Dominican Republic - Mining

Mining

Like the economy at large, the mining industry enjoyed extraordinary growth in the 1970s, when the country's major ferronickel and doré (gold and silver nugget) operations were inaugurated. Mining's contribution to GDP rose from 1.5 percent in 1970 to 5.3 percent by 1980, where it remained in the late 1980s. Although the mining sector employed only about 1 percent of the labor force throughout this period, it became a major foreign-exchange earner, increasing from an insignificant portion of exports in 1970 to as much as 38 percent by 1980, then leveling off at approximately 34 percent in 1987. Nonetheless, mining companies struggled in the 1980s because of low international prices for the island's key minerals--gold, silver, bauxite, and nickel. In the late 1980s, the government strove to tap new resources and to strengthen export diversification by actively seeking foreign investment in mining.

Gold and silver doré, which occur naturally in the Dominican Republic, played a central role in the rapid emergence of mining. Although the Spanish mined gold on the island as early as the 1520s, gold production in the Dominican Republic was insignificant until 1975, when the private firm Rosario Dominicano opened the Pueblo Viejo mine, the largest open-pit gold mine in the Western Hemisphere. In 1979 the Dominican government, then owner of 46 percent of the shares of Rosario Dominicano, purchased the remaining equity from Rosario Resources, Inc., a New York-based company, thereby creating the largest Dominican-owned company in the country. Rosario's huge mining infrastructure, with an annual capacity of 1.7 million troy ounces of gold and silver, impelled by rapidly increasing international prices for gold, had nearly succeeded in pushing doré past sugar as the country's leading source of export revenue by 1980. From 1975 to 1980, gold and silver skyrocketed from 0 percent of exports to 27 percent. Declining prices for gold and silver during the 1980s, however, curtailed the extraordinary growth trend of the 1970s, and by 1987 doré exports represented only 17 percent of total exports (one percentage point above ferronickel exports, and one percentage point below sugar exports). Declining reserves also limited doré production. Japanese and United States companies actively explored new gold reserves on the island, but gold mining was shifting away from the search for oxide ores, supplies of which were dwindling, toward the more expensive process of exploiting sulphide ores. There were some alluvial gold deposits as well.

Ferronickel also contributed to the mining prosperity of the 1970s. From 1918 to 1956, the United States Geological Survey performed a series of mineral studies in the Dominican Republic. These studies encouraged the Canadian firm Falconbridge to undertake its own nickel testing starting at the end of that period. Falconbridge successfully opened a pilot nickel plant in 1968, and by 1972 the company had begun full-scale ferronickel mining in the town of Bonao. In the late 1980s, the Bonao ferronickel mine was the second largest in the world. Buoyed by high international prices, nickel exports rose from 11 percent of total exports in 1975 to 14 percent by 1979. Although nickel exports, as a percentage of total exports, continued to climb in the 1980s, reaching 16 percent by 1987, lower world prices for nickel and a lengthy dispute between the government and Falconbridge over tax payments hampered output throughout the decade. Unlike gold, nickel had been proven to exist in large reserves in the Dominican Republic, which meant bright prospects for mining.

The Aluminum Company of America (Alcoa) began bauxite mining in the southwest province of Barahona in 1958. Bauxite output peaked in 1974 when Alcoa surface-mined nearly 1.2 million tons; exports totaled as much as US$22 million as late as 1979. As with other minerals, however, the international recession of the early 1980s caused bauxite prices to topple, as world supply outpaced demand. Alcoa closed its Dominican bauxite operations in 1982 and its small limestone mine in 1985. The Barahona mine remained closed until 1987, when the government purchased Alcoa's facilities and recommenced bauxite mining, selling the red ore to Alcoa for processing in Suriname.

The Dominican Republic also produced varying amounts of iron, limestone, copper, gypsum, mercury, salt, sulfur, marble, onyx, travertine, and a variety of industrial minerals, mainly for the construction industry. In the late 1980s, the National Marble Company was a profitable, but outmoded, government monopoly that mined marble, onyx, and travertine for the local construction industry. Corde's Minas de Sal y Yeso extracted salt and gypsum, generally at a loss. Salt mining was primitive, and its product was destined solely for the local market. The private sector mined and exported limestone, some of which went to the United States.

The government increasingly favored greater participation by the private sector in mining, so that the state's resources might be combined with the technology and the capital of foreign firms. Mining's promoters also sought to diversify the economy's export basis and to improve its international credit worthiness. Through Decree 900 of March 1983, the Jorge government further defined and limited the role of government in mining, by providing broader incentives for private involvement. Nonetheless, the state retained exclusive rights to mine gold, gypsum, and marble. United States, Japanese, Australian, and European firms explored Dominican soils after 1987, when the government opened up areas previously closed to foreign investors.

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