Mining in Colombia – an Engine of Growth

This article has been translated from Spanish – click here to view the Spanish version.

Since 2011, pressures concerning legal, environmental, labour and regulatory conditions have been increasing in the Colombian Mining sector. The Ministry of Mines and Energy, as well as the President of the Republic of Colombia, Juan Manuel Santos, propose that mining and energy are Colombia’s “engines of growth” towards economic prosperity and they intend to support the sector in developing legal, sustainable mining in Colombia, for the benefit of the whole country.

It is estimated that around 90% of mining in Colombia is undertaken illegally; not in compliance with Colombian requirements for developing mining operations regarding Health, Safety & Environmental Issues. There has already been some serious discussion about plans to eliminate the illegal mining, including formalisation of mining standards, in order to improve the working conditions and consequently restoring investor’s and mining professional’s faith in a sector with so much promise for economic growth.

Colombian Mining needs to develop incentive, supported by mining officials with legal and environmental knowledge of the mining business, that ensures multinational companies who conduct themselves according to regulatory standards, obtain benefits and recognition for supporting the organic growth of the nation. Decree 933 has been created to formalise traditional mining, it modifies some definitions of the Mining Glossary and establishes mechanisms for the evaluation and completion of feasibility studies, the subsequent adoption of a Program of Works and Environmental Management Plan and the granting of mining lease contracts.

Decree 4134 of 3 November 2011, created a government agency solely responsible for mining sector regulation. The National Mining Agency / Agencia Nacional de Minería (ANM) replaces the former Colombian Geological Service / Servicio Geológico Colombiano (Ingeominas).

The ANM opened their doors to the public on 2 June 2012 and since then, have been developing a series of reengineering actions in the sector. The Colombian government conceived the ANM as a solid, technical, entity; with first-line human talent that will allow efficient administration of mineral resources. The primary objective of the Agency is to promote dynamic mining, in order to continue generating resources which will enhance the development and welfare of the country and its regions, whilst respecting environmental sustainability and meeting community needs.

The new mining titles audit is one of the most important activities being undertaken by the ANM, where thanks to specialists contracted for this purpose, it has been possible to examine over 2500 of 9500 existing mining titles in the country. Thus far, over 80% of them have failed to meet standards, due to errors or missing procedures. Title holders have been given until the next cycle of visits to correct these issues in order to meet government contractual obligations and retain their title. One mining title generates 28 jobs on average (40% direct / 60% indirect). Operating costs and mining investment, on average, mining title hover around $ 1.8 million USD per year.

The ANM has also developed a new model of mining hiring, with specific clauses pertaining to social and environmental considerations. This model has already been applied to the Minas Paz Del Rio (Votorantim Group) contract as well as the Cerromatoso (BHP Billiton) contract.

Of all the mining projects in exploration phase, 60% are in the first stage of exploration (surface geological exploration), whereas only 10% are in the last stage (feasibility). 76% of the exploration in Colombia is for open-pit mining, and 24% underground mining.

Colombia is taking mining compliance seriously, and will present its candidacy to be admitted in the Extractive Industries Transparency Initiative (EITI), a global standard which ensures better governance of natural resources and transparency over payments from resources companies to government entities. With its participation in this initiative, Colombia would be the second country in South America to have this distinction, after Peru.

The Colombian Mining Industry is foreseeing positive outcomes, despite some of the bigger mining companies planning investment cuts, small and mid-tier companies may reverse this trend, promoting growth by investment in new projects and the development of the variety of minerals to take advantage of in Colombia. All this of course, is on the proviso that the Colombian government is able to provide stable guarantees to investors.

Juan David Viñas Restrepo – Senior Recruitment Consultant, Globe 24-7

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