US company granted state forest permit
- US$26M investment ahead, modern sawmill for Linden
SN, Tuesday, January 8th 2008
The government through the Guyana Forestry Commis-sion (GFC) has
granted a State Forest Exploratory Permit to American wood processing
outfit Simon and Shock Inc (SSI), after months of due diligence and
some tension between the company and the Guyana Office for Investment
(Go-Invest).
The company had indicated its earlier frustration with the lengthy
process, which had been stagnated for some months. To this, the
government said that the time was spent performing due diligence
background checks to ensure that the company had the capacity to
implement what it said it would.
The company, started by CEO Kelly Simon and Mike Shock, will set up a
sawmill in Linden with the aim of revitalising Guyana's lumber
industry. The two company executives are expected in Guyana next week
for further talks.
The company has been awarded concessions totalling 391,892 hectares in
Regions Six and Nine. SSI expects total employment to exceed 112 with
at least 85 per cent local hire ranging from senior management to
starting positions. The company plans to invest over US$26 million in
three years.
Simon said SSI has spent the last three years formulating and
implementing a new and practical approach to sawmilling in Guyana. He
said there are five other such mills: four in the US and one in Europe.
"We propose to build the sixth, and most advanced in Guyana."
President Bharrat Jagdeo announced the status of the company's permit
during his end-of-year press conference on Saturday.
Speaking from his Michigan office yesterday, Simon said there was a
breakthrough in talks with the government during the holidays. "We do
have our exploratory permit and we are setting up our mill… we want
to stress high recovery rates," he said.
The President had also mentioned at the press briefing that action had
to be taken against defaulting companies and staff attached to the GFC;
a direct reference to Barama Company Limited's situation which led to
it being fined. Jagdeo also mentioned the need for greater rigidity in
the forest sector and stressed high recovery rates. He said that there
should be standards in place to ensure higher recovery rates.
Simon said SSI hoped to achieve recovery rates upwards of 70 per cent,
twice as much as is being achieved in Guyana today. He said to achieve
such high utilisation of each log, the company is building from the
ground up, a brand new, modern sawmill, which, with the aid of computer
imagery, will be able to scan a log and calculate the number of boards
that it would yield. He said the little waste it produced would be used
to power its kiln-drying plant.
The company, which is primarily a lumber company, wants to buy timber
from other concession holders with a view to establishing long-term
supply contracts, which could be used to gain financing from foreign
banks to purchase equipment. Simon said the company would be buying
about half of its logs from other concessions.
Speaking to this newspaper yesterday, Minister of Agriculture Robert
Persaud said that after the due diligence and a comprehensive review of
the proposal, there was acceptance on the government's part. He said he
and the President met executives of the company over the Christmas
holidays to iron out the kinks.
Persaud said the company was now expected to complete an inventory and
Environmental Impact Assessment (EIA). The company also has to complete
a business plan in about three years.
"We are very impressed by the technology and the plan. [This company]
will change the landscape of the timber sector in Guyana. [But] we're
asking the company to stick to its time frame," Persaud told this
newspaper.
As a direct result of the talks with the government, the company
offered three written guarantees. Firstly that SSI would not export
logs from Guyana, since it was a lumber company and not a logging
company; secondly that SSI would build an advanced milling complex in
Linden before any logging activity took place; and thirdly, that if SSI
did not build the advanced mill in Linden in a specific time period,
all logging concessions granted to SSI by the government would be
returned uncut.
Simon said that SSI has been working in the hardwood sector in Guyana
for about ten years and the company's primary business has been in the
export of sawn hardwood lumber manufactured by local producers, into
the US and international markets. He said that for a host of reasons,
it decided that the only way to fully satisfy its current and future
customer base was to construct its own manufacturing facility in
Guyana.
Some years ago, the company began an extensive review of the hardwood
saw milling industry in Guyana and other tropical hardwood producing
countries.
Some months ago, the company and Head of Go-Invest Geoff Da Silva had
an exchange of words over the company's ability to meet its financial
obligations to the project in Guyana. Da Silva had raised doubts about
the company's financial standing.
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