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In a November 12 keynote presentation to the fourth annual Colombia Gold Symposium (CGS) here in Medellin, CGS founder Paul Harris pointed to a recent study showing a drastic decline in mining concession contract applications in Antioquia – the heartland of Colombia gold mining.

According to the study by Colombia-based consultant Portex, the number of mining applications being signed into concession contracts in Antioquia fell from 669 in the 2004-to-2007 period, to 243 in 2008-2011, then 35 in the 2012-to-2015 period, and finally none at all in the 2015-to-2018 period.

Antioquia is the only department in all Colombia that has its own mining authority, Harris noted.

But the Portex study “has shown the delegated authority the regional government enjoys for contracting and supervision is not achieving the goals of decongestion, efficiency, efficacy and fomenting the development of mining and exploration,” as Harris explained in his recent column in the Colombia Gold Letter magazine.

The Portex study found that Antioquia state missed-out on COP$24 billion pesos (US$6.9 million) in government revenues as a result of concession applications not being advanced to signed contracts.

What’s more, another US$173 million per year in capex was lost here because mining companies – lacking concession contracts – didn’t invest in exploration here, Harris noted.

“Unfortunately, the amount of territory which is effectively frozen because concession applications were neither granted nor rejected grew 22.7% annually from 2001 to 2018 from a total of 8,399 hectares to 1,772,948 hectares,” Harris concluded in his report.

The Upside: Higher Quality Mining

On the other hand, positive mining developments are emerging in Antioquia specifically, Colombia generally and also in next-door neighbor Ecuador, Harris noted in his CGS presentation.

Two of these developments include the relatively huge Continental Gold project at Buritica, Antioquia (due for start-up in 2020), and the potential for a giant copper-gold mining project by AngloGold Ashanti in Jerico, Antioquia (see related reports in Medellin Herald, November 18, 2019).

Big new projects for gold and copper mining here are partly a commercial response to a global rebound in metals prices. But the new projects also are gathering strength because governments see metals-mining as a new source of tax-and-royalty revenues -- in the wake of sharp declines in global oil prices and the resulting drop-off in oil-tax revenues, he noted.

In Colombia alone, gold discoveries in recent years could represent a US$94 billion bonanza for government tax-and-royalty revenues, he said.

While some local communities have blocked mining because of environmental concerns -- and Colombian courts sometimes have intervened to hinder some projects -- mining companies also share some of the blame for relatively slow progress in moving projects to commercial operation, he said.

“There have been clumsy community relations efforts by mining companies,” Harris noted here. “People fear mining and don’t understand the benefits. Mining is particularly unloved.”

Some leading global mining execs echo that sentiment, as for example Barrick Gold’s CEO, who recently stated that the “social license” for mining is more pressing than most other issues.

In a related CGS presentation here, Silvana Habib, president of Colombia’s Agencia Nacional de Mineria (ANM, the national mining agency), cited an urgent need for environmentally and socially responsible mining, which she dubbed “Mineria 4.0.”

Excessive government bureaucracy also has been partly to blame for slowing project development here, Habib conceded. Which is why ANM recently developed a “single application platform” for mining applications, employing a computerized system developed in Canada, one of the world’s top mining giants.

The new platform – incorporating both environmental and technical requirements -- can cut the former 325-days-long applications process to 90 days, a 72% reduction, she said.

Asociacion Colombiana de Mineria (ACM) trade-association president Juan Camilo Nariño added here in a separate presentation that mining is the single-largest contributor to health, education and infrastructure funding in Colombia.

While environmental advocates frequently assert that mining is a big threat, Colombia’s legal mining companies (as opposed to the criminal miners) are big spenders on environmental controls, much of which is required by government regulations, Nariño explained.

Future gold-and-copper mining projects could bring billions of dollars of investment and revenues for Colombia -- potentially boosting mining’s contribution to gross national product (“PIB” in Spanish initials) from 1.9% currently to 2.7% over the next decade, he added.

Consultant Warnings

While potential exists for more responsible mining development in Antioquia and Colombia, national elections last month also raise cautionary flags, as Bogota-based consultant Raul Gallegos of Control Risks warned here.

A recent rise of populist governments in Latin America is having a knock-on impact on Colombia as well, even though moderate conservative Ivan Duque handily won last year’s presidential election here.

In addition, Antioquia just elected a relatively mining-friendly governor (Anibal Gaviria) -- and recent Antioquian court rulings indicate relative tolerance to mining projects here, he added.

Still, some mining projects in Colombia likely will continue to face several legal challenges, protests and (sometimes) violent clashes -- with many politicians “deferring to [anti-mining] activists,” he warned.

Any company that attempts to steer-around such opposition by allying with corrupt politicians could face disastrous damage to corporate reputation, he added.

In a related presentation here, Colombia Risk Analysis consultant Sergio Guzman pointed to recent violent citizen protests in Chile, Ecuador and Bolivia – along with a leftward political U-turn in Argentina – as a possible opportunity for Colombia to attract investors fleeing from chaos elsewhere.

Colombia’s recent elections indicate that more voters are moving away from left- or right-leaning parties, in favor of more-centrist leaders focused upon concrete results rather than political posturing.

As a result, President Duque “needs to reach out to independents and other parties” in order to ensure that socially and environmentally responsible projects, reforms and policies will indeed move forward.

If political stability and moderation indeed gather steam, then “mining will be key driver of the Colombia economy over the next few years,” Guzman added.

Concluding the CGS agenda, Colombia’s top environmental scientist Brigitte Baptiste (former director of Instituto Humboldt) recounted the many social, political and environmental challenges facing miners not only here in Colombia but world-wide.

But even with those challenges, Baptiste added that “mining can be part of many sustainable activities” -- and it has vastly less negative global impact than deforestation for cattle ranching and agriculture.

To respond to criticism from environmentalists and other concerned citizens, “you have to be more detailed with your answers today,” in an era cluttered with sensationalist fake news and purely ideological opposition to mining, she explained.

While many environmental groups find the idea of negotiating with mining developers and government regulators “not acceptable,” such dialogue is the “only way to achieve a balance of interests and economic development for the country,” she said.

Combining new mining projects with environmental offsets such as bioparks, private reserves, municipal and regional planning initiatives, new ecotourism reserves and better mining practices are among the options for achieving such balance, she said.

“We need to legalize [responsible] mining and get rid of illegal mining,” Baptiste concluded.

South Africa-based global mining giant AngloGold Ashanti on November 28 unveiled more details of its proposed "Quebradona" copper-gold mining project at Jerico, Antioquia -- including a novel "Biodynamic" nature park that would restore and improve the entire area, as part of its just-filed environmental impact assessment (EIA).

AngloGold first unveiled the scheme at the Colombia Gold Symposium (CGS) November 12-13 here in Medellin, where environmentally and socially responsible mining took front-and-center stage -- outshining even the usual presentations on geology, politics and legalities.

Why this scheme is so important: If the new, socially/environmentally responsible miners succeed in convincing a wider public, then Antioquia and Colombia could look forward to billions of dollars of new investments, big jumps in tax-and-royalty revenues, new jobs and business opportunities, infrastructure improvements, educational advancements, government fiscal solvency -- and even (amazingly) environmental progress.

The "Quebradona' project would become Colombia’s biggest copper-and-gold mine in pastoral Jerico, Antioquia – while actually improving the local environment via post-mining construction of a remarkable “Biodynamic” nature park.

The repercussions could be seen as almost biblical, as AngloGold potentially could become something like a 21st-century version of “Joshua” at the battle of Jerico -- where anti-mining walls could come tumbling down.

According to the company, "after a rigorous process that included more than 14 years of studies of the subsoil and on the social, economic and environmental characteristics of Jericho, Antioquia, AngloGold Ashanti began the process of filing with the environmental authorities of the departmental and national agencies of the EIA for the Quebradona copper mining project, with which the route to obtain the environmental license for the project begins.

"To construct the study, the company carried out exhaustive analyzes and projections by 27 expert consultants in geology, hydrology, ecology, among other specialties. Also, between November 2018 and September 2019, AngloGold heard the concerns of more than 2,600 inhabitants of Jericho through 150 meetings, in order to raise solutions in the same document."

“The exhaustive analysis and dialogue with the community, together with the advanced technology that we plan to use in the project, allow us to have the certainty that the EIA not only integrates the components required by the authorities to ensure compliance with the technical specifications and social and environmental obligations of the project, but reflects high international standards of sustainable mining to ensure that it meets the purpose of converting the mineral wealth of the territory into social, economic and environmental progress, ” added Felipe Márquez Robledo, president of AngloGold Ashanti Colombia.

In response to public concerns, AngloGold Ashanti integrated into the EIA a "gradual regeneration plan of 2,550 hectares of tropical dry forest and high mountain forest of Jericho," according to the company.

 "The investment includes improving the connectivity of fauna and flora in the ecological corridor between the Cauca river, the escarpment area, the Piedras river, the Quebradona ravine basin, the integrated management district (Distrito de Manejo Integrado, DMI) of the Cuchilla-Jardín-Tamesis region, and the La Guamo ravine basin, in such a way that wildlife species recover mobility between ecosystems and increase native plant cover that will generate goods and services that can be used by birds in the region.

"The EIA also ratifies AngloGold Ashanti's commitment not to use water that supplies the Jerico municipality. In the construction and operation [of the mining project], the company will use less than 1% of the Cauca River water -- and recirculation [of Cauca water] will be 80% in the process circuit," according to the company.


Worried environmentalists, some local farmers and some townspeople in Jerico have been fighting the proposed “Quebradona” mine for years, fearing potential water, air and noise pollution, ugly land subsidence and possible increases in local crime and prostitution. In addition, the politically powerful, Medellin-based "Comfama" social-benefits organization has expressed concerns that the new mine might cause undue pollution or other harm to its proposed "Ecoparque Turístico Los Farallones de La Pintada" ecopark nearby. 

But the Colombian Constitutional Court recently ruled that local governments (including Jerico) can’t by themselves ban mining – although the Court also said that the national government ought to consult with local governments before issuing mining licenses and environmental permits. Colombia’s Congress is supposed to enact a new law defining this consultative scheme.

Meanwhile, two recent Antioquia court rulings have nullified prior Jerico ordinances that would have prohibited mining.

Just as significant, the newly elected Mayor of Jerico -- David Alonso Toro Cadavid – publicly announced that if the national government ultimately approves “Quebradona” licenses, then the local government will do everything it can to ensure an environmentally and socially responsible project.

AngloGold’s upcoming license application to Autoridad Nacional de Licencias Ambientales (ANLA, the national environmental licensing agency) is expected to be filed within weeks, according to the company.

Prior to that filing, AngloGold’s “Quebradona” mining project manager Ingrid Suarez and AngloGold Colombia corporate affairs manager Juan Camilio Quintero unveiled to CGS 2019 a startling, English-language animated film showing how the mine would be built, operated, safely closed and then repurposed into an environmentally friendly, 2,548-hectares-wide biopark – without polluting water, land or air, or causing any disastrous surface subsidence.

Rather than just generating profits for AngloGold, the “Quebradona” project aims to generate “social wealth for Jerico, Antioquia and Colombia,” along with “environmental regeneration,” Quintero stated here.

Bonus: The company will put US$2.5 million/year into “Fundacion ProJerico” for social development schemes.

The project design includes avoidance of noise or air pollution -- partly by employing underground processing of extracted rock -- and putting tailings adjacent to an existing, non-native pine-tree plantation – all of which eventually will be replanted with native species and reconnected to biological corridors that previously have been ruined by local deforestation.

The project entails four years of construction, 24 years of productive mining, 10 years of closure work and construction of the “Biodynamic” park, which will include bird-watching towers, an educational laboratory to promote conservation and native species, solar and wind turbines for zero-emissions electric power, and restoration of tropical dry forest.

The “Quebradona” project is located about three kilometers from the Puente Iglesias bridge over the Cauca river, from which 0.25 cubic meters per second of water will be withdrawn for the mine processing works, according to Suarez.

Sediment ponds from mine extractions and processing will feature effluent treatments to ensure that water returning to the Cauca river will meet stringent environmental limits, according to the company.

Tailings will include filtration systems to ensure that any possible water migration to nearby streams wouldn’t be acidic, she said. Plugging of ventilation shafts will avoid water filtration through the mine post-closing. Other systems will be employed to minimize noise, dust and light pollution during the term of mine operations.

Toronto, Canada-based Gran Colombia Gold (GCG) on November 14 reported US$9 million net income for third quarter (3Q) 2019, down from US$14 million in 3Q 2018 “primarily as a result of a non-operating loss on financial instruments in the third quarter this year.”

As for nine-months (January through September) 2019, net income rebounded to US$17.7 million, compared with a net loss of US$11.4 million in the first nine months of 2018..

Commenting on the results, GCG CEO Lombardo Paredes said: “As expected, our third quarter 2019 financial results reflected the positive impact of the higher gold prices while our high-grade Segovia [Antioquia] operations continued to deliver solid operating performance.

“With one quarter to go, we are on track to meet our production and cost guidance for the full year [2019]. For the first nine months of 2019, our revenue was up 19%, our adjusted earnings before interest, taxes, depreciation and amortization [EBITDA] was up 35%, our operating cash flow was up 22% and our free cash flow was up 31%, all compared with the first nine months last year.

“Our financial strength showed further improvement in the third quarter [2019] with our cash position increasing to US$63.3 million -- and we added another CAD$15 million [US$11 million] to our cash position in early November with the strategic investment by Eric Sprott,,” he added.

According to GCG, the company “remains on track to meet its gold production guidance for 2019. With 56,271 ounces produced in the third quarter of 2019, compared with 57,163 ounces in the third quarter of 2018, total production for the first nine months of 2019 was 174,754 ounces, up 7% over the first nine months last year.

“With another 21,011 ounces produced in October, the company’s trailing 12-months’ gold production at the end of October now stands at 232,960 ounces, up 7% over 2018’s annual production,” according to GCG.

Continental Gold Results

Meanwhile, fellow Toronto-based gold miner Continental Gold on November 14 reported a net loss of US$8.47 million for 3Q 2019, compared to a net loss of US$7.26 million in 3Q 2018.

For nine-months 2019, Continental posted a net loss of US$34 million, compared to a net loss of US$17.8 million in nine-months 2018.

The company reported an accumulated deficit as at September 30, 2019 of US$472.7 million and a positive working capital balance of US$31.8 million.

Development activities at the company’s flagship Buriticá, Antioquia project “remain on budget and on schedule for mechanical completion in 1Q 2020,” according to Continental.

Overall construction progress by mid-November 2019 was 90% complete, with 100% mechanical completion now forecast for January 2020.

In a separate November 13 presentation to the Colombia Gold Symposium here, Continental Gold’s Colombia operations CEO Luis Meneses boasted that the Buriticá project eventually will produce some 300,000 ounces of gold per year, generating about US$1 billion in taxes and royalties for Colombia (over the life-of-project) -- along with 4,700 direct and indirect jobs.

Not only has the project won wide community support, but also the project will be environmentally friendly, Meneses explained here.

Among the factors making Buriticá relatively benign: a new, US$44 million water treatment plant, and a tailings recycling scheme that eventually will fill-in the old mine excavation tunnels.

Community development projects sponsored by Continental include fish farms, poultry raising, coffee farming and natural-fibers production. In all, Continental has already invested COP$2.2 billion (US$638,000) in 320 development projects that benefit some 1,600 local people, he showed.

In addition, Continental has invested another COP$2.7 billion (US$783,000) in the “programa de encadenamineto productivo” (PEP) project, which includes laundry services, worker feeding, 500 employee houses, a hardware store, civil works, a mechanical shop, and a uniforms-production workshop -- all employing local people.

In all, some 80% of all Buriticá employees are from Antioquia, including “formalization” of some formerly illegal miners -- “although there are lots of threats surrounding this program” from criminal miners, Meneses cautioned.

On the environmental front, Continental is working with Fundacion Pantera, Animal Bank and Conservation International on biodiversity projects including efforts to preserve five species of wildcats in the greater area, he added.

Colombia’s national highway institute Invias announced November 25 the partial reopening of the Medellin-Bogota highway at kilometer 73 (San Luis, Antioquia) following a November 13 landslide that blocked all traffic.

According to Invias, more than 84,000 cubic meters of rocks and dirt have been removed so far, but the job isn’t quite finished.

As a result, only one lane of the two-lane highway is now open for alternating traffic between 7 a.m and 7 p.m. daily -- “as long as weather conditions allow and the condition of the hillside [where the landslide began] does not affect the safety for users,” according to Invias.

In total, 70 pieces of heavy equipment including backhoes, dump trucks and bulldozers are working to clear the site and unblock the adjacent “La Leticia” stream crushed by the landslide. One motorist was killed in the landslide incident, but no other fatalities or injuries have since been reported.

The removed dirt and rocks have been transported to the municipality of San Luis for reuse on tertiary rural roads, according to Invias.

Medellin-based multinational utilities giant EPM announced November 15 that its third quarter (3Q) 2019 consolidated net income fell 25% year-on-year, to COP$457 billion (US$134 million), down from COP$607 billion (US$177 million) in 3Q 2018.

The 3Q decline came despite a 9% year-on-year hike in gross revenues and a 13% boost in earnings before interest, taxes, depreciation and amortization (EBITDA), according to the company.

On the other hand, nine-months 2019 consolidated profits (January through September) rose 9%, to COP$181 billion (US$53 million), from COP$166 billion (US$48 million ) in nine-months 2018 -- mainly thanks to greater demand for energy and higher power prices in Central American markets, along with higher energy sales in Colombia’s regulated power market, according to EPM.

Nine-months 2019 EBITDA also rose 15% year-on-year, while gross income rose 11% over the same nine months in 2018, according to the company.

EPM’s international affiliates generated 36% of corporate revenues, at COP$825 billion (US$241 million), up 20% year-on-year.

Its “Ensa” affiliate in Panama generated COP$361 billion (US$105 million) thanks to a boost in client numbers and higher prices. The “EEGSA” affiliate in Guatemala generated COP$272 billion (US$79 million), thanks to greater power sales, while the “Delsur” affiliate in El Salvador brought-in COP$147 billion (US$43 million) mainly due to greater residential and industrial demand along with higher power tariffs.

As for EPM’s Colombia affiliates, the energy division’s income rose 7% year-on-year, while the water, sewage-treatment and trash-collection utilities boosted income 116% year-on-year, mainly thanks to the start-up of the “Aguas Claras” sewage plant north of Medellin.

Hidroituango Outlook

Meanwhile, EPM revealed that as of September 30, 2019, the Hidroituango hydroelectric project had reached 74.4% completion.

“For commissioning, it is estimated that the first power generation unit could enter service from the last quarter of 2021. However, this date of commissioning is very dynamic, due to the changes that occur in the variable techniques and the evolution and efficiency of the measures implemented to meet the contingency,” according to the company.

As for the company’s Mapfre insurance policy covering lost power sales and physical damage at Hidroituango, “the policy establishes an insured limit of US$2.55 billion for coverage of material damage to infrastructure and equipment. It also has coverage to cover the delay-of-entry-into-operation (money no longer received for damages arising from the contingency) for US$628 million, amounts that establish the maximum responsibility of the insurer,” according to EPM.

“The amount that the insurer will recognize and its corresponding payment schedule will be the result of a rigorous analysis of the quantification of damages, the results of which will be linked to the conditions of the policy such as deductibles, limits, additional coverage, among others,” the company added.

Medellin’s “Plaza Mayor” on November 14 unveiled a COP$32 billion (US$9.4 million) expansion plan that over the next 10 years would modernize a host of convention facilities and add a new hotel.

The “2019-2029 Events with a Future” scheme includes 10 proposals both within and outside the convention center, along with “modernization of spaces and extension of complementary services,” according to Plaza Mayor, which is owned by the City of Medellin.

A new tower would be built over the current parking lot at the Yellow Pavilion, incorporating a 200-room hotel, co-working spaces and office spaces.

The tower also would offer “small- and medium-sized salons and other services such as restaurants, spa, beauty salon and commerce,” according to the organization.

Plaza Mayor general manager Juliana Cardona Quirós pointed out that the additions and upgrades would capitalize on Medellin’s growing global event-marketing successes, with the city having hosted more than 371 international events in just the last four years.

As a result, Plaza Mayor would extend its offer of convention services to other areas of the city.

At Plaza Mayor, projects would include expansion and adaptation of annexed areas at the Yellow Pavilion, relocating the garbage-recycling zone and making the Blue Pavilion independent.

The scheme also includes developing “pleasant spaces for rest, work and meetings, to ensure comfort and connectivity for our visitors,” according to the organization.

A new electronic signaling system would help visitors orient themselves around the various spaces, while a new “Innovation Center” aims to boost business tourism.

A new food area would replace the existing area “providing more and better offers for customers and visitors,” according to Plaza Mayor.

The scheme also includes creation of a single event-ticket window (replacing multiple sites) for greater customer convenience, as well as storage lockers and improved connectivity.

Medellin-based multinational Grupo Orbis – producer of “Pintuco” paints, “Otek” water-handling systems and numerous chemical products – on November 14 posted a COP$10 billion (US$2.9 million) net profit, a big reversal from the COP$8 billion (US$2.3 million) net loss in 3Q 2018.

Gross revenues rose 6.3% year-on-year, to COP$1.08 trillion (US$315 million), while earnings before interest, taxes, depreciation and amortization (EBITDA) jumped 125%, to COP$87.7 billion (US$25.6 million).

These positive results are mainly due to a 9% jump in paint sales and a 71% jump in paints-division EBITDA -- spurred by architectural-sector demand along with general repainting demand in Colombia, according to the company.

Meanwhile, the Orbis chemicals division is benefitting from efficiencies resulting from the recent transfer of production to its Cartagena, Colombia facilities.

The company also credited better financial results from its affiliates in Brazil, Argentina and Central America.

Meanwhile, corporate financial obligations -- net of cash and short-term investments -- declined year-on-year, to 2.9-times, versus 4.2-times, the company added.

Sura 3Q 2019 Net Income Jumps 35% Year-on-Year

Friday, 15 November 2019 10:27 Written by

Medellin-based multinational insurance and investment specialist Grupo Sura on November 14 posted a 35% year-on-year jump in third quarter (3Q) 2019 net income, to COP$1.5 trillion (US$438 million).

The biggest contributor to net income (COP$682 billion/US$199 million) in the latest quarter came from the Sura Asset Management (AM) division, which manages a growing basket of profitable pension funds in Central and South America.

Second-biggest net-income contributor was the Suramericana insurance division, at COP$300 billion (US$87.7 million), according to the company.

Corporate-wide operating revenues rose 14.8% year-on-year, to COP$16.2 trillion (US$4.7 billion), while operating expenses hit COP$13.8 trillion (US$4.03 billion), up 13%.

“This produced operating earnings amounting to COP$2.4 trillion (US$701 million), for a growth of 26.3%, thanks to our ongoing efforts to gain greater efficiencies, optimize the profitability of our operations and the positive returns on the investment portfolios,” according to Sura.

“Likewise, fee and commission income continued to show a resilient level of growth (+9.9% in COP or +2.4% in local currencies) due to lower fee and commission rates in certain operations,” the company added.

Meanwhile, the Suramericana insurance division’s written premiums hit COP$9.5 trillion (US$2.78 billion), up 15.1%, while revenues from services rendered came to COP$2.8 trillion (US$818 million), up 23.7% year-on-year.

While Suramericana’s 3Q 2019 net income dipped 24% year-on-year, this fall “does not reflect the positive of its main operations due to the non-comparable impacts that affected the company’s performance,” according to Sura.

“These mainly included the macroeconomic and political situation in Argentina, the current situation of [lagging cost recovery] in the public health sector in Colombia and the VAT [value-added tax] expense incurred with life insurance commissions, also in Colombia.

“The current growth in the number of users of our healthcare services, which also benefits the other healthcare provider companies such as ‘IPS’ and ‘Dinamica,’ accounted for the growth posted in both healthcare revenues and the cost of services rendered.

“The retained claims ratio increased from 54.1% to 54.8%, which was mainly due to the increase in car and mandatory road insurance [SOAT] in the non-life [insurance] segment,” the company added..

As for Sura’s life-insurance segment (including Seguros de Vida Colombia, Asesuisa Vida in El Salvador, Seguros de Vida SURA Chile and Seguros Sura Vida in México), “the merger between the life insurance and workers’ compensation subsidiaries in Colombia took place during the first quarter of this year, with the former now posting the results of their combined operations,” the company noted.

“The life insurance segment shows a growth of 39.3% in written premiums thanks in part to the acquisition of Seguros de Vida SURA S.A. in Mexico in 4Q 2018, which contributed a total of COP$22 billion (US$6.4 million) to the consolidated production figure for this past quarter.

“If we were to exclude the contribution from this recent acquisition, the group life solution would have recorded a growth of 11.2% mainly due to the positive dynamics seen with the affinity channel in Colombia and El Salvador.

“The workers’ compensation solution also showed a growth of 16.2%, with this uptrend in revenues generated by a greater number of affiliates.

“The pension insurance solution also provided a significant amount of growth thanks to new business obtained in El Salvador for the 2019 policy.

“Furthermore, this past quarter marked one year since the capital optimization strategy was first deployed with the healthcare insurance solution in Colombia. This consisted of matching premiums as posted on the income statement with the actual collections of such, for which the corresponding adjustments were made to both reserves and capital requirements to levels consistent with the company’s collection patterns, which in turn had a positive effect on the working capital invested in this solution.

“This new initiative, upon completing its first year of having been introduced, generated a 167.5% increase in written premiums, which in turn implied higher reserves to be set up which leveled off the growth in earned premiums to 27.3%,” according to Sura.

Medellin-based multinational supermarket giant Grupo Exito on November 14 posted a COP$11 billion (US$3.2 million) net income for third quarter (3Q) 2019 – not comparable to 3Q 2018 since its former Brazilian operations are now officially listed as a “discontinued operation.”

Following a September 12 decision by most Exito stockholders and its board, Grupo Exito sold its stock holdings in the “Grupo Pão de Açúcar” Brazil operation to its France-based Grupo Casino holding company.

Exito’s corporate-wide gross income in 3Q 2019 rose 7.5% year-on-year, to COP$3.6 trillion (US$1.05 billion), while recurring earnings before interest, taxes, depreciation and amortization (EBITDA) rose 11% year-on-year, to COP$275 billion (US$80 million), according to the company.

Colombia operations saw their best sales in three years, posting 5.1% year-on-year growth, while recurring EBITDA margin grew 12.8% in 3Q 2019 and 4% in the first nine months 2019.
As a result, Colombia generated a net profit of COP$11 billion (US$3.2 million) for Grupo Exito.

“The results in Colombia show the positive impact of the implementation of innovative strategies, both in the ‘Exito Wow’ and ‘Carulla Fresh Market’ [store formats] and the maturation of the ‘Surtimayorista’ format. In addition to e-commerce and home sales, these accounted for 76% of total sales growth in the quarter,” according to the company.

In its Uruguay division, Grupo Exito bragged that this operation “continues to be the most profitable of the organization with an EBITDA margin of 8.4% and growth of 17%.”

In Uruguay, sales grew 4.1% year-on-year, “mainly due to the fresh-market format that already represents 34.5% of total sales,” according to Exito.

As for Argentina, “in the middle of a very challenging macroeconomic context, the company’s figures show a good commercial performance with sales growth of 36.7% in local currency,” according to Exito.

The company’s real estate business in Argentina “continued to leverage the results with more than 170,000 square meters of leasable commercial area and 93.4% occupancy.”

Grupo Éxito ended 3Q 2019 with 651 food outlets: 535 in Colombia, 91 in Uruguay and 25 in Argentina, with a consolidated sales area of more than 1 million square meters.

“The result of Grupo Éxito is very positive in sales growth and consolidation of its operating profit,” said Carlos Mario Giraldo Moreno, President of Grupo Éxito. “In the midst of very competitive markets, this profitable growth responds fundamentally to innovation in formats, digital transformation, complementary businesses such as real estate, credit, insurance and travel.

“In Colombia, the 'Éxito Wow, 'Carulla FreshMarket' value formats, and the cash-and-carry format brand, 'Surtimayorista,' continue to grow in double digits, and the electronic and direct commerce channels already represent 4.4% of the total sales of the company in this country, ” added Giraldo.

Colombia’s Controller General (Contraloria General de la Republica, CGR) Carlos Felipe Córdoba Larrarte announced November 14 that his agency has opened an investigation into two former Medellin Mayors, two former Antioquia Governors and three EPM representatives potentially responsible for construction errors and financial losses resulting from the collapse of a diversion tunnel last year at the US$5 billion “Hidroituango” hydroelectric project.

The decision to probe the former politicians, EPM officials and “Hidroituango” board members – including 29 others involved in the construction – comes on the heels of a CGR announcement in September determining that EPM could lose as much as US$1.17 billion in certain revenues and costs resulting from that tunnel collapse (see Medellin Herald September 20, 2019).

Immediately following the November 14 CGR announcement, EPM general manager Jorge Londoño de la Cuesta stated that EPM hasn’t yet been notified of the probe, but will cooperate with the investigation.

While the CGR didn’t name which politicians or officials are under investigation, the press release implicitly excludes current Medellin Mayor Federico Gutierrez and current Antioquia Governor Luis Perez.

Incoming Governor Anibal Gaviria was a Medellin Mayor during the time-frame cited in the CGR probe, as was former Medellin Mayor Alfonso Salazar.

Former Governors Luis Alfredo Ramos and Sergio Fajardo (another former Medellin Mayor) also were serving as Antioquia Governors during the time cited in the probe, as noted in a report by Colombian daily newspaper El Tiempo.

Former EPM general manager Juan Esteban Calle and current general manager Londoño de la Cuesta also would face questioning, along with former EPM and Hidroituango project board members.

The CGR announcement states that Hidroituango losses would include COP$2.97 trillion (US$860 million) in “loss or destruction of value of the project” as well as another COP$1.1 trillion (US$318 million) “due to resources no longer received by the government as a result of the non-operation of the hydroelectric plant,” which originally was supposed to have started-up at end-2018 -- initially at one-quarter (600-megawatts) of its eventual 2.4-gigawatts capacity.

EPM now estimates that first power output (at 600-MW) won’t happen until end-2021, three years after the original, planned start-up – hence costing hundreds of millions of dollars in lost power sales.

The CGR report alleges that missteps in Hidroituango construction, engineering and spending decisions were “not justified, because they obeyed the need to address situations that arose as a result of serious problems in the planning and execution of the project, attributable to improvisation and the lack of follow-up and control of the related parties as presumed responsible.

“These greater unjustified investments destroyed the value of the project as it was conceived from its baseline, thus generating damage to the state’s assets [including its part-owners: the city of Medellin and the Department of Antioquia] in the form of impairment or loss.

“In turn, as a result of the non-operation of the hydroelectric plant [that is, at the initial December 2018 start-up deadline], due to the unjustified increases in the work schedule, which were due to planning problems and construction errors, damage to the state’s assets was generated in the form of impairment,” according to the CGR report.

“After completing the respective notification process of this opening order, the CGR’s Office of the Intersectorial Comptroller Delegate No. 9 of the Unit of Special Investigations against Corruption will proceed to cite the alleged perpetrators,” according to CGR.

“After this process, the Office of the Comptroller General of the Republic will proceed to make the corresponding decision” on whether to impute charges or dismiss the case.

Page 3 of 45

About Medellin Herald

Medellin Herald is a locally produced, English-language news and advisory service uniquely focused upon a more-mature audience of visitors, investors, conference and trade-show attendees, property buyers, expats, retirees, volunteers and nature lovers.

U.S. native Roberto Peckham, who founded Medellin Herald in 2015, has been residing in metro Medellin since 2005 and has traveled regularly and extensively throughout Colombia since 1981.

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