THE ROAD TO EL DORADO

Colombia 2017 | ENERGY & MINING | FOCUS: GOLD

2016 has been a mixed and sometimes challenging year for the mining industry in Colombia, especially for gold, due to legal issues, competitiveness, and high volatility in international markets. While gold exports rose 40.5% in 2016 to USD1.5 billion, the Colombian Mining Association estimates that up to 80% of gold production is done illegally.

While Colombia maintains an attractive destination in the medium to long term, the country is coming off a challenging year in the gold mining sector. Although gold exports rose 40.5% in 2016 to USD1.5 billion, the Colombian Mining Association estimates that up to 80% of the country's 2 million ounces of gold production is done illegally. According to a recent Bloomberg report, gold has even surpassed cocaine as a revenue source for armed guerrilla groups such as the ELN.

However, major recently completed or upcoming mining operations and increased efforts by the public and private sectors to fight against and formalize illegal mining make for a sunnier picture. Projects from AngloGold Ashanti, Antioquia Gold, Continental Gold, and Red Eagle Mining are estimated to produce roughly an additional 650,000 ounces per year between 2017 and 2020.

The end of 2016 saw Red Eagle Mining's San Ramon project enter production, with expectations for 70,000 ounces in 2017. Further down the pipeline are the Cisnero mine (Antioquia Gold), which has a capacity of 30,000 ounces per year, Gramalote (AngloGold Ashanti/B2 Gold), with up to 350,000 ounces, and Buriticá (Continental Gold), which may have an additional 250,000 ounces. These mines will bolster Colombia's formal mining sector, which consists primarily of Toronto-based Gran Colombia Gold and the local Mineros SA.
Despite some of the country's well-documented challenges in mining, there are reasons to be optimistic. For one, there are still many rich untapped resources; AngloGold Ashanti's still-in-development La Colosa project, for example, is considered to be one of the world's largest untapped gold assets, with the potential for anywhere between 800,000-1.2 million ounces per year for 20 years. The security situation in mining areas, which has already made dramatic strides since the early 2000s, is set to become even more stable in light of the peace deal with FARC and the ongoing negotiations with the aforementioned ELN. The conclusion of the peace deal, which consumed much of Colombia's political will and attention, will now allow the government to tackle issues of mining and land regulations that have hindered the sector.

Colombia is eager to move on from a history of legal issues regarding permits and the protection of mining rights, which the private sector often cites as the major hindrance to doing business in the mining sector. It still faces a slew of international lawsuits, such as the ongoing dispute between Eco Oro Minerals and Colombia over its USD200 million mine in Angostura, though a string of key permit issuances for projects such as Continental Gold's Buriticá in 2016 are evidence that they may be turning a corner.

The security situation, beyond ensuring the safety of existing projects, also unlocks large areas of land previously inaccessible for exploration. The true potential of these areas is still uncertain, but going by geological profiles and proven discoveries near former conflict zones on the Ecuadorian side of the border, there are reasons to be optimistic. Colombia, with its history of natural blessings and manmade curses, is perhaps finally on the road to fabled city of El Dorado.