Russians to the rescue?
However, a possible ‘tin’ lining exists for a long-term contract at increased volumes albeit at the same depressed prices. On a recent visit by Stabroek News to the company’s various Berbice river operations, AMC officials would not disclose the company with which they are negotiating but said that it was a long-term contract involving increased volumes, which could offer economies of scale. The price being offered is not very attractive but if AMC could get concessions from its contractors it could yet pull it off. Plans are afoot to meet with the buyers and the contractors to see if a mutually beneficial arrangement could be arrived at.

Then there is a stronger possibility of a strategic alliance with RUSAL, the Russian aluminum conglomerate which plans to increase its aluminum production from 3M tonnes to 4.5M tonnes a year. The recent visit by a team from RUSAL could be part of its efforts to identify a secure source of bauxite ore. The planned increase in its aluminum production could make RUSAL the largest producer of aluminum in the world. The strategic alliance with RUSAL could involve the injection of capital to set up a smelter. This would solve a number of problems for AMC even though the local industry’s cost of production remains high.

Costs still too high
AMC is now comprised of its original mine site at Aroaima; the mine site at Kwakwani that was operated by Bermine; and the processing plant at Everton that was also operated by Bermine.

Aroaima and Kwakwani are 130 and 140 miles respectively up the Berbice river and are relatively inaccessible to the ships which transport bauxite overseas. Everton is nearer the mouth of the Berbice river and can load smaller ships. In fact ships are ‘bottom loaded’ at Everton and then topped off at the loading basin, operated by Viceroy Shipping at the mouth of the Berbice river and to which the ore is barged out by JP Knight, another contractor.

The overburden at Aroaima is on average about 80 feet and at Kwakwani it is about 55 feet but Kwakwani has the disadvantage of its ore being located in some cases as much as 12 miles inland.

At Aroaima, the seam of bauxite ore is about 20 feet thick and of variable quality. At Kwakwani the seam is on average 14 feet thick and is not homogenous in quality. According to Aubrey Abbensetts, a local manager, you could find in one seam the high grade, high priced Chemical Grade Bauxite (CGB); the Metal Grade Bauxite (MAZ), the price of which is rock bottom at the moment and is used to produce alumina; and the High Silica Grade bauxite that is used in the cement industry.

In Papua New Guinea, the overburden is not more than 6 inches and even though the quality is not as good, this is outweighed by the significant difference in mining costs to expose the ore face and the low cost of production because of the greater volumes that can be produced.

At Kwakwani the operations are yet to be put fully on the twenty-four hour, seven days a week footing employed at Aroaima. However, the workers there look forward to it because of the boost it would give to their earnings.

If the RUSAL investment is realised then production would have to be stepped up not only to supply the smelter but also AMC’s other customers.

What also gives AMC hope is the belief that the market has nowhere to go but up once the global economy picks up. So its philosophy is to keep on producing while keeping close control on its costs so that it is in the right position to benefit from the expected upturn.

Cost cutting evangelism
In line with this philosophy, AMC has introduced a number of cost-saving measures, which the management team of mainly local personnel are implementing with near evangelical vigour under their ‘pastor’ general manager, Morris Stuart. Local managers told Stabroek News they and the other workers now know what it costs to produce a tonne of bauxite and know significantly more about the company’s operations than they did under the Reynolds/Alcoa management.

Stuart is committed to running an operation free of government subventions.

An Australian, he has brought a new management philosophy to a company formerly managed by Americans, who at the time that Alcoa walked away, numbered around twenty-three.

He is also confident that the local managers can do the job and is willing to give them every opportunity, since they seem interested in learning everything about the operations. One of the mangers who knows about the operations at Linmine, where Stuart had worked, told Stabroek News that there the local managers, mostly university graduates, were not interested in learning anything. Whether by design or not, the number of graduates who are managers at Aroaima and Kwakwani could be counted on one hand. Stuart does not see this as a disadvantage as what they lack in academic qualifications they more than compensate for by their on-the-job experience.

Stuart has just two other expatriates with him: Ian McMaster, the Special Projects Manager and Chris Gilmour, Technical Support Superintendent - both Australian with a wealth of practical experience in their individual fields. Together with Stuart, their leadership style has injected a new sense of confidence in the middle level managers and workers, who have taken to the new methods and procedures like ducks to water.

The new management has been in place just after the beginning of the year, following Alcoa’s decision to sell its shares in the company to the Guyana government for US$1 at the end of 2002. The Guyana government and Alcoa were joint venture partners in the Aroaima Bauxite Company.

220 redundant employees rehired
AMC has some 686 employees including those at the mine sites and at its Georgetown head office in Carmichael street. Of these, 220 are former employees of Bermine at Kwakwani and Everton who were rehired after they were made redundant when AMC was given responsibility for managing the operations at Kwakwani and Everton. When the merger was announced, Prime Minister Sam Hinds said that about 120 of the retrenched workers would be re-employed. But when Stuart came aboard he saw that the model that was envisaged could not work and he was able to rehire about 100 more workers. Most of those workers were those in the clerical grades and were paid by the hour. They now enjoy the higher pay Aroaima workers enjoy. Of the three companies, Bermine was the lowest paid and industry sources say that was one of the reasons why they went against their union’s advice and accepted the severance package offered by the government.

Aroaima is a 24 hour hours 7 days a week operation all year round. Employees work 12 hours a day, seven days a week for 15 days and then they enjoy a five-day break which they can spend on site or can be transported free of cost to Linden. AMC provides housing, including some basic furnishings for married workers, free electricity, free water which is drinkable straight from the tap, free schooling for the workers’ children up to the secondary level, subsidised cooking gas and free medical services which are also available to the surrounding riverain communities. A medex is on site and a doctor visits every fortnight. Floyd Carmichael, who was promoted to his present position with the exodus of the expatriate managers, told Stabroek News that in between the visits of the doctor anyone whom the medex determines should be seen by the doctor is immediately transported to Georgetown hospital, irrespective of whether the person is an employee or a resident from the surrounding communities.

The provision of the social benefits at Aroaima, including the 60-mile access road from Linden which is also used by other companies in the area, costs AMC more than US$2M a year. At Kwakwani, where the bauxite workers are a minority in the estimated 5000-person community, Abbensetts told Stabroek News that the government provides a subvention towards the water and electricity his operations supplies to the town free of cost. The subvention, this newspaper understands, is not nearly enough given that the company now has a pole replacement exercise to ensure the reliability of its distribution system. It is not helped too, Stabroek News was told, by the unregularised building that is taking place and the government’s lack of a coherent approach to this problem. Kwakwani is a company town like Linden and like its Demerara River counterpart is depressed.

The operation at Kwakwani is on a five-day a week footing, with mining taking place 24 hours a day.

Abbensetts says that the reduction of the workforce to half of what it was under Bermine has compelled him to fit his resources to the available equipment, which is a much more efficient arrangement. He explains that workers are no longer expected to do just one task and as a result there has been a marked reduction in the number of workers waiting around for something to do.

He said too that the new operational arrangements involve the standardisation of the operation’s heavy equipment. In use before the take over, were British and Italian trucks, Italian tractors and Caterpillar backhoes and other earthmoving equipment. The arrangements are for standardising the equipment which should allow for their improved maintenance and availability.

Maintenance is key to equipment availability
The reduced manpower also brought changes in the maintenance operations, with the repairs to the Caterpillar trucks being undertaken by MACORP and routine maintenance being undertaken by mechanics in its repair shop.

This contrasts with the workshop operations at Aroaima, where almost all repairs except for the most sophisticated engines are done on site. Gilmour told Stabroek News that with the computerisation of the workshop and with added equipment all repairs would be done on site by the end of the year.

Compton Haynes, one of three general superintendents under Gilmour, said that the workshop’s mechanics, welders and machinists, take care of all engineering needs on site including repairs to bulldozers, backhoes, graders and loaders, generating sets and excavators, which up close are towering pieces of machinery but when seen from the top of the huge mine look like toy trucks.

Gilmour said the workshop’s ability to do the repairs on site is a tremendous saving to the company. It is one of Stuart’s innovations, as under the Reynolds/Alcoa management 90 per cent of the maintenance repairs were done off-site.

Another innovation is the planned maintenance, which Gilmour said allowed for 85 per cent equipment availability, despite the age of the equipment, some pieces of which have been 13 or more years in operation.

He praised the workers’ commitment to implementing the maintenance programmes, which involve addressing problems early. “Repairing small problems before they get large is basically good preventative maintenance.” Another contributory factor, Haynes said, is the increased use of the planning unit which is responsible for ensuring all the parts are available for the planned repairs to a piece of equipment. Gilmour’s credo is that “Good planning is the start of a good preventative maintenance programme.”

The warehouse run by Brian London, another of the local managers, provides critical support to the workshop. The warehouse, London said, provides optimum support to the workshop and stocks US$6.8M in spares. London said that the goal is to reduce the inventory to the point where it does not hurt the operation. “Modern day warehousing techniques involves the storing of items, including the `insurance items’, that could maintain the operations for about two months.” London defines insurance items as those which if unavailable could shut down the plant.

This he said would mean that the capital tied up in spare parts could be released for use in other areas. Under the Reynolds/Alcoa management, because of its deep pockets, the warehouse had a large stock of slow-moving parts.

“Now the warehouse operations are leaner and more efficient and better for the company’s bottom line.”

London, as a result of the merger, is responsible for procurement for Kwakwani and Everton as well but the day-to-day operations of the warehouses at those locations are the responsibility of the individual Operations Managers.

Planned maintenance is also a feature of the drying plant, which Philmore Cambridge runs. The plant dries the mined ore to ensure the required moisture content is achieved - for metal grade it is 10 per cent and for the CGB it is 5 per cent. It dries about 1.4M tonnes of bauxite a year.

The drying plant works 24 hours a day and is down for 5-6 days every six months for planned maintenance. Cambridge said that this was a change from Reynolds/Alcoa management, the attitude of which was “if it ain’t broke don’t fix it.” Cambridge said that this resulted in breakdowns at the most inconvenient times.

McMaster who is in charge of setting up a US$300,000 unloading facility for ore barged from Kwakwani for drying at Aroaima has 28 years experience of working on fixed plants and conveyors in places Papua New Guinea, Chile and Indonesia, but still defers to Cambridge’s intimate knowledge of the local plant. Cambridge’s knowledge has been gained in the ten years he has been working at Aroaima and he has come through the ranks so to speak. He is another of the managers to whom the departure of the expatriates has been a blessing, as he was one of the local employees promoted.

The unloading facility, due to be operational by June 1, includes a bin, which was lying unused at Everton.

A surprising feature in the plant’s operation is its contribution to ensuring a clean environment. One innovation is the use of waste oil from the workshops, which is blended with the fuel used in the burner.

Another feature is the facility, which allows the bauxite dust to be trapped in a tailings pond where it settles and the water wends its way to a creek in a serpentine manner and does not pollute the water used by residents in the riverain communities.

Dennis Chung, the mining manager at Aroaima said regular tests of the water quality are conducted to ensure no pollution is taking place. Chung said too that some effort is being made at filling in the areas already mined. The same is being done at Kwakwani.

Chung said that under Stuart’s management, chemical blasting of the hard cap of the bauxite ore has been introduced so as to reduce the toll on the excavators, something not done under Reynolds/Alcoa.

Chung said because of the depth to which they have to go to mine the bauxite, water is always a challenge and has to be constantly pumped out. Abbensetts has the same problem at Kwakwani, which he says is aggravated during the raining season. There is no tailing pond at Kwakwani but the lack of it does create an additional environmental problem.