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Colombia 2016 | ENERGY & MINING | REVIEW: MINING

Coal mining represents a significant portion of the country's mining sector, with coal and gold being the major players in the sector.

Colombia's mining sector is one that is largely untapped, yet it has the chance to play a significant role in the country's economy in the future. Colombia has large reserves of coal and gold, as well as a number of other minerals and rocks. For the past few years, the government has been pushing to increase foreign investment in the sector and has issued thousands of mining licenses. More recently, with the signing of a ceasefire with FARC, places that were once dangerous for mining companies, or would have high exportation fees, will soon start to become open to foreign activity. The private sector carries out 100% of activities in Colombia, with the main foreign investors being Drummond, BHP Billiton Glencore, Amcoal, and Rio Tinto, which has carried out large-scale exploration projects across the country. Even though the mining sector is relatively untapped, it still contributes a significant amount to the economy. In 2013, it paid $1.2 billion in taxes and royalties and represented 2.1% of the country's GDP. And while in some countries the sector has a poor reputation, in Colombia communities are quite welcoming of mining companies. In 2015, an independent survey was carried out by Brújula Minera in which it found that 73% of the people surveyed in the mining regions believed that mining was a positive thing for Colombia. One of the reasons for this could be the fact that the sector employees around 1 million people, both directly and indirectly. However, while there are many positives, the sector can still have a negative environmental impact on the country; the worst offenders for this are informal or illegal mining operations.

COAL

The coal sector is one of the most developed segments of the mining sector in Colombia. According to BP Statistical Review in World Energy 2015, the country had 6.7 trillion tons of coal reserves, which is the largest in the South American region. In 2015, Colombia was the fifth-largest coal exporter in the world, when thermal coal exports rose by 7.6% compared to the year before to 80.64 million metric tons. Colombia's main export markets for coal are the Netherlands, which imported 17.495 million metric tons and represented an 11% increase in YoY terms, Turkey, which imported 11.561 million metric tons and represented a 24% increase in YoY terms, the US, which imported 6.356 million metric tons with a 17% increase in YoY terms, and Brazil, which imported 6.121 million metric tons representing a 13% increase in YoY terms. While many export markets saw increases, some countries saw significant drops. The UK saw a 32% fall in imports of coal, falling to 4.187 million metric tons, and Chile saw a 23% drop in imports to 4.424 million metric tons. Most of the coal heading for foreign markets went through the Puerto Bolivar export terminal. Owned by Colombia's largest thermal coal miner, Cerrejon, the port moved 32.864 million metric tons of coal, which was a slight fall compared to 2014 by 3.8%. However, Puerto Drummond saw a 27% increase in YoY terms to 27.756 million metric tons while Puerto Nuevo saw a 7% drop to 16.622 million metric tons according to data released by Colombian shipping agent Deep Blue.

Along with being a major exporter, Colombia is also home to one of the world's largest mines, the Cerrejón mine. Operated by Carbones del Cerrejón Limited, the mine covers an impressive 69,000ha and is divided into three main areas: Cerrejón North Zone, Cerrejón Central Zone, and Cerrejón South Zone. The mine is estimated to contain 5.24 billion tons of coal. To help reduce the environmental impact of the mine, Carbones del Cerrejón Limited has turned to Australian company Pacific Environment to help to control the environmental impact of the mining activities and facilitate improved safety, sustainability, and production. Being an open cut coal mine, it has the potential to expose local communities and the surrounding environment to significant amounts of dust and air pollution. Carbones del Cerrejón Limited hopes to use Pacific Environment's EnviroSuite technology to implement cloud-based technology at the mine. It is hoped that by centralizing data the company will be able to better monitor the impact the mine has. The technology will also be able to map the mine and analyze and identify dust concentration so that problem areas can be specifically and efficiently tackled. Air quality will be monitored through the mine and the surrounding area and the data will be collected for analysis. As a major international mine, the pressure to produce results when combating the environmental impact of mining activities can be high, which this new system is expected to provide.

In April 2016, the Colombian Mining Association (CMA) announced that it was to join the World Coal Association (WCA), which is the global network for the coal industry. The CMA represents close to 92% of the nation's coal mining production as well as the explorers, producers, and providers of goods and services related to the mining sector. One of the main tasks of the CMA is to facilitate knowledge transfers to its affiliates and work on improving the sector in its technical, environmental, and social capabilities. By joining the WCA, the CMA will be able to tap into global best practices and knowledge to help create a sustainable coal mining sector. In addition, the CMA will be able to use the WCA to help create partnerships and new lines of business.

GOLD

Colombia represents one of the largest Andean gold producers; however, the segment has a considerable problem with illegal mining. In August 2015, it was estimated that 80% of all gold mining in the country was illegal and equated to a $2.5 billion industry. Illicit miners are present in 233 municipalities and have caused the destruction of 16,784ha of old growth forest and contaminated 19 rivers. In July 2015, President Santo unveiled a new plan to tackle the problem, including fresh measures in the fight against rebel forces, which are thought to be the main cause behind the illegal mines. President Santos also allowed a period for miners to “come clean," whereby illegal mines could file for licenses and begin paying taxes as well as carry out environmental impact studies. For those miners that remain illicit, new, more severe criminal penalties have been brought into place to combat the issue. Along with the financial and environmental impact, rebels behind the mines are thought to have displaced up to 200,000 people in 2013 alone from their homes as a result of being caught in the crossfire.

On the legal side of mining, things look bright. Gran Colombia Gold Corp, the country's largest gold producer, announced that it had hit its targets for 1Q2016 by producing 31,489 ounces of gold, up 4.8% on 4Q2015 and up 31.4% on 1Q2015. This means that the company is on track to meet its yearly target of between 120,000 and 138,000 ounces of gold.