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Giving confidence to Guyana's mining sector

Interview - December 17, 2014

Troy Resources is operating on almost every continent in the world, but Ken Nilsson thinks Guyana is where everyone should be paying attention to


What is the best way to deal with illegal mining?

The best way to deal with that in my opinion is to make it legal. It may be difficult but that is the only way to try to control it. It is quite interesting that we have talked to a lot of people and we have done a lot deals with various land owners and when we talk to people across the board they don’t understand that we are not alluvial miners; we are in fact only interested in hard rock mining. The Country has a long history of alluvial mining and it is clear that the public perception is that mining is synonymous with alluvial mining.

From what I have seen this country has massive potential, the problem here is that there has been a big brain drain for a number of reasons and there has been drain in terms of private capital from what I understand. We have a small country with a large landmass and a low tax base ie a small population hence communication and road network maintenance become very difficult which is also partly due to the high rainfall. Guyana needs to attract foreign money to help, which I see the Government is doing, because the current economy in Guyana does not generate enough in taxes to support the required work to maintain and grow the infrastructure. This is what people need to understand, no part of the world that I know of, except maybe for Canada and the US have been able to actually develop a mineral industry without influx of monetary capital from other parts of the world. A good example of differences is Argentina & Australia in 1955, their economies were similar while Argentina is now a long way behind Australia simply because of the difference in politics with Australia allowing influx of capital to drive and develop the mineral industry.

Our industry is good for any country in the sense that we create lots of jobs, which can also generate high incomes. Generally projects are in remote regions, which means that anyone who can work there normally gets paid more than you would get anywhere else. So people working in the industry would normally be ahead of the person who receive a normal city based income. So he receives more income and since he spends most of his time in the interior it mean he is slowly building up / saving some money. So he can in time buy a car or a new house which helps to grow the secondary industry by demands for more goods, more services and so on. The flow-on effect can be phenomenal if people can grasp the opportunity and the whole idea because flow-on affects depend mainly on the value of goods and services that can be sourced in Country.  Poor supplier base and lack of services diminishes the potential flow-on effect, which can reach 4-5 times the annual expenditure on goods and services by the Company. This is major amount of money that becomes available in the Economy if the support structure is there. For me is a big and important factor in what we do.

 The educational standard in Guyana is by all accounts reasonable, particularly from an academic point of view which sometimes is well above other SA Countries.

I believe one of Troy Resources’ commitments to doing business in the economy is to employ as many locals as possible?

Almost all our employees are local Guyanese. We have a small group of specialists that came in yesterday and it’s not that we cannot find them here; it is more a question of quantity. The idea for us is always to train locals. The is the way that we tackled it in Argentina & Brazil, we brought specialists to train locals so now in Argentina and Brazil we only employ locals and have a minimum of expats. This has always been my philosophy; I use local resources as much as I can for a number of reasons. One being, we need the people to accept us as part of their daily life and be a part of their economy. As guests in their country, as a Company we can’t get involved politics since that is not our role and we still have a lot to learn. To date we have been happy in Guyana because the people here are quite nice and generally all are cooperating and willing to help. Of course there are other elements in this like all other societies. At the end of the day people are generally satisfied and the people working for us are happy and the morale is high, this is noteworthy particularly since they are living in the middle of the jungle while we are building the operation and a new camp with conditions not always being ideal.

I believe you’ve also locally sourced around 1.1 billion Guyanese dollars of equipment from Farm Supplies, which I think this is one of the reasons Minister Persaud has recommended Troy Resources because of the sustainable, long term oriented practices of your operations.

That’s the whole idea; we have a very simple philosophy. If we come into any country, we look at their way of living and what they have. If they are not better off when we leave, then we have failed. You have to assist the Government and local industry as much as possible because it is in our interest to see the service sector grow. It is not a big deal doing it, you just have to make sure you stay away from the giveaways and make people become part of the investment / development. For example in Argentina we spend a lot of money in the community, we do this every year, but what we do is; when Government or groups ask for help in terms of fixed assets, we will buy the materials and give it to them on the condition that they use it as required and thus it becomes a shared project/investment.

So you are doing similar projects here in Guyana like social and environmental?

Yes! The only difference here is that because of the remoteness, we don’t have any nearby communities. We have only one Amerindian village. We have built a number of roads which are used by the public and also embarked on a major road upgrade / maintenance program in conjunction with the Government where we spent and are continuing to spend a reasonable amount on money on the Linden to Omai Road . We have built up our project infrastructure and constructed a registered airstrip. According to bush pilots it is the best one in Guyana. Quite a lot of medical assistance is given to local miners through our project medical team.

Given your vast experience in the mining sector from Mongolia to Brazil, what would you say are the competitive advantages of Guyana? I mean you could be anywhere in the world right now setting up a mining operation, why Guyana?

First reason was that there was a company in Guyana that looked like it had a really good project and they did not have a lot of money. So basically they needed to marry a company that could come and do what they could not. We had several project under review; in Mexico. Peru and in Argentine but the reason we picked this one was that the marriage between these two companies looked very logical and there was no real cash involved plus it was in a good jurisdiction; the deal was achieved by a share swap.

The reason we chose Guyana is also that we built up a good reputation in Brazil and in Argentina, particularly dealing with people and the environment. In Argentina we are have an ISO 14000E accreditation which is an Environmental international standard requiring very stringent operating practices and reporting.  We as part of our plan will be working towards achieving this in Guyana as well, it is very difficult to achieve and generally takes a couple years. We also adhere to the international Cyanide code. In Brazil and Argentina we have the reputation of staying on the straight and narrow.

Minister Persaud has stated that the extractive sectors “activities aren’t only about production and producing more, but we have strong social and environmental responsibilities.” I know one of the reasons Minister Persaud wanted us to meet with you is because Troy is implementing such practices, can you outline some of these for us?

That’s the corporate culture of ours in focusing on things that can make a difference, like in education and helping where we can make a difference. We are taking this quite a long way, for example we have people here in the university who we are sponsoring and we have the first group working on site. We are also training engineers and geologists; that is just part of our role. We are working with Technical institutions to start probably the only kind of training facility in the Caribbean for heavy earth moving machine operators and technicians. These are not cheap activities but we do it in partnerships. We do not however want to be seen as a handout facility but that people take up their part of responsibility; if they fail then that is up to them.

What are your expectations in terms of the timelines?

One of the tough tasks that we started is the work with the Amerindian village perhaps cutting through the hand out mentality which becomes the case in any country. It is difficult in the sense that they have been used to no or simple work plus they have problems as well like, communication, road access and health because of dietary issues. The government has provided a medical outpost and modern school buildings at this community and in the future linking our systems with theirs should have major benefits. The interesting thing is that we had a site discussion with the community and they came up with a big list of things they wanted us to give them. I asked them what they could do for us in return and they said they could work. We stopped the general discussion at the level and sat down to discuss  how to make things work. Since they are only 30 km from our project we could see the possibility of them becoming supplier of some products like eggs, vegetables and so on. We have thus set up a small internal program to plan this and get experts to assist in setting up a small commercial enterprise. I believe this can work starting small and as time goes on we and they will all learn how to help grow their independence.

We have said that we cannot do much to work at the moment but what we can do is try to get it set up and once the project is up and running they would become part of suppliers. We have a few of them working for us now. We treat all employees like family and we hang out together; that’s the ultimate for us.

Mr. Nilsson, you are a bit of a legend in the mining sector for being able to complete difficult projects under budget and even ahead of schedule. What are your secrets? How do you achieve this?

There are no secrets really. I guess it’s more of how I was brought up with my father’s input. I don’t have any ambitions about status and being important so I talk to everybody and am comfortable at any level and if someone comes up with a good idea, we use it.

It’s also the presence on projects, the fact that if you are managing remote then you are never going be close to what is happening and also having the attitude that everybody probably know more than you helps. Operating remotely you rely on consultants and people who may have a completely different agenda. So a lot of cost saving can be made by having an open mind and looking at alternatives and when we started in Brazil. I looked around and recognized that there was an old plant in Australia which could be used and modified work at a smaller project and it had been sitting there idle for many years, so I bought it at a very cheap price and shipped it to Brazil. Nobody had ever done that before in Brazil.

You shipped the whole plant?

Yeah the whole plant. We hired a big ship and did all that

So it is a hand-on approach?

It’s very much a hands-on approach. Talking of MBAs, I have a similar kind of philosophy but I translate it to managing by walking around; by being on the ground. Absolutely knowing what goes on and trying to empower people to make decisions for themselves. It is difficult with a large organization because of the hierarchy of systems but I’m a very flexible person and can do most things myself. I do a lot of the design work because there is time and I know what would work and what won’t. On the people’s side it’s more difficult, but I usually get along well with politicians, managers, business people and workers alike, at the end we are all workers; what you see is what you get. I don’t have any hidden agendas.

What is the most challenging project you have ever been a part of?

Well, they all have challenges. When we stared at Mongolia we did have an exploration company and it was challenging because of political uncertainties and the decision-making process. I had the same problem in Uzbekistan, we found a very good project that we wanted to do and we were well regarded by most of the people in government but once we had put a finger on this project and it was sent to parliament to have it transferred into our name, someone else acquired the project. Later on, I was called to a meeting by a Lawyer asking if we were interested in partnering. That was when I left Uzbekistan.  

Russia was difficult but I was not doing it for Troy, I was doing Russia for a management company we run through Troy. When I didn’t have much to do, I used to hire myself out and through a Canadian group I was asked to look into their interest in Russia. The history is incredibly interesting and probably the most interesting part of my life. It is because of the history of this particular project and I also became very involved with the government and was called to give a speech in the State Duma, (Lower House of Government) about investment in a specific project and how mining would help Russia. Then they invited me to go with a group of technical people from the parliament to travel to some areas in Siberia looking at projects and that was great. It was amazing

Given your wealth of experience globally, how can Guyana make the mining sector more competitive here? Do you see proof of improvement in the vital sectors?

The biggest issue is not the current political system and in fact in my opinion the current vison by Government in terms of investment policy is absolutely right; the problem here is largely the administrative processes in government like the public service this is far too bureaucratic compared with most other countries and there is often no clear understanding outside a narrow field. The knowledge in the technical skills is lacking; it is there but it is restricted and for example there is very little if any redundancy in the system. In other words, if someone goes on holiday or is ill there is no-one to take his role, perhaps reflecting budgetary constraints. If you go to somewhere else like Australia, you will find that there are a number engineers as opposed to only one so there is always a back-up. If someone goes on holiday here, the paperwork stays where it is until he comes back. Another factor is that in order to get a good system and productive teams you need to make sure you are able to pay salaries to attract the best.

Mining is a high-risk undertaking; you have to have reasonable terms and know how to do it. That obviously fitted this project, the perceptions of government and what we do, were fine. The only thing which may turn things upside down would be a radical change in politics; that should not happen. We came here to a viable project in a reasonably stable jurisdiction. It has English law, which we are familiar with no language barrier. Communication-wise it is not difficult, to transform the procurement and the need to get the support industry up and running has been a challenge.

I really don’t know why it is hard to find enthusiasm to sell new things, when we tried to buy our vehicles here the dealers appeared not to be interested. Eventually it sorts itself out.

I do like the people here, I find them nice and good to deal with. Of course it has the same issues as any emerging economy and there is always some undesirable elements and you need to watch where you are going.

In terms of the mining sector, where do you see the largest gaps? Is it in capital or knowledge? Do you think there is more room for partner in knowledge base and investments?

Investment is obviously key here because what is here on the ground is the easy part. Remember the country is covered with sand to a large extent. Therefore it is a high level of expenditure to look at what is underneath so you need lots of money for exploration.

In terms of administration, in general the mines departments appear under-staffed with difficulty in attracting the right people. I would personally argue that the practice of having the most senior position in any department, apart from the Minister and a permanent secretary, being a political appointee is not a good practice since with a change of Government you replace the decision makers/knowledge base. I have obviously dealt with this in Brazil and the change in Government always results in delays whilst the new managers are getting up to speed.

The biggest issue for me is to have a very clear guide on what to do to get to the end; what will happen, how much time it will take. I have seen some material here from Canada in terms of a booklet and there they expect it to take 5 years before you get a project approved in Guyana; it can’t be like that. If you are actually clear on what is needed and what has to be done and if the government is the same then all can be done quicker than that without taking short cuts in terms of the Environment and legal aspects.

The other issue in Guyana is that it is in the eyes of the world and rightly so, it has all the assets in terms of minerals, a unique environment, good agricultural land plus a ready work force. Managers in general and of course the Government are a bit nervous and cautious in terms of development of industry. This is natural and should be because the above makes Guyana unique and a fantastic place. All can be done and achieved by working together but one have to trust the industry and Government. There is an inherent problem when laws and restrictions and guidelines are imposed which can’t be completely adhered to because of lack of supporting services, monitoring systems and clear guide lines, for example we have an issue related to transport of some chemicals which needs to be done in line with international codes for us to meet our objectives. For example we are looking at transport of some dangerous goods and to do it to conform to the ISO 14001E guide lines it requires specific types of equipment and training of suppliers and service companies which at this stage is not available in Guyana. So to counter this we are training local suppliers at the moment to get the standard up to the level required. This does not mean it can’t be done safely now but it will require the additional items to be able to conform to the international standards and of course we are aiming to have this in place as soon as possible. Hopefully in time these systems and processes will be accepted as part of a National system which like in all countries takes time and effort.

You talked earlier about the sensitivity of the gold prices and how it impacts the mining sector. What are your expectations?

There is not much we can do about that. Gold like most things in the world are manipulated and also affected by supply and demand, what happens in terms of manipulation is that whoever is involved usually will make money out of it when gold goes up or down through various mechanisms. I would expect gold to rebound because particularly when we have political instability, negative movements in the US$ value and general world insecurity.

Obviously when production is less than the consumption eventually the price has to change. The one thing you cannot gauge is the whole impact on world gold supply such as scrap sales, sudden kneejerk reactions by Central banks in response to price movements or budget deficits, illegal mining and how Gold comes out secretly from other places. Guyana for me is really great place to be in terms of prospectively.

So this mine is just the start?

Yes! It is a long-term investment and that was our view, we have a very large land holding and we hope that this would be the first of our mines in Guyana and we hope to expand because we are spending a lot of funds on exploration. It is a long term investment. With short-term projects we tend to focus in areas where we have other kind of infrastructure already so new investments are easier. The other reason I’m still playing a part and my role over the last few years and pushing for this development is that we have our major operations in South America and we have an office in Toronto where our head of Explorations is so we are all in a time zone that actually makes communication and management much easier.

In this globalized world, the importance of countries to brand themselves and communicate their strengths to the international community cannot be overstated. How then would you like our American audience to perceive Guyana?

I would say that Guyana is the country that has lots of opportunities for somebody prepared. It is a bit of a pioneering country and that is how people internally see themselves. I know Americans like remembering their pioneering days; this is a perfect place to do that.