Future Of Colombia's Mining: $7.5 Billion In Investments Over The Next 5 Years
If Colombia's government could vouch for legal certainty to mining companies, the struggling industry sector could bring in about $1.5 billion a year in investments for the next five years, this according to a top representative at Colombian Mining Association.
The country’s judicial uncertainty has created a lot of problems and worries for the mining companies operating in the region.
“Legal certainty is the main challenge that the industry faces, it's what provides guarantees to investors and keeps mining production going forward,” head of the Colombian Mining Association, Santiago Angel, told Reuters in an interview this week.
Mining companies would like to see more concrete regulations implemented around public consultations and votes on mining projects, Angel added.
“If we get the investment conditions we want, as an association and as an industry, we could again bring in between $1.5 billion and $1.7 billion a year, for a five-year investment of $7.5 billion,” Angel said.
Investments into the mining sector have tumbled dramatically in the last couple of years, brining in almost nothing, he added. “This is an industry that in its best years brought between $2.5 billion and $3 billion a year. Unfortunately 2015 and especially 2016 were very bad years for attracting investment — we fell close to zero.”
In fact, the nation’s economy expanded just 2% in 2016, held back by the weakened mining sector, which shrank 6.5%.
Colombia is known for its prosperous coal and gold reserves. And lately, copper has been witnessing a spike in popularity from investors.
“There are mining companies that have quite advanced exploration phases, we believe that in the next few years we could have a working copper project,” Angel noted.
Companies operating in the country still lack legal security and clear investment rules even though safety improved enormously after a peace accord with the Revolutionary Armed Forces (FARC).
Miners often suffer from intense protests that sometimes lead to a halt of operations and production, Angel said.
One of the most well-known local rulings forced AngloGold Ashanti to halt operations at its La Colosa project in April following voters’ overwhelming support for a proposal to ban mining in the municipality.
This was a big blow to the company that invested about $900 million in Colombia over the last ten years, with La Colosa being the largest of its three projects in the region. The site in question also had the potential to turn into one of the world’s largest gold mines.
This is just one of numerous cases. The Colombian Mining Association pointed out that there are 39 ongoing local referendums that could lead to major problems for mining companies, local La FM reported.
This adds to a growing fear that current and potential investors might drop Colombia off their lists, as the government cannot guarantee the interests of global miners, president of the board of governors at the Colombian Mining Association, Roberto Junguito, told Financial Times earlier this week.
This and other concerns were raised by companies at the Colombian Mining Association’s annual conference, which took place last week.
“A lot of recent court cases have gone against the industry . . . Recent years have not been easy for mining,” Junguito said, noting some of the main obstacles, such as protests, road blockades, last year’s government tax reform and lower commodity prices.