No bauxite operation has been profitable in Guyana since the nationalisation of Demba
Stabroek News
October 25, 2001

Dear Editor,

Mr P.Q. DeFreitas has exhibited much that is incorrect and one sided in his letter [ please note: link provided by LOSP web site ] which appeared in Stabroek News of 2001-10-23 and earlier in the Chronicle. Please see below a response point by point in order of appearance in his letter.

1. P.QDF should know 'that a company like ABC is a corporate person and there is no question of the GoG or Guyanese being liable for or being made to pay any debt of ABC. Only ABC, not ABC shareholders are liable for debts of ABC.

2. The mechanism for write off of the debt is Preference Shares in ABC which will be sold to GoG for US$1.00 on or before 2002-12-31.

3. The Government has been insisting on a cash neutral operation of ABC and is satisfied with the arrangements made to that end. Yes there was need for a reduction in costs of production from about US$30/ton to US$20/ton. About half of this reduction comes from the effective write off of the RII debt removing about a US$5/ton provision for amortising this debt. The other half comes from reductions in payment to contractors and workers.

4. GoG is initially owner of 100% of ABC's equity shares. GoG has offered to disperse these shares to contractors and workers say quarterly in proportion to their foregoings.

5. All the speculation by PQDF of a gift to BPU - Reynolds is a wild goose chase, speculation gone wild. There is no sale of chemical grade bauxite (CGB) to BPU - Reynolds. ABC has been selling chemical grade bauxite to a special purpose company set up by RII which stores CGB and retails to customers. This company will continue to buy CGB from ABC and sel1 to its traditional customers. RII is seeking a buyer for this special purpose company.

6. PQDF's questioning about competition between bauxite producers in Guyana has been an old question with arguments on all sides. There have been charges from time to time about ABC undercutting the other companies but hard evidence has been hard to come by - in any case doesn't everyone call for an open free market and if ABC makes losses like the others, unlike the others there is no flow from the Treasury. If anything ABC has been more careful in its contracts - it does not have the Treasury to call on.

7. Concerning the value of bauxite in the ground, Mr. PQDF should be aware of the definition of ore - that which can be mined profitably. The converse is that that which cannot be mined profitably is not ore. Taken overall one can say no bauxite operation has been profitable in Guyana since the nationalisation of DEMBA - so there has been no bauxite ore. But if PQDF wants to assign a value of US$4/ton to bauxite in the ground at ABC should he not assign the same value to bauxite mined by Guymine, Linmine, Bermine and having done so should he not rework the accounts and report to the nation?

8. RII/ALCOA's management contract of ABC will end on 2001 December 3l - there is no management fee- for RII- ALCOA.

9. BPU-Reynolds is separate and distinct from RII - there is no question of BPU- Reynolds collecting RII's debt of US$60 million and as stated before this debt of ABC to RII is in effect being written off by RII.

10. The people of Guyana are not losing anything they had. To reiterate there are no Government subsidies: Neverthe-less Mr. PQDF is being invited to state clearly and accurately where the subsidies will be occurring and the linkage between the write off and the subsidies.

11. Mr. PQDF has his facts wrong: and his arguments only have the force of special pleadings: he should take the same arguments about the value of bauxite in the ground to the fully owned GoG bauxite companies since the mid seventies and then compare results. The people of Guyana are not losers in this transaction: this transaction is one of salvaging a situation until better can be done as has been and continues to be the case with GUYMINE, LINMINE, BERMINE.

12. There has been quite an effort to be open and transparent on this transaction. It may be good for the reader and Mr. PQDF to review the newspapers of the last months. Almost everything stated above has been stated before. If Mr. PQ DeFreitas has been so busy as not to notice or to read so quickly as not to understand, he can be forgiven.

Yours faithfully,

Samuel A. Hinds

Prime Minister and Minister

Responsible for the Bauxite