Le­gal threats, not wars scare min­ers in Colom­bia

Kuwait Times - - BUSINESS -

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.

‘NIGHT­MARE’

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

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