STUDY THE SUBSOIL

Colombia 2014 | INDUSTRY & MINING | VIP INTERVIEW

TBY talks to María Constanza García Botero, President of the National Mining Agency, on Colombia's mineral potential and creating the right investment environment.

What is your assessment of the mining sector in Colombia and where do you see potential for its development and growth?

Mining is an ancestral economic activity in our nation; even before the arrival of the Spanish our indigenous population had a mining tradition. This is why it is not surprising that the mineral potential of Colombia is vast. Nowadays, we have defined 11 strategic minerals, including coal, both metallurgical and thermal, iron, copper, gold, and platinum, among others. These are categories in which we have identified a huge potential for exploration. The government is working, through the National Geological Service, to gather detailed scientific knowledge of the subsoil in order to widen our knowledge base, which will increase investment in the mining sector. The gold sector has mostly been developed by SMEs, and there are estimates that Colombia's potential may be around 35 million ounces, an interesting point for exploration companies. There is also potential in nickel, copper, phosphates, potassium, and emeralds. Emeralds from Colombia are widely known as being the most special in the world due to their particular characteristics. Additionally, we have potential in coltan, a combination of columbite and tantalite, which is a very important mineral for electronic devices. The National Mining Agency (ANM) is in charge of overseeing the mining sector, granting concessions, and issuing titles. We have two ways of doing this, one of which involves a bidding process, which we are restructuring. The other process, according to the law, is a first-come, first-served system. We already have more than 9,700 titles around the country, 35% of which are at the exploration stage and 35% of which are at the production stage. The remainder is in the building and construction phase. Of particular importance is the fact that less than 5% of the territory has been granted and less than 1% is being explored. One challenge the government is facing is finding a balance between mining, environmentalism, and agriculture. For that reason, we are working to reach that equilibrium. If we can do so, the sector has considerable potential. There are, however, other areas that need to be dealt with before this can happen. One central issue for us is the occupational safety of our miners, especially those who are working in underground mines, which account for 86% of the sector. We have introduced new equipment to support the work of rescue teams responding to emergencies. It is the responsibility of the government to work with mining companies and bring them up to the highest safety standards.

How would you characterize the demand for coal, given its importance in Colombia?

The demand for coal is still growing. We have been working with different organizations that have been monitoring the world coal markets. Coal will be the engine of energy production because it is the cheapest option; there is no cheaper source of energy nowadays. So, even though prices are fluctuating and are not as good as they used to be, the investments that large companies have made confirm that coal will remain in demand for a long time. In fact, some studies show that the majority of energy generation infrastructure that is going to be built in China over this decade will be coal based.

“One challenge the government is facing is finding a balance between mining, environmentalism, and agriculture."

What potential is there for metallurgic coal?

At this point the price of metallurgic coal is higher. According to recent coal trends, demand from China is on the rise again. Secondary industry is demanding coal. The problem with metallurgic coal here in Colombia is that it is located in the central region of the country, an area that is disconnected the rest of the nation, in particular from the ports. However, several improvements are being made in infrastructure, especially railroads, and the potential for metallurgic coal should be realized in the near future.

What was the average coal production for this year and what do you expect for 2014?

It was at around 90 million tons, and we aim to produce around 104 million tons of coal next year.

Which minerals do you think have the greatest potential for trade, apart from coal?

Gold is very important in Colombia, and we forecast about 69 tons of gold production for 2014. Potentially, there are 35 million ounces distributed across 19.9 million hectares. Additionally, we have potential in coltan, as well as platinum and uranium. Nickel is produced in Colombia by a company that belongs to BHP Billiton. Environmental and social responsibility issues are highly important in the exploitation of these materials.

What do you think is necessary for the sector to develop further?

A refining of environmental responsibility regulations is necessary, and not only from the point of view of companies, but also from the government. Clarifying and stabilizing laws and regulations is something that we have been working on, yet still need to improve on.

Could you describe the licensing process for private companies looking to enter the mining sector?

We now have an improved technological platform to which proposals can be submitted from anywhere in the world. Three days after the initial proposal, all necessary documents in support of the proposal must be submitted. There are also certain legal, financial, and technical requirements that must be complied with in order to obtain a mining title in Colombia. We re-opened that window on July 2, 2013, and since then we have received approximately 3,100 submissions. We have also reserved an area of 20.5 million hectares to grant through a bidding process, which we are structuring and hope to be able to launch soon.

In your opinion, what role does the mining sector play in attracting foreign investors?

It has been very important, especially as Colombia is ranked seventh out of the 25 most attractive countries for foreign investors. Even though commodity prices are falling, FDI figures continue to grow as security has improved in our country thanks to government efforts. According to the World Bank and the Fraser Institute, we are very strong in terms of the rule of law and foreign investment protection. Moreover, there is a huge potential for the mining business, in particular considering that our knowledge of the subsoil is still limited; our knowledge of geology is 51%, 20% in geochemistry, and 5% in geophysics. There is a lot to explore in Colombia.

How do you see the future of the Colombian mining sector?

There is not much optimism for the mining sector mainly because of the pricing environment. Yet, while this is not the best scenario, the demand for commodities, along with market developments in China and India, indicate that prices may rise again and create stronger demand. And, as Colombia has strong mineral potential for minerals such as gold, coal, platinum, and coltan, among others, we think that the mining sector can be developed if things are done properly. We are working to solve our environmental issues and to engage with affected segments of the population. President Juan Manuel Santos is actively involved and the relevant authorities are keen to facilitate the licensing process, not only for mining, but also for environmental licensing and agreements with other sectors. Institutional reforms are central to any future success, and the Ministry of Mines and Energy is keen to develop the mining sector. In addition, the Geological Service is gathering data, not only for us, but also for the hydrocarbons sector. Overall, regulations and the improved rule of law are strengthening the sector, which means that investors know more about what to expect in Colombia.

© The Business Year - October 2013

 

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