Editorial
To anyone reading the comment by P.Q. de Freitas Inc on Alcoa's concept paper proposing a restructuring of the Berbice Mining Enterprise (Bermine) and the Aroaima Bauxite Company (Aroaima) it is clear that the government should not accept any deal based on that concept or any close variant of it. The financial results of the operations of Aroaima from l99l to 2000, during which time it was managed exclusively by Reynolds, now a subsidiary of Alcoa, are so disappointing that at the very least one would require the most detailed independent scrutiny of those accounts before proceeding further.
Stabroek News
July 19, 2001
Here are some facts. The company sold l6.4 million metric tons of bauxite in the period l99l - 2000 for about US $435 million. It paid no royalties, customs dues, port fees or income tax but had an accumulated loss of US$7.62 million. After making profits for five years, it suffered losses in every year from l996-2000 when production was at its highest. It also ended up with a reported debt of US $57 million to Reynolds. Though the government had two directors on the board it seems to have known little of the financing, operating and marketing details of the company. It may not even have known the amount of Reynolds annual management fee, de Freitas suggests.
In the final analysis l6.4 million tons of bauxite valued at US $435 million have been exported and the benefits obtained were about 500 jobs, mainly low paid, and the dredging of the river.
The essence of the merger concept submitted by Alcoa is that Bermine close its Everton operations and hand over the 8l million metric tons of bauxite deposits at Kwakwani and other selected operating assets there to Aroaima, which is jointly owned by the government and Reynolds. This would enable it to produce about 2 million metric tons a year which would satisfy the needs of Reynolds and the customers taken over from Bermine. Reynolds would have complete control of management of the merged operations. Reynolds would capitalise its debt of US$57 million and government's investment in the new, merged company would be the bauxite deposits and assets at Kwakwani. Alcoa valued these deposits at US $0.60 per metric ton in situ. Reynolds and government would own 50% each of the merged operations. The workers at Everton would lose their jobs.
The joint committee investigating this `concept' and another proposal has on it people of the highest calibre like Dr Clive Thomas. Some of the issues they will consider include the likely future of the bauxite industry given potential demand for aluminium from the aircraft and automobile industries and the cost of production. They have so far not been able to secure a meeting with Alcoa which is essential to enable them to ask questions on the Aroaima accounts and generally to examine the Alcoa `concept' paper in much more detail before they can consider the matter properly. As P.Q. de Freitas Inc put it, with an old, inefficient plant, a shortage of mining equipment and a lack of adequate technical and management skills Bermine apparently produced better financial results.
Does the ratio of overburden to bauxite in these sites make the production of bauxite a marginal operation given the very heavy oil costs? Does hydropower provide a realistic alternative? And of course it must be recognised that to Alcoa as a fully integrated operation the losses suffered by Aroaima in the production of bauxite may not matter, given the significant added value in the process of producing aluminium. There is much for the committee to ponder on and their report will be awaited with interest. Clearly the industry has been under pressure for several years and a joint venture partner is badly needed but that would not justify making another Aroaima type deal where the country earns little or nothing for its bauxite.