Despite a long history of mining activity, the Dominican Republic remains a bit-part player in the Latin American mining sector and has been left behind by regional neighbours that have put in place much more investor-friendly legislation.
Yet those familiar with the sector say the country’s potential remains high – neighbors such as Jamaica and Cuba derive substantial income from important mineral deposits – and so a key task for the Mejía government is to redraft mining laws so as to stimulate exploration and production.
“The geology indicates it is promising territory,” says Bruno Picard, Canada’s ambassador in the Dominican Republic. “But they need to modernise the legislation and create competitive conditions so it can develop,” he continues. “They must take mining seriously because I am convinced they can have as much success in the mining sector as they have had with tourism and with the free-zone sector.”
Current mining legislation provides little guaranteed protection for investors who might strike it lucky, so unsurprisingly international companies have little incentive to explore. Hugo Guiliani, the secretary of industry and commerce, agrees that the laws need to be changed. The government aims to send new legislation to congress by the end of the year, says Guiliani.
The only current development of any significance is the nickel mine and smelter owned and operated by Falconbridge of Canada, in which the government has a 10% stake. Now in its thirtieth year of operation, the mine at Bonao, 80km north of Santo Domingo, has 65 million tonnes of proven and probable 1.16% grade nickel reserves. The mine employs 1,300 workers and can produce 30,000 tonnes of nickel in ferronickel annually but has suffered periods of closure as a result of fluctuating world prices.
Most recently, Falconbridge said in August it would stop production at the mine for three months from 28 October because of market conditions and high prices for oil, which fires the company’s 200MW power plant at the site. It is estimated the shutdown will cut production by 8,000 tonnes.
Ferronickel exports were worth $237 million last year, only 4% of total exports, but still the most important of the country’s traditional, non-free zone sourced, foreign currency earners.
In July another Canadian company, Placer Dome, won the rights to negotiate a contract for the Pueblo Viejo gold and silver mine after a government bidding process. Pueblo Viejo, said to be one of the world’s biggest gold deposits, began life under a US company before being nationalised and finally closed down in 1999 when the easily exploitable reserves were exhausted. Exports of doré, a gold and silver alloy produced at Pueblo Viejo, had been worth $49m in 1996 but petered out over the subsequent two years.
The previous Fernández administration had begun but not concluded an earlier attempt to privatise the government-owned operations.
Placer Dome hopes new technology will bring the 30 million ounce open-pit mine back into profitable production for both gold and silver, but the company must first deal with sensitive environmental issues stemming from the previous operation of the mine. A contract should shortly be signed with the government.