Stabroek News
June 17, 2001

The joint bauxite committee last weekend presented two sets of options for the sustained viability of the Berbice Mining Enterprise (Bermine) because its members could not agree on a common set of recommendations about the proposal from Alcoa for merging the Bermine operations at Kwakwani with those of Aroaima.

The proposal would involve the immediate closure of the Everton operations and the merger of the Kwakwani and Aroaima operations. Under this arrangement the work force would be reduced over three years from 944 to 400. The company would have access to about 100 million tonnes of proven and possible reserves and would pay royalty on the ore it exported.

The government has indicated that it favours accepting this proposal but is open to considering any alternative which is practical, viable, readily implementable and would not impose a burden on the treasury.

It claims that Bermine has requested US$5.6 million as working capital and has already advanced US$1.350 million. Advances to Bermine are repaid by the company at 15 per cent interest.

Informed sources have told Stabroek News that one set of options was submitted by co-chair of the committee, Clive Thomas, together with Lance Carberry and Claude Saul who were nominated by the PNC/R.

The other set of recommendations was put up by the other co-chair, Robeson Benn, together with Odinga Lumumba, Kim Kissoon and Ron Webster, who were nominated by the government.

The two sets of options emerge from differing views as to the viability of Bermine and its prospects under the Alcoa proposal.

While the Benn group favours accepting the Alcoa proposal, the Thomas group feels that it is not a basis for serious negotiation since it is a concept paper, something which Alcoa had stated in the paper.

The Thomas group proposals

The recommendation by Dr Thomas, Carberry and Saul is that the government should reject the Alcoa proposal as being an inadequate basis for serious negotiations. They recommend that Alcoa should be so advised and that it should amend the proposal in such a way that it could constitute a basis for negotiation.

Based on the limited details provided in Alcoa's concept paper, the group says, the restructured company within the timeframe given for its establishment would incur tremendous social costs. In addition, the members maintain that the track record of ABC in Guyana is not one to inspire confidence, and a track record is an important ingredient of any decision to further engage a company. Among other things, state Thomas et al, there is no justification in Alcoa's paper for its assumption that it has the superior management pool and workforce.

While the concept paper was based on synergies, say Thomas and his colleagues, the output levels proposed there have been determined by existing scale constraints within ABC. Furthermore, Alcoa has not demonstrated satisfactorily to the committee how the indebtedness of ABC arose.

They recommend that the government should explore other options for Aroaima, which would be out of reserves in about three years, such as leasing ore-bearing lands or engaging Bermine as a producer of ore for sale to Aroaima.

They also recommend that without prejudice to its position or implication of intent the government should have a due diligence exercise conducted on Aroaima as well as obtain the due diligence exercise conducted on Bermine or have its own exercise conducted.

The group considers that the proposals made by the Bermine Group of Employees and Centrotrade Minerals and Metals (CTMM) are grounds for serious negotiations without prejudice to any other proposal it might receive at a later date.

It is of the view too that there should be set criteria by which the various proposals would be evaluated thus ensuring transparency and accountability.

The Benn group proposals

Benn and his colleagues have put up an extensive set of recommendations in relation to the Alcoa proposal and for the operations at Everton and Kwakwani.

They recommend acceptance in principle of Alcoa's proposal to synergistically merge the Aroaima and Kwakwani operations.

Further they say that the Government and Alcoa should commission a study to assess the size of the market, and the amount and valuation of reserves to which Aroaima would gain access.

They also recommend that only after the negotiations with Alcoa have been concluded should it initiate any others.

Benn and group propose that the restructured company be only granted ore reserves that would ensure operations for a minimum of 15 years on which royalty and harbour dues must be paid when exported. The company must also be required to pay corporation tax.

The group also considers that the liabilities of the Bermine operation and the loans and government grants should be accounted for in any new arrangements.

It suggests that under the new arrangements to be negotiated with Alcoa, the combined operations should mine, transport and deliver 350,000 tonnes of bauxite annually, at competitive rates to the Everton site, for the production of abrasive A grade and chemical grade bauxite and alum.

Also they say that in the event of the sale of the renegotiated operations to a third party, which it must approve, the government must retain no less than 17 per cent of its shares. Of this amount 10 per cent should be held in a Community Development Stimulus Fund, which fund should be jointly administered by the government, union and communities for the seeding of commercial activities in the communities.

With regard to the operations at Everton which would be closed down immediately under the Alcoa proposal, Benn and group recommend that the Bermine Employee Group in association with CTMM should be allowed to acquire, finance and operate the Everton facility for the production of abrasive A grade bauxite and alum as well as any other bauxite based chemical with the exception of alumina.

They recommend too that the production of chemical grade bauxite should be limited to 80,000 tonnes per year.

The Everton site should be opened up and expanded to include general cargo trade and appropriate fiscal incentives should be given to stimulate new activities at Everton.

Workers made redundant should be enrolled in a Retraining Skills Conversion Programme funded with stipends by government to allow entry into agriculture, trades and "new economy" activities.

In their view, Berbice bauxite, with Ituni-Kamaka-bra laterite, landed at Everton probably holds the current best arrangement for a bauxite-alumina project with annual production of 400,000 tonnes of alumina and Trinidad (or Guyana) oil.

In relation to Kwakwani, Benn and his colleagues suggest that government should stimulate economic activity at Kwakwani by rehabilitating the infrastructure, particularly the roads and other routes to the forested and agriculture areas.

The establishment of a Kwakwani Community Deve-lopment Stimulus Fund as well as facilitating the establishment of kiln drying facilities for export lumber and manufacture of knockdown wooden furniture for export is recommended.

Bermine is wholly owned by the Guyana government but receives no subvention from the government. It pays royalty on the ore its exports as well as taxes. It has made a profit in six of the ten years but as a result of the losses in the four years when it did not make a profit, its losses over the ten years from 1991 are US$3.74 million. It that period it shipped 4.215 million tonnes of ore earning revenues of US$138.31 million.

The Guyana government and Alcoa jointly own Aroaima. Its ore reserves will run out in three years according to Alcoa.

Aroaima has made a loss every year from 1997 and under its expatriate management racked up a debt of US$57 million and losses over the ten-year period of US$7.62 million. During the ten years it has been in existence it has shipped some 16.37 million tonnes of bauxite on which it paid no royalties, taxes or dividends to government as a shareholder on the US$17.913 million profits it earned during the first five years.