, M. et al. 2002) raise a number of fundamental issues, for which the GGMA does not have the scope, coverage or authority to satisfactorily resolve through its own efforts. There are many other stakeholders in these issues and my principal recommendation would be to work towards the promotion of a Stakeholders Forum that would be inclusive of all, including those not traditionally considered in relation to small and medium scale gold and diamond mining: jewellers, eco-tourism, non-timber forest products (NTFP) producers, as well as interested organisations and citizens to consider this issue as well as to develop a designated policy document for the sector, as earlier recommended.

2. The specific studies mentioned in the Recommendations of Section 6 (1) should target Amerindian communities as priority.

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Section 8: Concluding Remarks

After a short introduction, this scoping study examines 1) the performance 2) organisation and operations 3) legal and regulatory framework 4) environmental concerns 5) the possible impact of the low-carbon development strategy and, 6) relations between surrounding Amerindian Communities and the small and medium scale gold and diamond mining sub-sector. As indicated, a principal aim of the study is to contribute to the design of future scientific and in-depth studies, which are needed to guide 1) the positions advanced on behalf of the GGDMA and its members and 2) the transparent design of a Policy Document for the industry.

The study has established, beyond doubt, both the strong performance and the indispensable contributions of the sub-sector to Guyana's economy. By any measure, the sub-sector is clearly, "too big to be allowed to fail". By 2010 it is expected that, spurred by rising prices for gold in the world market, the sub-sector will be incentivised to declare production in the region of 300,000 ounces of gold. This output as we saw, is close to that projected for the "hypothetical rational economic deforester" seeking to maximize private benefit at the uncaring expense of the standing forests. Contrarily, however, such a level of gold output has not, by the LCDS' own admission, led to any significant deforestation or forest degradation in the standing forest estate (SFE) of Guyana. Further, no indication has been given in the LCDS as to the relative contributions expected for the large, as against the small and medium scale businesses to the indicated output of the rational deforester.

By 2010 I expect, with the growing pressures on the other main exporting sectors and in particular the residual effects of the global crisis, the small and medium scale gold and diamond sector could be contributing about one-third to Guyanas total export earnings. Over the six-year period 2004-2008, export earnings from the sector were in excess of one billion US dollars (US$1 billion). Value-added by the sub-sector was already 7.4 of Guyana current GDP in 2008, with a projected growth of 9.7 percent for 2008. The subsectors share in current GDP could therefore, well rise to 8 percent or more by 2010. In addition, the GGMC data provided in Section 2 indicate that a six percent change in

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declared output from the sector led to a 20 percent change in expected employment a ratio of 1:3.3. Applying this ratio to a declared output of 300,000 ounces annually, yields an increase in output of approximately 15 percent and therefore of projected employment of 49 percent. This seems very high as it assumes a constant function of output to employment. Assuming that function is halved, the suggested increase in output is still quite significant.

The small and medium scale gold and diamond mining sub-sector also has numerous strong backward and forward linkages. As shown in this Report, its inputs place a substantial demand on the domestic supply of air services; river transport; basic infrastructure (roads, bridges, water control networks); basic social services (health, education and welfare); communications (postal, packaging and telephone); security and protection (a raft of retail services supplying food, clothing, pharmaceuticals, toiletries, entertainment); banking (finance and credit) as well as industrial suppliers of fuel, lubricants, repair, fabricating and metallurgy. It is the major supplier to the jewellery industry which as we noted is growing. The main value added to the industry comes from the fact that it is the main supplier of inputs into the jewellery industry. While the current size of this industry is not fully known, the number of establishments has been estimated at 400 operations. Many of these are small enterprises that produce and sell jewellery to individual consumers informally. Larger establishments however, exist and it appears account for the bulk of the sales by value, through the formal retail sector. Tracing the economic dimension of these linkages or the input-output structure of the industry has been identified in the study as a priority area for future research.

The industry also basically finances the operations of two major government organisations: the GGMC and the Guyana Gold Board. Over the five years 2004-2008 it has paid over G$8 billion in royalties and taxes on gold sales not to mention payments of fees, rental income, fines etc., to the GGMC.

For convenience the Schedule (3) below summarizes the key recommendations in the Report.

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Schedule 3: Summary of Key Recommendations Sections

1: Introduction

Recommendations
Raising industry profile through public awareness and education Professional/expert guided; well-targeted Make data-reporting standard, regular, timely Confine irregular studies exclusively to in-depth, science-based areas as resources permit Professionalize data acquisition, storage and dissemination Build strategic alliances with key institutions outside the industry Promote beneficial occupation/resist landlordism Actively seek resolution of the concerns over Brazilian miners Promote feasibility studies as standard industry practice Regularize calculations of costing of business operations Complete study of the input-output structure of the subsector Promote the production of a Policy Document Promote GGMC review/re-evaluation Promote electronic/computer usage Expert review of pricing and marketing relations

2: Performance

3: Organization and Operations

4: Legal and Regulatory Framework

5: Environmental Concerns

Clarifications of the science basis of environmental concerns translation of these into regulations emphasizing unambiguity and precision Support non-discrimination/non-discretionary application of regulations to avoid charges of bias or conflict of interests Conflict resolution-mechanisms plus appeals/procedure plus transparent/objective enforcement mechanisms Continue to promote education, know-how and awareness Hold fast to already committed public position on the environment Promote mining operations as businesses In light of the above, the crucial role of development of business skills Alongside this data-mining, R&D, innovation, adaptation, opportunities for technology transfer, and productivity Institutional networking in support of above Specific under-researched scientific studies to be promoted: postclosure mining pits, trace metals analysis, soil studies for mercury Seek to remove unclarities in the LCDS as they pertain to the sub-sector Direct above-mentioned under-researched scientific studies to Amerindian areas Policy Document

6: Environmental Exchange sand LCDS

7: Amerindian Communities

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Guyana Gold Board (GGB). Various Years. Annual Reports. Harrison, J.B. 1908. The Geology of the Gold Fields of British Guiana. London. Harvard Law School (International Human Rights Program). 2007. All That Glitters: Gold Mining in Guyana: The Failure of Government Oversight and the Human Rights of Amerindian Communities. Harvard University Law School Human Rights Clinic. Massachusetts. Livan, K. 2007. CIDA Sponsored GENCAPD Project (1998-2004) and WWF Sponsored Gold Mining Management Project (2004-2007): Lessons Learnt, GGMC. 2003. A Compilation of Health Effects of Methyl Mercury & Inorganic Mercury Vapour, Environmental Division, GGMC. Lowe, S. 2008. Situational Analysis of Small Scale Gold Mining in Guyana . WWF Guianas Program. April. Mars, P. 1998. Socio-Political Impact of Large Scale Gold Mining in Guyana: Resolving Tensions Between Capital and Labour. In D. Canterbury (ed). Guyanas Gold Industry. Institute of Development Studies University of Guyana. National Development Strategy, 2001-2010: A Civil Society Document. 2001. National Development Strategy for Guyana (Draft). 1996. Guyana. Office of the President, June, 2009. Transforming Guyana's Economy while Combating Climate Change (A Low-Carbon Development Strategy) Draft. Guyana Omai Gold Mines Ltd. 1997. Information Bulletins and Fact Sheets 1-4. Guyana. Ouboter, P. (et. al) 2007. Mercury Pollution in the Greenstone Belt. Final Technical Report, WWF Guianas-Guyana. Persaud, K. 2009. Mineral Property Evaluation for Small and Medium Scale Gold Miners. GGMC, (Geological Services Division). Rawana, D. 1998. Survey on Environmental and Health Impacts. In D. Canterbury (ed). Guyanas Gold Industry. Institute of Development Studies University of Guyana. Shields, H. 1998. The Gold Industry in Guyana: A Position Paper, GGDMA Swain, W.A. 1980. The Gold and Diamond Industry in Guyana. Georgetown. Thomas, Clive. 1998. Omais Gold Production in Guyana. In D. Canterbury (ed). Guyanas Gold Industry. Institute of Development Studies University of Guyana.

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United Nations Development Programme (UNDP) (n.d.) Artisanal Mining and Sustainable Livelihoods, New York. Veiga, Marcello. 1998. Artisanal Gold Mining Activities in Guyana: United Nations Industrial Development Organisation (UNIDO) World Trade Organisation (WTO). 2009. Guyana Second Trade Policy Review. Geneva. 2008. Guyana First Trade Policy Review. Geneva.

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APPENDIX I: LETTER OF TRANSMITTAL

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