Colombia Mining: Why has it stalled?
The Colombian government has positioned the country as an attractive destination for mining investment based on a solid economic performance, a competitive business environment and a relatively positive ranking in international mining surveys.
Junior miners have flocked to the country and large-scale international miners are involved in various stages of exploration and development. But despite this, no large-scale mining operation has entered production in almost 30 years.
Mining development in Colombia is fraught with contradictions and the tug of war between environmentalists and developers, informal miners and so-called criminal operators, and institutions with opposing ideologies looks certain to continue.
Informal and illegal mining operations, coupled with nationwide media coverage that is frankly anti-mining, have led to growing social opposition.
One of the most emblematic projects in the country is AngloGold Ashanti’s La Colosa in Tolima department. This year proved problematic for the project after the regional autonomous corporation Cortolima ordered the suspension of mining activities in the Piedras municipality. The suspension was followed by a local referendum which returned a resounding “no” to the project.
Much of the social opposition to mining is rooted in environmental concerns.
The landmark case is that of the Santurbán páramo regional park in Santander department. Up to end-2013, Minambiente had failed to define the limits of the high altitude ecosystems known as páramos in this park, putting at risk investments by miners such as Eco Oro, CB Gold and AUX, all of which are awaiting a final demarcation decision before deciding how to proceed with projects potentially located within the páramo.
Related to this issue is the slow pace of environmental permitting, which is affecting juniors and operators alike. In 2014, authorities will have to revisit the contradiction of having the national government in charge of granting exploration permits while autonomous regional corporations (CARs) have control over permits such as those for water, access and discharge.
Of the 14,300 mining operations outlined in a 2010-11 census, 63% were illegal or were operating without a mining license and the government is looking to make headway on this issue in the rest of 2014.
Colombia is Latin America’s biggest coal producer but 2013 saw a series of strikes and disruptions in the sector that hit production and caused delays to projects. Coal output is likely to have fallen to 85Mt from 89Mt in 2012.
Colombia is clearly not ready to host giant, large-footprint gold mines, as evidenced by social conflicts and the incapacity of state entities to agree on how and where mining should take place.
With that said, there is still near-term hope for gold mining in Colombia. If companies are able to switch to a focus on high-grade, low-footprint underground gold projects, they will be more likely to obtain permits and financing.
Harris Gomez Group has assisted several juniors with the due diligence and purchase of properties in the region. Please do not hesitate to contact our office if you need any assistance.