COOKING THE PIE
TBY talks to Mario Escobar, President & CEO of Ashmont Resources, on Colombia's mining scene, community relations, and long-term development plans.
How would you assess the mining sector in Colombia?
Mining offers wonderful opportunities because it has been underdeveloped for the last 20 years as a result of security issues. In terms of mining, the country is like Peru 20 years ago, or Chile 30 or 40 years ago. We have much higher prices in certain commodities, and the technologies and techniques we use are designed with the environment in mind. The deposits that we have in Colombia include nickel, copper, gold, and diamonds. The potential is there. We have the entrepreneurship and the management skills to succeed in the sector. The Colombian workforce is very fast at training people, and Colombians are very hard workers, so we have what we need here. The big challenges are the government and its institutions. The National Mining Agency (ANM) and the Environmental Ministry understand that you need very clean processes. For us, that means we need to know the requirements at every stage of the process. I'm referring here to exploration, construction, and production. But we are probably eating the pie before we cook it, and we need to be more careful about that. We need to generate the right signals in order to develop projects that can generate both royalties and high employment rates for the country and consolidate the “new Colombia." It is important to generate employment and possibilities outside of urban areas, and the best way to promote that is with mining. This is because mining is a sector that generates infrastructure, is highly intensive in developing suppliers, and pays higher wages than other sectors. All of that can only happen if we understand that Colombia needs to develop mines, so we need to explore and we need to be able to construct mines to the highest specifications in the world. For that, we need to have a clear framework and then translate that into production. If we do not accomplish this now, the exploration later on will be very frustrating, and we will miss the window of opportunity.
Ashmont Resources recently expressed interest in acquiring American Gold Mines. What is the strategy behind this decision?
The deal has not been finalized yet; we are in the process of due diligence. What I can tell you is that in Colombia there are a lot of artisanal workers, and there are a lot of products that have been underdeveloped because of idiosyncrasies in production—people have the wrong ideas about production, engineering, and design. If you go into those areas with fresh eyes, you're adding more knowledge. At Ashmont Exploration we are mainly focused on geology as well as social and environmental challenges. As a private company we can move very quickly, and I think that is our big advantage—we see opportunities and we go for them.
What are your expectations for the El Alacran and Santa Cruz projects?
El Alacran is a copper-gold deposit, and it is a project that is moving forward very fast. We are in the second phase of the drilling campaign right now, and we expect to move to pre-feasability in 2013 and then to feasibility by the end of the year. It is a fantastic deposit in terms of the geology and geometry of the body. In terms of infrastructure, because it has been developed by Cerro Matoso, it is in a mining district, so it is among pro-mining communities. My personal challenge is that El Alacran is one of the first of a new generation of professional mines in Colombia. Although it is not a huge mine, more second tier, it has access to infrastructure, which is not very common in the Colombian mining sector. Overall, we are very happy about the results we have obtained so far. We feel comfortable moving forward, and I think we are addressing the major issues. The team at Ashmont tries to foresee problems before they arise, and are moving forward in the social and environmental area at a higher standard than what is required by the government, which gives us a lead in that respect.
How important are your relations with the community?
I think that, as in any country, you need to maintain good relations not only with the ministry, but also with the community. We have successfully built that, and for us it is very important, not only because the mining code is being written right now, but also because it is important for us as Colombians to share experiences and give advice on what communities can do better, and what they should not be doing. I am very active in participating in the Mining Chamber to share my point of view.
How can Colombia best take full advantage of its mining resources?
The first thing that the government has to do is integrate agencies and take the leadership to determine the procedures for the sector. What you need as an investor and as a developer of projects is to have clear rules, because then you can plan and invest. I think that the government has to be very strong, being able to take decisions and move this locomotive of change. The government can't think that only the major companies can develop exploration. The world is composed of junior companies that explore and are more flexible than the majors. Infrastructure in mining is not that important, because if you have a clear set of rules, and you have a deposit that is big enough, you can build the infrastructure. You can also build a public-private partnership (PPP), and make an agreement with the government where it, for example, puts in $400 million and you put in $200 million and make it work. The opportunities create themselves if you build the right framework.
What is your long-term vision for Ashmont Resources in Colombia, and for the mining sector in general?
For Ashmont Resources, we want to consolidate as an exploration company in Colombia. I want to be a big inspirational company in Colombia, and we are going to move forward in both production and greenfield exploration. In Colombia 90% of the territory is unexplored, and we are going to invest a lot in geophysics and become the top exploration company in the country. As for the mining sector, we are at a crossroads. If we do things right, Colombia will become a very strong mining country with a lot of opportunities. You have to understand that what we know about gold in Colombia is what the Spanish knew. We have not produced new knowledge in 300 years, so you can imagine the opportunities that we have here. In terms of location, we have been trying to build a very good port on the Pacific that will allow us to export any kind of metal you can imagine. The opportunities in the sector are just unbelievable. It is a sector that is more intensive in infrastructure and human resources than oil, for example. If you manage to put them together, security will improve, unemployment will decrease, foreign investment will increase, and royalties will increase. Overall, Colombia will be richer.
© The Business Year - August 2012