Govt's hold on “Block 37” could cut off US$46M bauxite deal -- OBMI
February 12 is deadline for response
Kaieteur News
February 3, 2007
The Canadian firm, IAMGOLD, which recently sold its shares in Omai Bauxite Mining Inc (OBMI) to BOSAI Minerals for US$46 million, yesterday urged an amicable resolution regarding the Block 37 property, which has a large bauxite reserve.
President Bharrat Jagdeo, prior to his departure for Russia on a three-day visit to sell Guyana to the Russian investors, stated the administration's intention to ensure that any company granted the assets contained in Block 37 would not sit on the bauxite deposits or mine the reserves in a manner inimical to the interests of Guyana.
On December 22, IAMGOLD, which bought Cambior, notified the Government that it had entered into a conditional share and purchase agreement with BOSAI, through which the Chinese company would acquire 70 percent interest and shares of OBMI. Government holds the remaining 30 per cent.
The deal with BOSAI is subject to the conditions of the shareholders agreement between Cambior, the National Industrial and Commercial Investments Limited (NICIL) and OBMI.
NICIL represents the Government's 30 percent stake in OBMI.
OBMI said, yesterday, that it has a valid Prospecting License (PL) to the property, and warned that Block 37 is an integral part of the Shareholders Agreement between Cambior and NICIL, and is part of the share purchase agreement with BOSAI.
In a press statement, OBMI said that it has complied with its obligations regarding Block 37, and noted that Cambior had relinquished to the government rights held for two other properties at Bamia-Moblissa and Tiger Jump.
BOSAI had previously stated its intention to fully utilise Block 37 in accord with its obligations under the PL.
According to OBMI, the transaction with BOSAI was entered into in good faith.
IAMGOLD is looking forward to the Government, through NICIL, to either waive its right of first refusal and consent to the purchase of OBMI by BOSAI, or exercising that right by matching the offer received from BOSAI, the release stated.
NICIL is required, under the Shareholders Agreement, to either exercise its right of first refusal or elect to purchase the offered shares within 30 days of the receipt of notice of the conditional share purchase agreement, or to waive this right.
Since IAMGOLD gave notice, on December 22, 2006, a formal response should have been submitted by January 22.
However, Government has contended that NICIL has not been provided with sufficient information to allow it to arrive at a considered decision, and all parties have agreed to extend the deadline to February 12.
Opposition Leader Robert Corbin, during the debate on a Motion to discuss the sale, had warned of the implications of allowing BOSAI, which has had to compete with calcined bauxite produced here by OBMI, to control the large deposits.
He warned that the Chinese could choose to minimise production here, or shut down the operations entirely to allow their bauxite to dominate the global market.
IAMGOLD, while still operating as Cambior, informed the Government, in June last year, of its intention to dispose of its interest in OBMI because of the substantial losses it incurred.
OBMI said it acquired a financially troubled operation at Linden , but subsequently invested some US$70 million in plant and working capital in its operation, which continues to incur operational losses.
It is estimated that when the sale to BOSAI is concluded, IAMGOLD will still record a loss in excess of US$30 million after the assumption and transfer of OBMI's outstanding debts, according to the press release.
OBMI said that the Government and NICIL were kept fully informed of the worldwide search conducted by the investment bank of BMO Capital Markets for an investor ready to continue the operations of OBMI.
It said that the Government and NICIL were also fully aware of the negotiations with the Chinese firm, and had access to the same information that was made available to companies to facilitate due diligence in the bidding process.