Legal threats, not wars scare miners in Colombia
Gold mining companies have invested hundreds of millions of dollars but not extracted a gram. Palm farmers are told their land belongs to someone else. Some communities are voting to ban mining in areas already awarded for exploration.
Whether or not President Juan Manuel Santos can salvage a peace deal with Marxist rebels that was rejected by voters on Oct 2, legal roadblocks and high taxes are a major deterrent for companies looking to invest in Colombia. Santos says ending Latin America’s longest-running conflict would open up vast areas of land to development, reduce corporate security costs and bring additional growth of up to 1.5 percent a year.
Since voters narrowly rejected the deal, Santos has scrambled to extend a ceasefire with the rebels and meet with opposition figures in a bid to find common ground and resurrect hopes of a negotiated end to the 52-year war. But even companies eager to explore former conflict zones say other worries are more pressing.
Many are wary of recent court decisions banning exploration on land already awarded in concessions and giving local authorities greater power to reject mining projects. For others, high corporate taxes are a damper.
“It’s useless to have a post-conflict window of opportunity if our neighbors have half the tax rate we do and if 30-year contracts are signed and then the conditions change,” said Santiago Angel, head of Colombia’s mining association. Analysts calculate many businesses in Colombia pay over 50 percent tax, compared with 27 percent in Peru and 25 percent in Chile.
Canadian gold miner EcoOro, which has spent $240 million on exploration in Colombia, lost 50 percent of a concession in Santander province after a constitutional court ruling halted mining exploration to protect wetlands.
“Changes in laws and legislation make project development impossible,” chief executive Mark Moseley told Reuters. The company is hoping it can reach a compromise with the government under Colombia’s free trade agreement with Canada. Despite security improvements in recent years, industry insiders say companies may reconsider expansion plans or simply not move to Colombia altogether due to the legal uncertainties.
Of some 150 miners that arrived in Colombia during a gold price boom in 2009, only 30 remain.
Experts estimate half of Colombia’s territory has been starved of investment because of the war and Santos hopes peace would triple foreign direct investment to $36 billion a year over the next decade with companies exploring deposits of gold, coltan, copper, rare earths, emeralds, tungsten, potassium and coal.
Still, mining firms complain that tighter regulation and political pressures are hurting the industry. South Africa’s AngloGold Ashanti is facing a public vote that could stymie its plans to extract gold at its flagship La Colosa project in Tolima province.
Mining at the site - a $2 billion potential investment which could yield 28 million ounces of gold - would be banned if Cajamarca municipality follows the lead of nearby Piedras, whose residents voted to ban extraction amid water quality fears. Under current law, companies must get approval from local ethnic groups before beginning projects, but do not typically consult the broader community. Some areas are using referendums to change that.
Both Cajamarca and the city of Ibague have pending votes. If passed, AngloGold, which has invested close to $900 million in Colombia since 2006, would be forced to abandon the project.
“Tell me what the rules of the game are, I’ll analyze them and take a decision about whether to invest in the country or not. But don’t tell me in the middle something isn’t constitutional,” said AngloGold executive Juan Camilo Narino. For Ibague mayor Guillermo Jaramillo, there are clear health and environmental reasons to banish mining.
“They are going for gold. We are defending our land,” he said from his office overlooking the city’s colonial square.
AngloGold says it follows all regulations and mining at La Colosa would not affect ground water. Whatever the rights and wrongs of each side, the panorama of uncertainty is a deterrent to investment. The government says it understands challenges facing companies and will try to adapt. “We have to keep working on a series of institutional fixes that will give much more clarity on mining and energy development,” deputy mining minister Carlos Cante said.
He said solutions include better defining what areas can be explored and improving company relations with communities. Potential new investors from Australia, Canada and Asia have expressed interest in Colombia, he added.
The government hopes agriculture would benefit particularly from peace, since part of the accord reached with rebels of the Revolutionary Armed Forces of Colombia (FARC) is focused on investment in rural infrastructure. But here too producers say they face hurdles beyond the conflict. Programs to return land to displaced war victims are roiling property holdings and could prevent expansions into fertile areas once controlled by rebels. — Reuters