So far so good: How Colombia's green energy push dovetails with its mining industry
The Colombian government's push into green energy fits well with its mineral endowment.
President Gustavo Petro, who was sworn into office in August 2022, has announced a number of policies to reduce his country's emissions to meet the government's Just Energy Transition roadmap. He is supported by resource minister Irene Velez Torres who previously worked as an environmental social leader. The government wants to decarbonize the economy and turn Colombia into an exporter of clean energy.
Transition Metals to Lead the Way in Colombia - Silver & Copper in Focus
While nickel, cobalt and lithium are most closely associated with the metals needed for energy transition, Colombia has its own vital niche to play. Photovoltaic power, the leading source of green electricity, requires silver, and Colombia is well equipped to provide this vital ingredient to the green revolution supply chain.
Meanwhile, solar panel demand for electricity generation is one of the fastest-growing sectors of the green economy, with silver being a significant ingredient for the panels. With solar panel demand expected to grow at nearly 30% per year, the energy crisis in Europe could have a major impact on an already tight supply chain as Europeans might accelerate purchases of solar panels heading into next winter. If this happens, it would exacerbate already low silver inventory levels, and further amplify Colombia's potential as an important future source of supply.
Silver Consumption by the Solar Industry to Remain Strong Heading Into Next Decade
The World Bank forecasts that by 2050, consumption of silver in energy could grow dramatically, reaching a level equivalent to more than 50% of the entire current total silver demand—the largest proportion for any non-battery metal. The amount of silver in cars is also climbing sharply. Electric vehicles have a lot more electronics than automobiles powered by internal combustion engines. Silver is an excellent conductor and the metal is required in specialized componentry. Taken together, silver demand could go from 120 million ounces today to as high as 500 million ounces by 2050, according to an analysis by Hecla Mining.
Silver is good, but the fundamental metal for energy transition is copper. It is the keystone metal, and Colombia has a vital role to play there as well.
Copper is used in electric vehicles and solar panels, as well as in wind, hydro, and geothermal units. Compared to fossil fuel and nuclear sources of energy, copper is used five times as much in renewable energy systems. Given the declining grades of tired old mines and the ramp up in demand, copper could run as high as $9 to $10 a pound, estimates Gianni Kovacevic, Founder of LithiumBank Resources. Copper currently trades at under $4 a pound.
Copper Demand Expected to Increase by More than 50% Between Today and 2040
By the Early 2030's, Copper Demand Could Outstrip Supply by more than 6 Million Tons per year
Colombia at the Forefront of the Green Energy Supply Chain
Colombia is located on the Pacific belt line, considered a strategic strip with copper potential. The country has three porphyry copper belts with important prospects.
"In the medium term, Colombia has the potential to become a global powerbroker in the copper market, considering the country's copper deposits are world-class," writes Katherin Galindo in a report for Global Americans, adding that usual average grades are around 0.6 percent copper per ton while Colombia averages 0.98 percent per ton.
Colombia has been growing its copper output. Copper mine production in Colombia came in at 8.3 thousand metric tons in 2021, up 800% from the start of the last decade. And Colombia still has further to run.
In December it was announced that the Alacran project would be jointly developed by Ivanhoe Electric subsidiary Cordoba Minerals and China-based JCHX Mining - a ringing endorsement by an outside party for Colombia's next generation of transition metals and mining plan. Once built, Alacran will be one of largest copper mines in Colombia. In 2018, the Alacran project was declared a "Project of National Interest" by the Colombian Government, which denotes a significantly high priority for the country. Cordoba is currently working on a feasibility study for the project.
Meanwhile, Zijin Mining's Buritica Gold Mine is among the world's largest ultra-high grade gold mines and is being tuned up to produce more copper. Speaking at the CGS2021 conference in Medellin, James Wang, the CEO of the local subsidiary, said the company planned to boost the mine's copper and zinc capacity. Changes to processing would see the mine produce 600 tonnes per year of copper and 5,000 tpy of zinc.
Colombian Mining as a Key Pillar of the New Green Economy
Colombia's government is embracing mining. Since its inauguration, the government has demonstrated that it is at the forefront of a roadmap that will focus on developing mining deposits that contribute to "electrification generation". In doing so, miners operating in the country and their investors back home should find reassurance in recent steps taken by the Petro government to show its support for the ambitious transition metals-focused mining plan.
Significantly, in November Aris Mining announced that its Marmato Pan de Trabajos y Obras or PTO "was approved by the Agencia Nacional de Minería as a progressive step toward fully permitting the expansion project." Aris is backed by mining heavyweights Ian Telfer and Frank Giustra, and construction of the mine is estimated at $280 million.
And in December, South32's northern Colombia mine Cerro Matoso was granted a 15-year extension by the Colombian government. In 2017, the mine produced 40,600 tonnes of ferronickel. In Colombian mining circles, it is believed that this permit extension was a ringing endorsement of the government's ambition to promote its mining plan related to decarbonization and help quell concerns about its overall commitment to mineral extraction.
Colombia has a lot to gain from mining, which represents a key pillar of the country's economic platform. The Colombian Mining Association told Reuters that the forecasted export value for the sector in 2022, including gold and other minerals, was $22.16 billion, up from an average value of about $12 billion in the past five to six years. In the face of more volatile commodity pricing, the government will be seeking other forms of mining revenue as well.
With Colombia's copper and silver endowment, the country stands to benefit. Investment at the junior level is evolving around this transition metals plan, including from Collective Mining - a junior explorer with a recent copper and silver-rich discovery at its Guayabales project. The company knows Colombia as well as anyone, as it is the same team that developed, permitted and ultimately sold Continental Gold to Zijin Mining in March 2020 for C$2 billion (EV). CEO Ari Sussman recently said that he likes what he sees.
"In summary, the government will be judged by their actions and so far so good," tweeted Sussman.