PDAC 2015: Mines Minister says Colombia is picking up the pace

Colombia’s mining sector makes up 3% of the country’s gross domestic product. It is the world’s fourth-largest coal producer at 90 million tonnes per year, the tenth-largest nickel producer, and it is rich in copper, precious metals and emeralds.

Forty mining companies listed on the Toronto Stock Exchange and the TSX Venture Exchange have invested more than $55 million in 58 projects across the country, including B2Gold (TSX: BTO; NYSE-MKT: BTG), Continental Gold (TSX: CNL; US-OTC: CGOOF), Eco Oro Minerals (TSX: EOM), Gran Colombia Gold (TSX: GCM; US-OTC: TPRWF), Cordoba Minerals (TSXV: CDB; US-OTC: CDBMF; US-OTC: CBHDF), CB Gold (TSXV: CBJ; US-OTC: CBHDF) and Red Eagle Mining (TSXV: RD; US-OTC: RDEMF).

Other investors in the country are Glencore (LSE: GLEN), BHP Billiton (NYSE: BHP; LSE: BLT), AngloGold Ashanti (NYSE: AU), Anglo American (LSE: AAL) and Votorantim.

Tomas Gonzalez was appointed Minister of Mines and Energy in August 2014 after serving as Colombia’s deputy minister of mines and energy from 2010–13. He spoke with The Northern Miner at the recent Prospectors & Developers Association of Canada mining convention in Toronto, about how Colombia hopes to make it easier for foreign mining companies to advance projects in the country.

The Northern Miner: Colombia has designated certain mining assets as “Projects of National Interest,” and that means that the Federal government and state agencies will help facilitate permitting. Is that correct?

Tomas Gonzalez: Yes, those projects of national interest will receive special support from the government so that they can move forward as fast as possible. Under the new system, the ministers responsible meet every week and look at the projects with that designation, and see how each one is progressing. The meetings include the ministers of Mines and Energy, Environment, Defence, Labour and the Interior. We sit around the table and look at what issues face each project, and then assign tasks to the various ministers. In the following meeting, we then evaluate each task, and see how the project has progressed.

TNM: Continental Gold’s 100%-owned Buritica gold project, 75 km northwest of Medellin, was designated as a project of national interest about a year ago. How has the designation helped it so far?

TG: It was named a project of national interest in 2013, and it is an example of a success story. The company had problems with an environmental licence. It had been in limbo for three years. So we sat down with the environmental authorities and said: ‘Look, this company asked for technical support from the ministry of environment. What is holding things up?’ The minister of the environment then had to investigate. So the ministry contacted the company and gave them a list of things they needed to supply more information on. The company is now working on that and will resubmit the information, and then the government has 30 days to make a decision. So we think this will be resolved by mid-year. We need to make sure these projects happen, because we need royalties for development.

TNM: Last year Colombia earned 80% of its mining royalties from coal, 9% from precious metals and 6% from nickel. How does the royalty structure work?

TG: The royalties depend on the mineral. In the case of coal, it’s a bit higher, and in the case of gold, it’s a bit lower. The coal royalty is 10% of production. For gold, it is 2–4%, depending on the size of the mine.

TNM: There is also a surface fee of about US$10 per hectare on land that a company uses for exploration, is that right?

TG: Yes. When you are exploring, you have to pay a fee for each hectare of land that you use, and the purpose of the fee is to provide an incentive for companies to move quickly from exploration to production. However, we are working on lowering the surface fee to boost exploration.

TNM: What are some of the other things your ministry is attempting to do to make it easier for foreign mining companies to operate in Colombia?

TG: Our focus has been cutting down times on mining permits as quickly and reliably as possible, which is important.  There are also lots of applications for new titles or claims to concessions, and we’re trying to bring down the time it takes to get them. We issued a decree at the end of 2014 that gave clarity to mining authorities and mining agencies, and in the last two months we have issued 300 new titles/claims.

TNM: Can you give me any other examples of how the process is improving?

TG: In the past, companies that had two or three exploration concessions that were not contiguous had to develop them sequentially. Now we are allowing the different concessions to be developed as one single concession. It was also taking a long time for land owners to change concessions or sell title to their concessions. For example, if a concession holder wanted to sell or transfer it to someone else, the process took too long. There were six to eight steps involved in the process. Our goal is to make all these transactions take no longer than 60 days. In just the past two months, for example, we have brought the number of pending concession title changes down from 1,500 to 1,000.

TNM: Do you think the current mining code, which was enacted in 2001, is working well? Does it need to be updated?

TG: The government hasn’t presented a new mining code to Congress. We feel the existing code has most of the tools we need. The government does have something it calls the “National Development Plan,” and this is something that is presented to Congress every four years. We did this a month ago, and it included changes for mining and legal changes, and most of the changes are geared to formalize informal miners.

TNM: Illegal mining operations are problematic across South America but particularly in Colombia, where you’ve also got criminal and guerilla groups. How is Colombia addressing the problem?

TG: We’re trying to formalize artisanal miners. Typically, three out of four artisanal mining operations are run by between four to six employees. We’ve looked at what Peru is doing to formalize artisanal miners. It’s difficult when you’re trying to bring someone to a more modern way of functioning.

TNM: In 2012, the government withdrew 210,000 sq. km of prospective land from staking and earmarked it as strategic mineral reserves that were to be auctioned off. How has this been going so far?

TG: The bidding process for these areas will start for the first time in the last quarter of 2015. We’ve been working with the World Bank and they have helped us structure the bidding process. We’ll have five or six blocks to start with, and companies who win these blocks will have the benefit of being deemed a project of national interest. The companies will have the highest standards. They will be good at what they do, and receive special support from the government.

TNM: So
will these companies have much time to do due diligence on the ground?

TG: Companies can get access to the data on these projects. We’ll decide the technical standards on which to compete. The government has been researching this 210,000 sq. km for the last three years, so there is data to look at. We’ll invite companies to come to Colombia, and we’ll come to Canada to talk about the potential we’ve seen and discuss the terms and conditions needed to participate, and after this part of the competitive process, the actual bidding process will take place. It will be just like biding on oil projects. We will open it up to all parties, and depending on the proposals we get, we will choose the winners.

TNM: Do junior companies have a good chance of bidding on these projects, or do you think they will lose out to the companies with deeper pockets?

TG: In Colombia, rules and conditions for mining titles are equal for everyone, legal or natural persons, citizens or foreign nationals—whoever wants to come in and engage in exploration and exploitation of minerals.”

TNM: The issue of security in Colombia is often on the minds of investors. Can you update us on the status of the peace process with FARC?

TG: We’re in the final stages of a peace process that is going to bring an end to a 50-year conflict. We agreed to a five-point plan with the FARC and we’ve reached agreement on three of the five points, and we’re discussing the other two. At the end of last year, FARC declared a ceasefire and everyone expects we should get an end to the conflict. This will be great for the mining sector because it will increase security and open up parts of the southwest that are underexplored. In the post-conflict era, mining is going to be an important source of jobs in rural and remote areas.

TNM: What are the priorities for Colombia right now?

TG: The focus right now is on investing in education, the peace process and the fight against poverty. If it is successful, as everyone hopes it will, that will be good for investment. We need an active mining and oil sector and we need to move projects forward as fast as we can. We need to generate resources to fund this investment, we need projects to prosper and do well, and we need quantities of minerals and oil to be sufficient enough to fund this investment.