By Patrick Denny
Stabroek News
May 30, 2001

Prime Sam Hinds last night confirmed that the government was in favour of the proposal to consolidate the bauxite mining operations of Aroaima and the Berbice Mining Enterprise (Bermine).

He told Stabroek News that the half a loaf possible with the proposal was better than no loaf at all.

Hinds said he expected that the committee set up by President Bharrat Jagdeo and PNC REFORM Leader, Desmond Hoyte, on the future of the bauxite industry would share its view that the proposal by Aroaima's parent company, Alcoa, offered an opportunity to change the history of the bauxite operations in Guyana. Alcoa acquired Reynolds Mining which had negotiated the mining agreement with the Hoyte administration in 1989.

If the committee did not share its view of the Alcoa proposal, Hinds said, he would expect it to recommend an alternative, which in totality offered a better opportunity for the sustained vitality of the Bermine operations.

Hinds explained to Stabroek News that the combined operations offered the best opportunity for the Berbice operations to make a sustainable and decent profit.

Hinds said that he would be travelling to Aroaima, Everton and Kwakwani to put the government's view to the bauxite workers and the communities at the weekend. The proposal would mean the closure of the operations at Everton, resulting in the loss of 270 jobs.

The committee also plans to visit these locations to get the views of the workers on the Alcoa proposal and their own thoughts on what should be done. It has also contacted three Guyanese experts P.Q. DeFreitas, Joe Barrow and Sylvester Carmichael to help develop criteria against which to assess the various options.

Hinds said that the operation at Everton was a drain on the public purse and the workers there never had the satisfaction of participating in an enterprise which had some major accomplishments.

Contending that the Everton workers would be out of jobs that gave them no satisfaction, Prime Minister Hinds said the workers needed to focus on getting new jobs and getting into the new economy. He said the jobs, which they had to orient themselves to finding, should be the well-paying ones that would come on stream with the current world economy.

Commenting on the observation that the government might have been acting in bad faith in setting up the committee when it already had a position on the Alcoa proposal and had already indicated its acceptance in general, Hinds said that it had not.

He said that the Alcoa proposal had been on the table since 1997 and in January the company had carried out a due diligence exercise at Bermine. Hinds said that since 1983 a number of investors had looked at the Bermine operations and said thanks but no thanks. These investors he said included US Steel, Kaiser Aluminum, Reynolds, Alcan, Billiton, Hydro Aluminium of Norway and Glencore.

Hinds contended too that the government's acceptance of the proposal was a recognition that the "people in bauxite had been having a hard time because of the high overburden, shipping costs and the market operations." He said that the government wanted to give the bauxite workers a less difficult challenge and greater chance at achieving success as what they have been engaged in during the years was "the destruction of people and capital".

Explaining what he said was a misconception about the 1989 agreement, the Prime Minister explained that the US$5 million the government and Reynolds had initially put up was insufficient to fund the start up of bauxite operations. As a result, he said, Reynolds had advanced the company US$60 million on which interest at around eight per cent had to be paid and the debt retired to some level before dividends could have been paid. He said that Aroaima had been making a profit from which the interest on the advance was being paid and a small amount of the advance whittled down.

He said that additionally, US$15 million had been invested in establishing the Deep Water Shipping Facility, which allowed for the shipment of bauxite in larger ships.

The Prime Minister posited that with the consolidation of the operations of Aroaima and Bermine the remainder of the advance and the investment in the shipping facility could be converted to equity, with Bermine being assigned a value to allow a US$60 million stake by each side.

This would mean that the interest payment and the payment on the capital would now be reflected as income which could justify a purchase value of some US$20 million to US$30 million. The Prime Minister said that the agreement would give the government first refusal at Alcoa's writing off of the remainder of the advance that could have a value of about US$10 million to US$15 million, in his opinion, on the US$60 million investment.

Hinds said that the write-off would give a boost to the company to make it profitable.

He said too that the combined operations would generate synergies in the movement of ore from Kwakwani and Aroaima to the deep water shipping facility, as well as high production levels.