Guyana, the former British Guiana, was given independence in 1966, and has since had a democratically elected government. Guyana is the only English-speaking country on the South American continent, but is considered a Caribbean nation, being a member of the Caribbean Community (Caricom - https://caricom.org/country_profiles/guyana). Caricom established the Caribbean Basin Trade Partnership Act (CBTPA) – an extension of the 1983 Caribbean Basin Initiative (CBI), which gives Guyana-based companies preferential access to the US market. Caricom is headquartered in Georgetown, the capital of Guyana.
Guyana continues with the legacy of British law and business practices. The country has a modest population of 800,000, however, as a consequence of steady emigration, especially beginning in the 1970s, approximately only half of Guyanese now live within the borders of Guyana, with the remainder scattered in diaspora communities across the globe, with a focus on the U.S., Canada and the U.K.
Guyana has a long history of mining – with Omai representing the largest gold operation in their history. The discovery of offshore oil in 2015 has significantly improved Guyana’s economic prospects for the future. A 2022 study by energy intelligence group Rystad Energy finds Guyanese oil production growing at such a rapid pace that it will surpass production levels in other big offshore basins, including the U.S., Norway and Mexico, by 2035 to become the world’s 4th-largest offshore producer. Rystad reports that Guyana has been the global leader for new discoveries since 2015, with 11.2 billion barrels of oil equivalent, which amounts to 18% of total global discoveries and 32% of discovered oil.1
Guyana has been identified as one of the fastest growing economies in the world. According to the IMF (Sept 27, 2022)2, “Oil production in Guyana has increased significantly. Oil GDP is expected to grow over 100 percent in 2022, and by about 30 percent on average per year during 2023-26. Oil production has the potential to transform profoundly Guyana’s economy (overall real GDP growth rate is projected to be 57.8 percent in 2022). Guyana’s commercially recoverable petroleum reserves is expected to reach over 11 billion barrels, one of the highest levels per capita in the world. This could help Guyana build up substantial fiscal and external buffers to absorb shocks while addressing infrastructure gaps and human development needs.”
According to estimates by the World Bank and International Monetary Fund (IMF), the English-speaking nation bordering Brazil, Venezuela and Suriname could see GDP growth of close to 100% at the end of 2023, compared with end-2021 figures, thanks to the growth expected this year and next. Guyana has already outpaced global growth averages. In 2020, with the economies of the world collapsed due to the coronavirus outbreak, Guyana’s GDP grew by 43.5%, and in 2021 by 19.9%.3
1 Forbes July 28, 2022 “New Oil Power Guyana On Pace To Surpass U.S. Offshore By 2035”
3 (Guyana Poised to Post World’s Highest GDP Growth, November 11, 2022) https://www.bloomberglinea.com/english/guyana-poised-to-post-worlds-highest-gdp-growth/
Mining in Guyana
Guyana has a long history of mining, predominantly for gold, bauxite and diamonds. Gold represented 8.8% of Guyana’s economic output in 2021.* The geology of Guyana is dominated by the mineral-rich Guiana Shield, a Paleoproterozoic greenstone belt already demonstrated to be prolific in gold deposits.
When the Omai gold mine was in production (1993-2005) it was South America’s largest primary gold producer, averaging over 300,000 ounces per annum. The Omai mine was owned and operated by Cambior Inc. which was acquired by Iamgold Corporation in late 2006.
Guyana’s government is enthusiastic about mine development for job creation and additional infrastructure it will bring to the interior -- and keen for Omai to re-open the mine, which employed more than 1,000 people during the years of production.
Guyana is an under-explored region for a number of reasons. Much of the country is covered by dense rainforest with minimal and difficult access to the interior. This is combined with the fact that there is a deep weathering of the bedrock that forms a thick “saprolite” cover that over the bedrock, making mineral exploration more difficult.
*Source: Mining Market in Guyana by Canadian Trade Commissioner Service
Guyana Mineral Tenure (Guyana Mining Act of 1989) - Summary
The ownership of all minerals within the Republic of Guyana is vested in the State of Guyana. Correspondingly, the owners of surface title whose rights are governed by the State Lands Act (Chapter 61-01) have no mineral rights.
The Guyana Mining Act of 1989 ("Act"), and the regulations made under the Act (“Regulations”) empower and define the duties of the Minister responsible for mining ("Minister") and the Guyana Geology and Mines Commission ("GGMC") to carry out the objects of the Act and Regulations including the grant mineral title and supervising the conduct of mining and prospecting operations. The Act and Regulations also govern the rights, obligations and restrictions imposed upon those granted mineral title. The Minister and GGMC enforce the procedures to be followed in the grant and regulation of all mineral title in Guyana. At the present time the Minister responsible for mining is the Minister of Natural Resources and the Environment.
The types of mineral title granted under the Act that are relevant to the Company’s current operations are as follows:
- Prospecting permits for small scale operations which grant the holder of the permit the right to carry out prospecting operations (which is defined as operations carried for or in connection with exploration for any mineral) and locate and mark out claim licences;
- Claim licences which grant the claim holder the right to carry out small scale mining operations;
- Prospecting permits for medium scale operations which grant the holder of the permit the right to carry out prospecting operations and may be converted into mining permits for medium scale mining operations;
- Mining permits for medium scale operations which grant the holder of the permit the right to carry out medium scale mining operations;
- Prospecting licences which grant the licencee the right to carry out prospecting operations and may be converted into mining licences for large scale mining operations;
- Mining licences which grant the licencee the right to carry out large scale mining operations; and
- Permission for geological and geophysical survey (“PGGS”) which grant the holder the right to conduct geological and geophysical surveys over a larger area of land than a prospecting licence.
The first four types of titles can only be granted to and held by Guyanese citizens or companies whose shareholders are exclusively Guyanese citizens. The last three types of titles may be granted to either foreign or Guyanese citizens or entities. Despite the restrictions on foreign ownership for the first three title types, it is possible for foreign citizens and entities to enter into exclusive commercial contractual arrangements to explore, develop and mine within such tenements. The Civil Law of Guyana Act (Chapter 6-01, Section 3) determines that English Common Law applies as the common law of Guyana and accordingly all contractual commercial agreements are based on English Common Law.
The definition of small, medium and large scale operations is prescribed by the Regulations or from time to time by notice from the Minister. Currently small scale operations are considered to be operations in which less than 200 cubic metres of material is mined per day, medium scale operations in which 200 to 1,200 cubic meters of material are mined per day and large scale operations in which greater than 1,200 cubic metres of material are mined per day.
The period for which mineral titles and the conditions under which titles are granted and renewed are stipulated by the Act and are summarised as follows:
- Prospecting permits for small scale and medium scale operations are granted for one year and are essentially renewable indefinitely once application for renewal is made and prescribed fees paid to the GGMC. However, once the holder discovers a “mineral of anomalous occurrence" (a term which not defined under the Act) an application for a claim licence or mining permit must be made to the GGMC within 60 days (or such longer period as the GGMC may allow) of the discovery or the prospecting permit shall lapse.
- Claim licences for small scale operations are granted for one year and may be renewed indefinitely. However, the GGMC may not renew a claim licence if it has reasonable grounds to believe that an applicant for renewal does not intend to carry on in good faith, within the limits of their competence and resources, mining operations within the claim licence. The Act defines mining operations in broad terms as "operations carried out for or in connection with the mining of minerals".
- Mining permits for medium scale operations are granted for five years and may be renewed for successive periods of not greater than five years or the life of the mineral deposit whichever is shorter. However, the GGMC may not renew a mining permit if it has reasonable grounds to believe that an applicant for renewal does not intend to carry on in good faith, within the limits of their competence and resources, mining operations within the permit.
- Prospecting licences are granted for a period of three years and may be renewed twice for a period of one year. Grant and renewal of prospecting licences are subject to the applicant/licensee having sufficient financial and technical capacity to carry out prospecting operations, the applicant's/licensee's proposed annual prospecting operations being considered adequate by the GGMC and the applicant/licensee having made adequate provision for the employment and training of Guyanese citizens. The GGMC may also grant or renew a prospecting licence under any special circumstances that it deems adequate or warranted by exceptional circumstances.
Within 30 days of the discovery of "a mineral of anomalous occurrence" the holder of a prospecting licence must notify the GGMC of the discovery in writing and promptly undertake to quantify the mineral occurrence. Within a further 30 days after the initial discovery notice, a licensee must notify the GGMC whether or not he considers the discovery to be of commercial interest after which a licensee may at any time within one year from the notice of commercial interest apply for a mining licence. Notwithstanding the foregoing the GGMC with the Ministers approval may allow the licensee further time which the GGMC considers reasonable for the licensee to apply for a mining licence. If the licensee applies for a mining licence in line with this procedure and the application otherwise complies with the Act and Regulations the Minister must grant a mining licence to the licensee over the area applied for.
Mining licences may be granted for a period of 20 years and subsequent renewals are for periods not exceeding 7 years. Renewals may be refused if the licensee is in default of the Act or the Regulations.
An application for a mining licence requires the applicant to submit a detailed proposal for the establishment and conduct of mining operations, all supporting data and any other particulars as may be prescribed. A mining licence requires its holder to carry out development and mining operations in accordance with the forgoing detailed proposal, and duly notify the GGMC upon the commencement of production. Other particulars that are currently prescribed are:
- approval of an Environmental Impact Statement by the Guyana Environmental Protection Agency;
- the submission of an adequate mine closure plan in accordance with the Regulations;
- compliance with obligations to keep accurate production records; and
- submission of quarterly and annual reports to the GGMC on all prospecting and mining operations.
- The Minister may grant a PGGS for the purpose of geological and geophysical surveys or any other investigation in Guyana or any part of it, which the Minister considers relevant for the prospecting or mining of minerals on terms and conditions that may be negotiated between the Minister and the applicant for the PGGS.
- Typically the holder of a PGGS has the exclusive right to file applications for a number of prospecting licences (as negotiated and defined by the terms of a PGGS) located within the area of a PGGS at any time prior to the expiry of the PGGS. The granting of a time extension to a PGGS may be negotiated but the grant of such extensions is solely at the discretion of the Minister.
For all of the above types of title the mineral to be mined or prospected for must be specified by an applicant for mineral title and the title documents will state the mineral or minerals for which title is granted. Furthermore the holder of a prospecting permit or prospecting licence may in general only apply for a claim licence, mining permit of mining licence for the mineral or minerals that the preceding prospecting permit or licence had title.
Regulations defining the size of and fees payable for mineral title are prescribed by the Minister and may be varied from time to time. Currently the following fees and prescribed sizes of the various mineral titles are as follows:
- Prospecting permits for small scale operations cost US$7.50 per year and allow prospecting operations for the location of claim licences for small scale operations within any part of any one of the five mining districts in Guyana.
- Claim licences may be no larger than 800 by 1,500 feet and may not be located within other existing granted mineral title. The annual fee for claim licences is US$10.00 per licence.
- Prospecting permits for medium scale operations may be between 150 and 1,200 acres. Annual fees commence at US$0.25 per acre and increase by US$0.10 per acre upon each subsequent annual renewal.
- Mining permits for medium scale operations may be between 150 and 1,200 acres. Annual fees are US$1.00 per acre.
- Prospecting licences may be no larger than 12,800 acres. Annual fees are US$0.50 per acre during the first year, US$0.60 per acre during the second year and US$1.00 per acre for the third year and for each of year of the two subsequent renewals. The holders of prospecting licences are required to submit annual work plans and budgets for approval by the GGMC. A performance bond of 10% of each annual work budget must be posted by the licensee each year.
- Mining licences require the payment of annual fees of US$5.00 per acre. As most mining licences are granted subsequent to a prospecting licence they typically may be no larger than 12,800 acres.
Permissions for geological and geophysical survey may be of any size and fees of any amount as negotiated between the Minister and the permittee.
The payment of gross production royalties are provided for by the Act and the amount of royalty to be paid is prescribed by the Minister. As such royalties may be varied from time to time. Currently, the prescribed royalties on gold production are ad valoren of gross production sales at the following rates:
- For claim licences 5%;
- For mining permits for medium scale operations 5%;
- For mining licences 5%, however recent mineral agreements entered into stipulate a royalty of 8% if the gold price is above US$1,000 per ounce.
The Act makes broad provision for the GGMC with approval of the Minister to enter into mineral agreements with applicants for or holders of prospecting and mining licences in respect to:
- The conditions to be included in the licence as granted, applied for or renewed.
- The procedure to be followed by the GGMC while exercising any discretion conferred to it by the Act.
- Any matter incidental to or connected to a licence.
At present it is usual for two mineral agreements to be entered into. One applicable to the early stages of prospecting operations and the other prior to the grant of a mining licence or commencement of mining operations.
Such mineral agreements provide incentives, define the fiscal regime and ensure the stability of the incentives and the fiscal regime for the entire term of a prospecting licence or for a set period (currently 15 years) for a mining licence. While it is possible for provisions of a mineral agreement to be negotiated it has been the practice of the GGMC and the Minister to provide the same terms and conditions at any one time for all holders of or applicants for prospecting and mining licences.
Currently the holders of prospecting licences are granted the following incentives under mineral agreements:
- Zero rating on all customs duties, VAT and excise taxes on the purchase and importation of all equipment and supplies to be used directly in prospecting operations with the exception of food and office equipment apart from computers.
- Exemption from all excise tax on fuel used in prospecting operations.
- 10% rating on consumption tax for aviation fuel.
Currently mineral agreements entered into prior to the grant of mining licences or the commencement of mining operations grant and ensure the following incentives and fiscal regime:
- Zero rating on all customs duties, VAT and excise taxes on the purchase and importation of all equipment supplies, consumables, and spares to be used directly in mining operations.
- Exemption from all excise tax on fuel used in mining operations.
- 10% rating on consumption tax for aviation fuel.
- Consignment of the above incentives to contractors of the company who provide services directly in support of mining operations.
- Zero rating on VAT for payments to certain contractors such as drilling or mining contractors.
- Corporate tax rate of 30%.
- Exemption from withholding taxes on dividends and interest payments to the parent company or other offshore entities.
- Deductibility of royalty payments against corporate taxes.
- Offset of the cost of certain infrastructural works of general benefit to Guyana against the mineral royalty.
- Royalty of 5% if the gold price is below US$1,000 per ounce and 8% if the gold price is above US$1,000 per ounce.
- Capitalisation of prospecting costs.
- 20% straight line depreciation.
- Stability of royalties, incentives and tax rates for the term of the licence, the life of the deposit or for 15 years whichever is shorter.