Mining over the coals

Colombia eyes diversification from coal to copper and gold.

Mining will be crucial in the recovery of economic activity in Colombia following the COVID-19 crisis. The mining industry in Colombia represents 2% of the country’s GDP, generates 350,000 jobs and, in 2019, contributed USD 2.5 billion to the country’s GDP.

Although in 2020 the sector was affected by a drop in demand, the National Mining Agency (ACM) reported that the start of operations in five mining sites: Buriticá, Gramalote, Minesa, Quebradona y Marmato have the potential to generate USD 5 billion, 28,000 jobs and deliver a 1% GDP increase over the next four years. Gold, copper, platinum, uranium and iron are the country’s main mining strategic products as defined by the Ministry of Mines and Energy.

There are numerous challenges to delivering this successfully.

Our sources in the industry most commonly cite a deficiency in exploration as a major challenge. The President of a major copper mining company operating in Colombia observed, “The Government has committed to improving the practices and policies that were affecting exploration. Exploration is one of the main challenges [in Colombia], it is improving but it is a slow process.”

“Exploration is one of the main challenges [in Colombia], it is improving but it is a slow process.”

President, major copper mining company, Colombia

The President continued, “Outside of coal, exploration is still incipient. There is increasing investment in copper exploration, the government wants to become a regional power in copper – it is cheap, its production is clean and technical and there are a varied number of uses and the mines have a longevity of some 40 years. Another mineral that is attracting investment is gold. Although in recent years most of the exploitation of gold had been illicit, this is being modified and regulated.

Despite the government’s ambitions to promote copper, a senior mining engineer did not see much support, “Mining attracts a lot of foreign investment, and the government is not giving incentives or benefits, but it is not discouraging it either.”

“Mining attracts a lot of foreign investment, and the government is not giving incentives or benefits, but it is not discouraging it either.”

Senior mining engineer, Colombia

The global energy transition is a structural threat to coal so Colombia needs to diversify away from it. A specialist mining lawyer saw a number of problems for the future of coal in Colombia, “It is becoming harder to get environmental permits. The Constitutional Court has been issuing judgments that are very pro-environment and pro-communities. Looking at Cerrejón, they have had problems with a modification of their environmental license – in addition to financial problems.”

The head of a major coal mine in Colombia agreed that the operational environment is becoming more challenging, “There are two variables that, in terms of regulation, affect the industry: on the one hand, the environmental authority (ANLA) is becoming stricter. On the other hand, the sector has a high cost burden because in addition to paying royalties they must maintain strong CSR programmes.”

Mining is crucial in the energy transition. Copper and steel are paramount in the construction of renewable energy infrastructure, particularly wind turbines. Other metals like gold are expected to be used in the new generation of electric vehicles due to its electric conduction capacity and resistance. In this context, Colombia will have to prioritise low emission mining which includes lithium, cobalt, iron, magnesium, nickel and copper, among others.

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