Gold and Diamonds

Gold and Diamonds

The bauxite sector attracted foreign investment in the late 1980s because companies knew about Guyana's vast reserves and the country's previously formidable production capacity. Gold mining, in contrast, attracted more speculative investment from companies eager to explore the country's neglected potential. Gold production peaked in 1894 at 4,400 kilograms per year but declined to an officially declared level of 160 kilograms per year in 1983. Declared production averaged 500 kilograms per year during the late 1980s, but undeclared production was thought to be five times as high: an estimated 3,000 kilograms of gold were being extracted each year. Individual miners working in southern Guyana smuggled most of the gold they found to Brazil to avoid paying taxes and to avoid receiving Guyana's low official price, which was based on an artificially high exchange rate.

Lured by the prospect of a 1990s gold boom, at least ten foreign companies began operations or preliminary explorations within Guyana in the late 1980s. They brought with them industrial equipment, such as powerful suction dredges, that could extract up to 500 grams of gold from a riverbed in a twelve-hour shift. Three of the largest companies were Canada's Golden Star Resources and Placer Dome, and Brazil's Paranapanema. Others included Australia's Giant Resources, Homestake Mining of the United States, and Britain's Robertson Group. The Guyana Geology and Mines Commission hosted potential investors' visits to the country, and the government promised to pay the market value for gold (US$356 per ounce in May 1991) in United States dollars. The government's promise achieved measurable results in 1990: during the first half of the year, declarations increased by 75 percent over the previous year.

Even if only a few of the proposed foreign investments reached their expected output levels, the government projected that Guyana would still be producing over 6,000 kilograms of gold per year (presumably officially declared by the foreign companies) by the mid-1990s. Paranapanema, drawing on experience in Brazil's tropical terrain, expected to produce 1,500 kilograms per year at its Tassawini joint venture on the northwest Barama River. In the Mahdia region on the Essequibo River, Placer Dome and Golden Star Resources reported that an operation capable of producing 2,000 kilograms per year was probably possible; the companies planned a feasibility study before actually starting operations.

Information on diamond production in Guyana was sketchy because the bulk of the mineral was reportedly smuggled out of the country. Declared production fluctuated between 4,000 and 12,000 carats per year in the 1980s. Undeclared production was probably much higher. In 1966, the industry produced about 92,000 carats, 60 percent of which were reported as gem quality.

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