Guyana - Mining

Mining

Guyana's mining sector offered the best hope of rapid growth in the late 1980s. The government's decision to open the sector to foreign management and investment attracted interest from companies in a number of countries, including the United States, Canada, Brazil, Norway, and Australia. Guyana was known to have sizable reserves of bauxite, gold, and diamonds. Foreign investment was expected to dramatically increase the rate at which those reserves were mined.

Gold and Diamonds

Aluminum

Guyana was known to have a 350-million-ton bauxite reserve, one of the world's highest concentrations of the valuable mineral. But production of bauxite dipped sharply after the government nationalized the industry in the 1970s. In the mid-1980s, bauxite production hovered around 1.5 million tons per year, or half the annual level of the 1960s and 1970s. The state-owned Guyana Mining Enterprise Limited (Guymine) suffered repeated losses as a result of inefficient management, declining world prices for bauxite, and prolonged strikes by workers. The losses drained the company's capital reserves and led to deterioration of plants and equipment. Guyana's single alumina plant, located in Linden, used to separate 300,000 tons per year of aluminum oxide from raw bauxite ore until the facility closed in 1982. From then on, Guyana was forced to export only unprocessed bauxite ore, foregoing the added revenues to be gained from refining the mineral.

In the 1970s, Guyana had the advantage of being the world's leading supplier of so-called calcined bauxite, a high grade of the mineral used for lining steel furnaces and other high-temperature applications. After 1981, however, China emerged as a major source of calcined bauxite, and Guyana became known as a less reliable supplier. By the end of the decade, China had displaced Guyana as the leading exporter of calcined bauxite, even though Guyana had the advantage of being closer to the major North American and European markets.

Bauxite mining was concentrated in northeast Guyana. The two largest mines were located at Linden, on the Demerara River directly south of Georgetown, and at Kwakwani on the Berbice River. There was little development of new mining areas during the period of state ownership. But in the late 1980s, the government began offering foreign companies the chance to rebuild and expand the bauxite industry.

The Reynolds Bauxite Company, formerly the owner of the mine at Kwakwani, was one of the first foreign firms allowed back into Guyana. It provided managerial assistance to Guymine beginning in 1985. In the late 1980s, Reynolds began investing an estimated US$25 million to open a bauxite mine at Aroaima on the Berbice River. An elaborate system of tugboats and barges was required to bring the bauxite 126 kilometers down the Berbice River and then 120 kilometers along the coast to Georgetown for transport to the United States. According to London's Economist Intelligence Unit, Reynolds awarded a ten-year transportation contract to GoliathKnight , an Anglo-Dutch company. The mine was expected to produce 1.5 million tons of bauxite in its first year of operation (July 1990-June 1991) and 2.6 million tons per year by 1995. Guymine was also negotiating to allow Venezuela's Venalum company to begin extracting 600,000 tons per year in the region around Kwakwani.

The government anticipated further development of the bauxite industry in the Linden area. A new mine near Linden, called the East Montgomery North Mine, was expected to open by 1994. It was to take the place of the three largely depleted pits in the area. The government sought significant foreign investment for the project; production was expected to reach 2 million tons per year in the 1990s. Norway's Norsk Hydro was discussing the possibility of reopening the alumina plant near Linden at a cost of about US$100 million. Furthermore, just as the Reynolds company was returning to the mines it had previously owned, Alcan was negotiating a return to bauxite production facilities in Linden.

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