A high-risk hunt for Guyanese gold


A high-risk hunt for Guyanese gold


A high-risk hunt for Guyanese gold


It is a fortuitous but unlikely business relationship forged in the pursuit of gold. The investor is Golden Star Resources Ltd., an Edmonton-based mining company with a blue-ribbon board of directors that includes Ernest Manning, a former Alberta premier who acts as the company’s special adviser, and Donald Getty, a prominent Tory leadership candidate and potential premier. The site is Guyana, an indebted South American country with mineral-rich jungles, a stagnant economy and a pressing need for foreign currency. The object of the strange union: the exploration and development of five gold mines, one of which has reserves possibly worth as much as $2.5 billion. Investors have sent Golden Star’s stock soaring, but the speculative interest is matched by criticism surrounding the operation.

If Golden Star’s highly speculative mining properties prove to be as rich as it claims, its shareholders will become millionaires. Even if only two of the company’s five properties go into production, Golden Star would become impoverished Guyana’s major foreign investor. But there are risks involved, among them questions surrounding Guyana’s political climate. Over the past two decades the Socialist government of President Forbes Burnham has earned a reputation for electoral fraud, countless human rights violations and political repression.

Human rights activists say they fear that the mining project will merely prop up a corrupt and unpopular government. Charged Alberta’s NDP leader Ray Martin: “Making a buck off a country like this is inappropriate, and it is definitely not proper for someone like Don Getty who wants to become premier of Alberta.” Last week Getty, who is a leading candidate to replace retiring Premier Peter Lougheed as Alberta Tory leader, told

Maclean's'. “I have never been there. I am just a director [of Golden Star] representing a small interest.”

Still, concerns about the stability of Guyana’s politics have not prevented Golden Star’s stock from becoming a market sensation. It issued one million shares to the public with a face value of 40 cents each in May, but the demand was so great that trading on the stock

opened at $1.10 and in two days jumped to $1.75. In June rumors about the company’s most promising mining lease, called Omai, drove the price to $6. Since then the price has stabilized at about $3 while investors wait for geological data on the property to confirm their high hopes. Said Thomas Callaghan, vicepresident of the Alberta Stock Ex-

change: “We have not seen any junior company that approximated Golden’s performance in five years,”

Stock analysts say that the company’s phenomenal success is a result of excellent timing and the credibility of its supporters. Golden Star’s stock issue corresponded with renewed interest in gold, which many analysts predict will rise from its current price of around $320 an ounce to as high as $500 within a year. Political instability in South Africa, the world’s primary gold producer, has also indirectly benefited the company, as investors search for promising gold stocks elsewhere. Meanwhile, reports about the Omai mine have mesmerized investors. It was previously explored by the mining giant The Anaconda Co. of Colorado in the 1940s, but was abandoned because gold was then valued at an unprofitable $35 an ounce. Said one knowledgeable stock market official, who requested anonymity: “The potential is there for the mine to be the largest gold-bearing deposit in the world.”

Within the western Canadian business community, the company’s executives are known as “the football club.” President David Fennell, a successful Edmonton lawyer who owns oneeighth of the company, earned the nickname “Dr. Death” when he played as a defensive lineman for the Edmonton Eskimos of the Canaz dian Football League I from 1974 to 1983. Getty, who owns five per cent of the firm through his Edmonton oil company, Nortek Energy Corp., was a quarterback for the Eskimos from 1955 to 1964. And the co-owner of the Guyana claims, a mineral development company called Inter-Oceanic Resources Ltd., of Vancouver, is headed by Neal Beaumont, a former defensive back for another CFL team, the B.C. Lions.

Golden Star’s other prominent directors are more noted for their links to

Alberta’s Tories. They include Hugh Horner, former deputy premier and trusted Lougheed aide, and James Sparrow, a director of Sparrow Industries Ltd., of Edmonton, which has extensive holdings in property and oil rigs. Sparrow’s brother Donald is Alberta’s minister of public lands and wildlife.

The company also has important connections with Guyana’s government. In fact, the venture began when University of Alberta geologist Roger Morton, the company’s secretary and treasurer and a major shareholder, received a telephone call last year from one of his former PhD students, Grantley Walrond, Guyana’s current commissioner of geology and mines. Walrond told Morton that Guyana wanted to renew its moribund mining industry and asked if he could recommend any potential investors. Morton, who had examined four properties in Guyana since 1980, convinced Fennell to form a company and assemble a board of directors.

Still, other Canadian mining company officials view the undertaking with some reserve. Declared Vancouver mining consultant Ray Saunders, who rates the majority of the company’s properties as excellent: “They are saying, ‘Hey, it looks good, but we do not like the politics in Guyana.’ ” Critics of Guyana’s governing party, the People’s National Congress, say that it represents the interests of the nation’s African minority and has dominated the country’s East Indian majority by repression and intimidation for nearly 20 years. According to political analysts, it relies on the loyalty of the police and defence forces to stay in power.

In 1982 an external affairs and defence subcommittee in Ottawa wrote a scathing indictment of Guyana. Its report described unfair elections, torture, government-sanctioned death squads and persecution of political opponents. It called Burnham’s rule an “administrative dictatorship” and recommended that Canadian aid to Guyana be reduced. Most recently, Amnesty International has cited Guyana for letting at least seven prison inmates die of malnutrition. For his part, Guyana’s Walrond has seen references to human rights violations, but he told Maclean's, “I do not know what they were about.” He said he hopes that Golden Star’s investment will signal other corporations that Guyana is open for business.

For Fennell and Morton the venture is a chance to prove their geological expertise and business acumen. Said Fennell: “We are going to have a lot of growing pains, but the future looks extremely bright.” And despite the controversy, for Golden Star’s supporters there is still the lure of a possible fortune.