Colombia Braces For Renaissance In Gold Mining

MEDELLIN, COLOMBIA — One of South America’s historically richest gold-producing nations appears poised to regain a crown that was stolen by years of endemic corruption, crime and warfare.

Colombia is finally awakening from the social and political nightmare that robbed it of foreign direct investment for the last many decades.

And while no one here would say things are perfect — the narco-guerilla outfits Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN) are still active in contained parts of the country — positive changes are so palpable that miners at the country’s fifth annual mining convention, held in September in Medellin, were unabashedly exuberant over the country’s mining potential.

Long known as the home to significant coal and nickel laterite deposits, much of the new enthusiasm centres around gold.

Junior and senior gold mining companies alike are being buoyed by high grades that aren’t being found with such consistency any- where else in the world. Indeed, it is only because of the country’s recent troubled past that such prospective gold deposits remain undeveloped today.

The recent turmoil has left Colombia with no significant hard rock mines to speak of, with most of what there is in terms of gold production coming by way of alluvial methods.

But things appear set to change — although not without the usual growing pains that go along with the blossoming of a new sector in the economy.

Challenges facing companies considering setting up shop in Colombia consist of both the geological and political varieties.

In fact, the only thing more complicated than Colombia’s recent political and social issues is perhaps its geology.

Situated at the top of the continent, the country’s geological activity has been driven by great forces moving in different directions.

From the west comes the Pacific plate, smashing into the continent and giving rise to the Andes Mountains, which stretch all along South America’s western side. But unlike its neighbours to the south, Colombia is also at a point where the Caribbean plate crashes down on it from the north. The result is a mountain formation that splits into three distinct lines in the heart of the country, the eastern, central and western, with all three being home to significant gold discoveries.

Making matters more challenging for gold explorers is the lack of geological data available to assess it. The country’s recent issues, combined with a jagged mountainous terrain, have made geophysical surveys spotty at best.

While the mines ministry says it has begun flying surveys, it admits that, to date, they have been done at very wide intervals, leaving companies to fill in the gaps.

And more challenges on the political side could be facing miners as well.

The government is in the process of ratifying a new mining code. To become law, the code awaits only President Alvaro Uribe’s signature. Most experts here believe the code will be in place, in some form, by the end of the year.

There are four major contentious issues with the mining code as it stands today.

Firstly, there is talk of banning all mining above the 3,500-metre level. This amendment was championed by the former minister of the environment to protect what were deemed to be sensitive high-altitude ecosystems. Most major projects currently in the country do not fall in that category — the exception being Greystar Resources’ (GSL-T, GYSLF-O) massive Angostura gold-silver project.

The company, however, says it is in compliance with the terms of reference for its ongoing environmental impact study, has a strong social and environmental track record, and has the backing of the International Financing Corp. (a branch of the World Bank that has a 13% stake in Angostura) making it hard to imagine that such a late-in-the-game amendment to the mining code could stop its development.

Another aspect of the code raising some eyebrows here is a plan to give property rights to artisanal miners that have worked a given claim. While details are scant on how such a policy would be implemented, it could cause severe title headaches for prospective companies if it goes through.

Next on the list is the government’s stated intention to change the current practice of automatically renewing 30-year mining licences for an additional 30 years. Instead, the government would review a given project after 30 years, and then issue a 20-year permit at its own discretion. Such a move might cause companies considering investing in mine expansions to seriously reconsider.

Lastly, the new code proposes a relatively hefty fee of roughly $8 per hectare per year on exploration ground.

While the fee may anger companies that had first-mover status here and staked much of the country, it is being applauded by junior miners looking for a way in.

The move was designed to break up any monopolizing of claims by a few players, and allow serious juniors to move in and begin exploring quickly. The fee is eliminated once a company gets a project into production.

However the mining code ultimately pans out, what is clear is that this is a watershed time for the gold mining industry in the country.

With improved security resulting in the opening up of many unexplored and highly prospective regions, companies are currently only scratching the surface of Colombia’s potential.

It can only be hoped that the companies that are already well positioned here set a positive example on the corporate social responsibility side, so that the government and the population alike will be amenable to the future growth of the industry.