Russian mining firm RUSAL is to invest US$20M in the form of operating assets in the Berbice bauxite industry.
Through its subsidiary Bauxite and Alumina Mining Venture (BAMV) it will lease equipment to Aroaima Mining Company (AMC), thereby allowing that company to expand bauxite production from 1.3 million tonnes per annum to 2.5 million tonnes.
This is the result of the government and AMC entering yesterday into agreement with RUSAl's two subsidiaries BAMV and the Bauxite Company of Guyana Inc (BCGI).
The agreements - one for the new company's shareholdings and the other a management contract for AMC - were signed by Prime Minister Sam Hinds, RUSAL Director Roman Bolgarin, Head of the Privatisation Unit Winston Brassington and Commissioner of the Guyana Geology and Mines Commission (GGMC) Robeson Benn, among others from RUSAL and AMC. The signing took place in the conference room of the Office of the Prime Minister.
The agreement saw the creation of a joint venture to be owned 90% by BAMV and 10% by the Government of Guyana. According to Brassington, BGCI will manage AMC until that company's full privatisation some time in 2006. This is expected to open up mines in the Berbice area and be the successor to AMC in production and sale of bauxite in Berbice. The arrangements for this venture with BAMV and BCGI are expected to take effect in January 2005.
RUSAL will also be exploring in parallel pre-feasibility work to develop an alumina plant in Linden, but this process will take years and substantial investment. Any decision will not be known until completion of these studies to determine the feasibility of the venture. If the alumina venture were to be undertaken, it would represent an investment of US$1 billion.
In 2005, the total production is expected to increase to 2 million tonnes and this would go up to 2.5 million in 2006 under the BCGI management.
Prime Minister Hinds said it was a good day for bauxite in Guyana, coming off the heels of another major agreement signed last week between Cambior and the Government of Guyana for the creation of Omai Bauxite Mining Inc.
He said that with these investments, Guyana has a chance of becoming significant in the world of bauxite again, but profitability is essential for survival.
He said that Guyana's cost of production has always been to high and the industry will work to reduce it by 30%
Hinds said that the new company will enjoy the present tax regimes in place for mining and those involved in development of interior regions. He said there may be a bit of a waiver of the applicable royalties until an agreed upon date which he could not give. But he said that this waiver might be necessary to help the industry attain some measure of profitability.
He said too that investment beyond the initial US$20M would be determined based on the performance of the company and the profits yielded.