Aroaima's bid for Bermine rejected Brassington proposes move to negotiations By Andrew Richards Stabroek News April 27, 2000 Head of the Privatisation Unit, Winston Brassington, has disclosed that the bid put forward by Aroaima Bauxite Company (ABC) for the Berbice Mining Enterprise (Bermine) is not acceptable based on the government's bid evaluation criteria and the privatisation process for the local industry will have to go back to the bidding table. "We have essentially closed the formal process for Linmine [Linden Mining Enterprise] and Bermine and even though we have gotten one proposal we are effectively not accepting it and so we are now able to start over," he stated. The privatisation process of the local bauxite industry has failed to attract sufficient credible bids owing to several factors. Brassington told a gathering at a second deliberative forum on the local bauxite industry yesterday at the Park Hotel that the solution to the problem was increased cooperation among interested parties and a willingness to share the risk. The two-day forum, which ends today is being hosted by the Guyana Bauxite and General Workers Union (GB&GWU), National Mining and General Workers Union and Guyana Mines, Metals and General Workers Union. Brassington said the significant merger activity occurring in the international bauxite industry was a significant factor which contributed to the failure to attract enough bids. In Bermine's case, the employees of the company together with Glencore indicated interest in the privatisation of the company. This proposal is still sitting in the bid box and will be considered at a later stage, Brassington disclosed. Giving his personal opinion, Brassington said he did not think that the process should go back to the re-tendering stage. "Given the experience we've had I think we have learnt a lot from it. We've seen the dynamics involved and I think time is of the essence." There were various options in the Privatisation White Paper and one of them was to go for direct negotiations, he said. He opined that a result could be achieved in a transparent manner without going over the entire process again. Both in the metallurgical and refractory industries on a global scale, companies are unsure of the changes taking place and small countries such as Guyana would not be treated with priority in this context, he stated. Brassington said he has observed a lack of familiarity among some consortia when working together after companies merge. This unfamiliarity makes the task of bidding on a venture more difficult. He stated that the performance of Bermine was better than that of Linmine, but noted that Bermine had prior contractual arrangements with buyers for its products. Linmine's operational performance left the company in a poor state. The company suffered from a lack of investment since the early 1990s and bauxite mining was a capital-intensive venture. The performance of Linmine could also have been a reason for the lack of credible bids, Brassington said. The Privatisation Unit head said it would be preferable for the potential lead investor in the local industry to be one which has some experience in some aspect of the industry. In relation to the workers' future, he said there was an argument that employees preferred a severance package and would then take their chances with future employment. And there was another argument that workers preferred continuity of employment, he said. A buyer mighty be concerned about having to take on the unions in this regard, together with other social issues, without the assistance of government. The employment/employee issue would have to be open and this could be an interesting aspect of the process, he stated. The mining licences which were introduced under the new Mining Act of 1989 have not been tested in relation to foreign companies investing in Guyana, he noted. ABC was the only company which came into the country since and the testing of the licences would be also interesting, he said. There was already a commitment for tax holidays and low royalties in the industry. Brassington said cost and reliability of power and shipping logistics were issues which would have to be revisited if there was to be substantial change from the current mode of business. He pointed out that the development of new products would be critical to the long-term viability of the companies, which could not survive on the limited market available for the refractory grade bauxite unless the recovery percentage was improved. The entire production line might have to be re-engineered. There was also the problem of finding outside financing. Brassington said the international investors left nothing to chance and very few investors would want to come in to inject equity into a new deal. Brassington stressed that the process must be done in an expeditious manner. "The longer the time, the more the risk increases and many deals could fall apart this way," he stated. "Closing a deal, if you've got the essential ingredients together, is best be done quickly and try to perfect everything or then you may end up losing it all." The last forum on the future of the industry was held in July, 1998. Lincoln Lewis, general secretary of the Guyana Trades Union Congress who holds the same position in the GB&GWU, posited that there had been a lot of double talk pertaining to the future of the industry. He said government spokesmen had had a pessimistic outlook for the industry, while on the other hand the administration was trying to market it for privatisation. "If it is good for people to come and buy the bauxite industry, why is it not good enough for people here to think of investing in it?" Lewis queried. He said a comprehensive document was drafted out of the last workshop and a study was conducted on the state of the industry, which recommended several options but the government did not act upon them. "We are in a better position to say where we intend to go with regard to Bermine and Linmine. Basically what we are setting out to do is to make this our last forum before putting out a final position to the companies on where we stand in the whole process," Lewis told Stabroek News yesterday.