LatinFinance - May/June 2017 - 41

AngloGold Ashanti commented on the
vote with a brief statement, saying that it
would "evaluate the referendum result,
whilst continuing the often-painstaking
work required to build consensus around
the creation of a modern, environmentally
responsible gold-mining industry in Colombia."
Resource-rich
Habib believes that new mines under
development could trump the setback in
Cajamarca. "Colombia has everything to
become a mining country. I say become,
because we cannot say right now that we
are a mining country," she says.
The ANM reports that only 3.8% of Colombian territory, or 4.4 million hectares,
is dedicated to mining, with just 2% already
under production, 0.7% in development,
and 1.1% being explored.
With mining accounting for a paltry
2.1% of GDP in 2016, and mining exports
reaching $6.8 billion, the government sees
potential for the sector to increase as a
percentage of GDP. Mining exports could
also boost the economy, which expanded
by 2% last year and is forecast to grow a bit
faster in 2017 - 2.5%, according to the Santos administration, and 2.3% by estimates
from the IMF. Mining could also help close
Colombia's trade deficit, which amounted
to $1.1 billion in 2016.
Coal remains the principal mining
activity in Colombia, representing 65% of
mining's contribution to the economy. The
country produced a record 90.5 million
tons of coal in 2016, an increase of about
6% from the previous year. With an estimated 17 billion tons of coal reserves in the
ground, coal continues to attract attention,
with the government awarding 1,444 claims
for coal exploration, covering 980,000
hectares.
Most of the coal is mined by three companies: US-based Drummond; Cerrejon,
a partnership between UK-based Anglo
American, Australia's BHP Billiton and
Swiss commodity company Glencore; and
Glencore-controlled Prodeco.
The government is hoping that gold will
provide another major source of export income. It has awarded 1,928 titles, covering
2.4 million hectares, for gold exploration.
Several projects are nearing production. The San Ramón mine in Antioquia
finished construction at the end of 2016 and
entered full production in the first quarter
of 2017, with forecasts to extract an average
50,000 ounces annually. Vancouver-listed

PHILIPP SCHÖNROCK, CEPEI

"PEOPLE KNOW THAT
THE GOLD IS THERE,
BUT..., WHEN THEY
WEIGHED BOTH SIDES
THEY DECIDED
THAT THEY WANTED
TO STAY WHERE
THEY ARE"
Red Eagle Mining owns the mine and has
invested $120 million.
"This is a medium-sized project, but it
is important because it is the first underground gold mine to start operations in
more than 15 years. It shows that projects
can be approved and start operating," says
Habib.
Another smallish project, the $40 million
Cisneros mine in the Antioquia province,
should start producing gold in July. Operated by Canada's Antioquia Gold, the mine
will produce around 15,000 ounces in the
first year or two, doubling output to 30,000
over the next decade.
The state is looking forward to two big
mines, especially Gramalote, which is
operated by AngloGold Ashanti. Gramalote,
with an estimated investment close to $780
million, was the first gold mine designated
by the government as a Project of National
Strategic Interest (PINES in Spanish) to
receive an environmental license, a critical
approval for projects to move ahead. It is
on course to start production in 2019 and
is expected to turn out 400,000 ounces of
gold annually.
Also designated a PINES mine is the $450
million Buriticá project, also in Antioquia.
Canada's Continental Gold expects to start
construction in 2017. It will produce around
282,000 ounces of gold and 500,000 ounces of silver annually, according to ANM.
Tough climate
Colombia is not alone in its ambivalence
toward extractive industries. "El Salvador's
Congress effectively banned all metal mining in the country on March 29 when it
approved legislation. It is the first nation to
pass such a sweeping prohibition.
Anti-mining protests have also stopped
or slowed big projects in Argentina, Chile
and Peru.

Peru has the longest history of mining
protests, where plebiscites on mining have
been held for the past 15 years. While the
votes in Peru have all been non-binding
and the results rejected by the state, they
have had a major impact on investor
interest. The first referendum, in June
2002, overwhelmingly rejected a mine in
Tambogrande, in Piura on the northern
coast. Canada's Manhattan Minerals, which
planned the $500 million open-pit gold
mine, abandoned the project in 2005.
In a 2007 referendum, more than 90%
of voters cast ballots opposing the $3 billion
Rio Blanco copper mine in the highlands
of Piura. China's Zijin Corporation now
controls the project, but construction has
been stalled since the vote, and opposition
remains firm.
Peru's ombudsman's office, a state
agency that monitors social conflicts, listed
95 conflicts involving mining in its March
2017 report. The majority of these conflicts,
like those in Argentina, Chile and Colombia,
are linked to water.
Martínez, the mining attorney, says that
the water/mining debate is more political
than technical. In the case of La Colosa, she
says, there is no evidence that the mine will
deprive farmers of water. "This supposed
division between water and gold is a political position," she says.
She says that La Colosa could end up like
other projects in the region, such as Tambogrande in Peru, where gold deposits are
abandoned because of protests and later
tapped by illegal miners. "Illegal mining
does not respect environmental or labor
conditions. It respects nothing. Everyone
knows this deposit is there, and if not
exploited legally, will be invaded by illegal
miners," she says.
CEPEI's Schönrock says the La Colosa
case and other votes that could be held
this year could lead to a different kind of
economic and political debate as Colombia
moves toward the presidential election in
May 2018. "The vote in Cajamarca has given
us an opportunity to see that Colombia has
much more to offer than gold and could
create something positive going forward as
we look at options for a green economy,"
he says.
As Colombia enters its election cycle, he
predicts the political debate over the boons
and ills wrought by mining will ratchet up.
"I think we are going to see politicians in
Colombia and the rest of the region start to
reconsider extractive industries as the main
source of development," he says. LF

May/June 2017 - L ATINFINA NCE.COM 41
http://www.LATINFINANCE.COM
Table of Contents for the Digital Edition of LatinFinance - May/June 2017
