Delving deeper into Colombia’s mining issues

Colombia is currently one of the world’s more enigmatic mining jurisdictions. There is no denying that country’s lost ‘cocaine’ years have left it with swaths of unrivalled prospective ground ripe for modern exploration. Added to that has been years of pro-business governance and improving security. Despite those positives the country’s mining sector has failed to live up to its potential owing to a range of issues in need of resolution.

There is the status of one of the country’s pre-eminent gold projects, Eco Oro Minerals’ (EOM-T) Angostura, still up in the air because of environmental permitting issues. Then there is the government’s attempt to balance artisanal miners’ prosperity against environmental degradation and the funneling of funds to illegal groups like the FARC.

Making matters more complex is the fact that government agencies tasked with dealing with unleashing its full mineral potential are suffering under a confluence of having to work within a bureaucratic infrastructure stressed by years of underfunding and a massive inflow of foreign capital that needs to be managed properly.

This year, Colombia is not only crafting a new mining code but is also looking to complete its first national geological mapping program, to re-open its now closed concession claims process and the database that it is build on, and to devise a new claims distribution process.

With so much on the table and so much at stake The Northern Miner sat down with Maria Constanza Garcia Botero, the president of the Agencia Nacional de Mineria, in Toronto during the Prospectors Developers Association of Canada convention in Toronto to discuss how the government is tackling such issues.

The Agencia Nacional de Mineria is the government body responsible for implementing much of the policy handed down from the ministry of mines — one of two national mining agencies in the country with the other focusing exclusively on geological issues.

The Northern Miner: What is the status of the new mining code?

Maria Constanza: The current mining code is going to die May 11. We knew it would happen. We took most of the articles from the old code and put them into a national planning law, which gets renewed every four years.

At this point we have proposals that need to be consulted with the minority groups. We have tried to attain a resolution with them more than 10 times. Now the court has acknowledged that we tried and were not successful so it has allowed us to move forward with the law.

TNM: the plan to auction off claims currently held by the government is causing concern for some as they fear that the lot sizes will be so large that it will be prohibitive for junior miners to bid on them. Can you comment?

MC: We are working on the size and it will depend on information from our geophysical and geochemical tests.

The information we get from those studies will guide us. Right now we have a lot of pieces of good information, but how big and for whom the auction will be, whether its juniors, majors, nationals….it will depend on the information we get.

Juan Castro: We are not making a differentiation between juniors and majors. The process will be open to junior exploration.

The government hasn’t specified the size of the blocks nor the number of claims nor the regions. Therefore companies don’t really know what the process will be, so they can’t say it is closed to juniors.

Also we are not going to do the auction in one step. There will be further steps over 10 years that will be dependent on the level of knowledge that comes out of our emerging geological information.

The necessary geological information required to begin the auctioning process is expected to be in by September of this year and the auction process is expected to get underway in the beginning of next year.

TNM: It has been said the government wasn’t pleased with the fact that AngloGold Ashanti’s securing so much land before foreign direct capital really started to pour into Colombia. Can you speak to the impact that AngloGold Ashanti had on shaping government policy?

MC: We want to prevent that and things are changing.

Our agency used to have very few people and not a lot of money, now we have a budget of almost US$200 million and two auditing companies working with us, each with more than 700 people.

They are currently reviewing all titles and making sure that companies are paying royalties and leases and that they are compliant with the law and their contracts.

So far out of 1,700 reviews 60% are not compliant. Now some of those may be just missing a paper or something.

Companies have not been used to such auditing and now that we are doing it they don’t have an incentive to ask for a lot of land, because they have to pay, they have to prove that they have everything in place and they have to show that they are exploring.

There are also restrictions so that companies don’t apply for a lot of land they are not going to use. They have to show that they have the financial, legal and technical capability to work the land otherwise they have to return it to the government.

TNM: Some industry watchers have expressed concern that the government’s national airborne geophysical testing is being flown via airplane rather than helicopter. They feel this is a mistake given the country’s intense topography. Are you concerned that the test may not be as accurate as investors would like it to be?

MC: There are cost benefit reasons to do it by plane and it will be complimented by walking studies on the ground. We are looking to get a complete picture: the geology in general, geophysics and geochemical.

We already have some information as the entity that is now the geological agency has been in place for 100 years. The new information will be complimentary and in the end we will have very good information.

TNM: The issue of artisanals is an important one in Colombia with the government long stating its desire to improve the lot of the countries illegal miners. How is that process going?

MC: The policy is to try to make them legal — that is the first step. Then we want to go with them all the way, so that they can ask for loans and so they can do mining the right way, complying with environmental and security regulations.

We are currently working on setting up a pool of capital that would be available for loans. We are trying to implement something similar to our coffee system, which was implemented 40-years ago to help small and medium sized coffee growers and was very successful at the time.

TNM: Can you discuss what lead to the mining concession process being closed and how it is being dealt with?

MC: The complete system is closed. Why? Because the backlog was so huge. The government found 19,400 proposals for concession that it couldn’t get to. One was from 1968.

But by March 1st of this year we had resolved more than 11,000 of them and we continue to be working on solving the rest. We are putting together a bullet proof platform that recognizes the past corruption. It will be a transparent process. You submit your request and the government will protect your rights. The first in line is the first in law.

You have to realize it is not just the database that needs to be completed. If I invite you to the party everything has to be ready, the drinks, the food, the decorations not just they table.

Constancia expects that it will re-open by July 3rd.

TNM: The issue of security is always on the minds of investors when they think of Colombia. Recently we have learned that many artisanal miners are threatened by FARC and other groups to make pa
yments to them from their mining proceeds. How will the government ensure the security of foreign investors?

MC: We are working on putting all the issues together, security and the environment. On the security side we will try to measure and give info about the risk so companies can give it a value.

So we will say ‘okay this area we are putting in market and there used to be a guerrilla group here, they went a way and the probability of their returning is 10% or 80% or whatever it may be.

The idea is to put everything in place so people can measure risk and at same time the government and minister of defense and working with Canadian government to increase security.

TNM: For all the potential of Colombia there still has been little in the way of modern mine construction and production. What has held up the process and how serious is the government about getting a modern mine into production?

MC: The biggest obstacle has been environmental issues and the consultation with native and minorities. But nothing is preventing companies from getting to production from the government’s point of view.

We are working every single week, project by project for mining and hydro carbon projects to try to find ways to solve these obstacles.

Constancia went on to say that the much publicized delays at EcoOro’s Angostura project are the result of both defining the limits of a National Park in the area as well as the definition of the limits of the Paramo, a protected high altitude ecological zone. She said that the government does want to see the project go forward into production.

TNM: Can you describe the general attitude of local communities to mining company’s and where some friction exists?

MC: Overall local communities are very close to the sector and are willing to work with companies.

There are some regions in Antioquia where they have framed the issue as mining against agriculture and mining against the environment. We are working to change that mindset to one of mining and agriculture; mining and the environment.

There is a mayor in Antioquia that is trying to forbid mining in their municipality, but that according to us is against the law.

We are addressing that by teaching them about mining. We are using the State Governor, who is closer to them, to work with them. The Governor is doing a good job and everyone is working to find a way.

TNM: Would you consider legal action?

MC: We prefer to negotiate with them. We don’t want to take it to court. The legal process would take forever.

TNM: For the rest of the year, what are some of the milestones you would like to see the mining industry pass in Colombia?

MC: We hope we will get most of the environmental permits issued. We may get all the approaches to the minority groups done. We have the census on all the outstanding land titles and we will know if they are all compliant or not.

After we complete the picture on the titles, the law and commitments we will move forward to correct issues and problems. And also we will have some land that will come back to the government as a result of having to cancel the contracts that don’t comply.