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Good News, Bad News on Mining in Colombia, Antioquia This Month

Colombian economy Written by  Wednesday, 07 October 2015 15:23 font size decrease font size increase font size 1
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First, the good news: The Alliance for Responsible Mining (ARM) and Swiss watch and jewelry maker Chopard announced October 7 that several more mines in Colombia -- beyond those in Antioquia -- just obtained “Fairmined” certification under a joint ARM-Chopard project.

“As part of their long-term CSR [corporate social responsibility] strategy, called ‘The Journey to Sustainable Luxury,’ Chopard has financially supported the mining organizations in reaching ‘Fairmined Certification’ as well as sourcing ‘Fairmined Gold’ from other Fairmined certified mines for various jewelry and watch creations and for the famous Palme d’Or [trophies] of the Cannes Film Festival,” according to ARM.

The Fairmined Certification system was developed by ARM to “support the transformation of artisanal and small-scale mining (ASM) into a social and environmentally responsible activity that creates positive impact in mining communities” (see “Antioquia’s Big Mining Problems, Possible Solutions Detailed in New Study," in Medellin Herald, September 29, 2015).

“The collaboration between ARM and Chopard is part of a larger project that ARM is implementing in Bolivia, Colombia and Peru thanks to the support of the Inter-American Development Bank (IDB) and the Multilateral Investment Fund (MIF),” ARM added.

Now, the bad news: Narco-terrorist gangsters known as “Los Urabeños” recently murdered two miners and wounded two others affiliated with the “Damasa” gold-mining organization in Segovia, Antioquia, which mines on behalf of Canada-based Gran Colombia Gold (GCG).

According to an October 6 report from Medellin newspaper El Colombiano, 1,600 miners working for Damasa affiliates Navar Asociados and Mineros Asociados have quit their jobs because of the murders and threats arising from miners' refusal to pay extorsion to “Los Urabeños,” according to the report.

Even though the Colombian government has sent 80 more soldiers and 230 more police officers to Segovia in response to the latest violence, “the situation has become unsustainable,” Damasa spokesman Julio Erazo Cordoba was quoted as saying in the report.

Antioquia police commander Ramiro Riveros added that in the wake of the recent violence in Segovia, police have captured 11 suspects in Segovia, Remedios, Cáceres y Tarazá in a “plan of attack against extorsion,” according to the report.

Damasa workers have operated the “El Silencio” and “Providencia” gold mines via an operating contract with GCG, which has enjoyed a relatively good reputation in Antioquia because of special attention to worker’s rights, benefits, health and safety, and environmental protection.

Just days prior to the announced cessation of mining by Damasa, GCG cofounder and chairman Serafino Iacono boasted to Medellin Herald that GCG has been producing an average of 120,000 ounces of gold annually.

“We have a great program in Segovia with small miners where we have affiliated them to our company, trained them [and] gave them technical support. They are our contract miners, organized with all the benefits in a cooperative.

“They pay taxes. They have safety standards. And they don't use mercury. This project that we created is now being taken as an example by the government as a way to stop illegal miners,” Iacono added.

GCG describes itself as “currently the largest underground gold and silver producer in Colombia with several underground mines in operation at its Segovia and Marmato operations” in Antioquia.

The Segovia-Remedios mines in Antioquia have been in operation for more than 150 years, according to GCG.

 “Gran Colombia Gold’s mining plan at its Segovia operations is comprised of both company miners and third party contacted miners, also known as artisanal miners,” according to GCG.

“Under these existing contracts, the artisanal miners work the company’s mines and deliver the ore to the company’s mill for processing. Under this model, Gran Colombia Gold formalizes the artisanal miners, which provides the miners with health and pension benefits, health and safety training and a safer work environment.

“There are significant environmental benefits to the people and the community of Segovia because the Gran Colombia Gold operated processing plant eliminates the personal and environment exposure to mercury.

“With the growth of independently operated ore processors that use mercury to extract gold from the ore, this area of Colombia releases an estimated 60 to 100 tonnes of mercury into the environment every year and has the highest mercury pollution per-person in the world,” a problem that could be avoided if more miners adopted the relatively environmentally friendly GCG model of operation.

Read 5470 times Last modified on Thursday, 21 January 2016 11:03

1 comment

  • Comment Link Ray DeMotte Thursday, 08 October 2015 09:22 posted by Ray DeMotte

    Colombian Mining Dilemmas: One Expert’s Viewpoint

    By Ray DeMotte, Vice President-Business Development and Chief Financial Officer, Brookville Enterprises, Inc., Richmond, Indiana, USA

    Having experienced entering and establishing an exploration venture in Colombia, I can compare this to similar experiences in Mexico or Peru, or for that matter the United States or Canada.

    Colombia perhaps is one of the best prospective mining areas in the world in terms of exploration potential and potential to increase production -- and this could significantly contribute to the overall economy and in particular for poorer sections of the population.

    However, Colombia could better realize this potential if some changes are made.
    Here are some areas where changes are necessary:

    1. Regulatory Burdens:

    Colombian mining regulations are excessive -- and what’s worse, they are incomplete. Overlapping departmental and national agencies make it almost impossible to have clear guidelines. To illustrate the point, it is easier to do mining in Bolivia than in Colombia.

    2. Lack of Strategic Plan:

    The answer of government appears to gear everything to large projects with government “experts” guiding the process. This raises several issues:

    a.) A need to develop local expertise: Colombia has a limited number of technical and administrative personnel conversant with mining. On top of this, often one has to bring in junior geologists form Peru or Mexico, because local, experienced mining exploration geologists needed additional training. Any strategic plan should address this issue. Encouraging exploration as well as production will increase the mineral exploration experience of local personnel -- and increase chances of new discoveries!

    b.) A lack of clarity: Often, regulations are so unclear that even a government official may not know what is permitted or not permitted. On top of his, one could go to best law firm in country for outlining required steps to get permits, and then one discovers out of the blue that additional agencies had vague involvement, but also require permits.

    c.) A lack of understanding that foreign involvement is critical to create a vibrant exploration environment: Foreign investment would bring-in capital and expertise -- plus start addressing issues of environmental and safety issues.

    In my experience, we have found uniformly that beyond just meeting regulations, we also have implemented environmental and safety measures that a small Colombian miner either wouldn't do or was not aware of. Encouraging foreign exploration companies with a clear regulatory environment would bring in capital, but even more important, expertise. This also goes back to regulations: It can often be so expensive to comply with government regulations that small miners simply cannot comply even if they wish to.

    3. Security:

    Small miners will continue to be a large proportion of the industry and security issues won’t disappear overnight. However, with more involvement by foreign companies, and with a government focused on creating a favorable environment for exploration and production, and with an added emphasis on providing security, then this situation could improve step by step.

    More precise reporting of tonnages mined and grades, and processing through regional mills, would improve government ability to track down what “seeps” out of the system. Flexible rules reasonably applied would permit small miners to “enter the system.”

    In summary, a strategic plan -- implemented by perhaps a “mining czar” to cut through the maze of regulations, unclear regulations, and excessive focus on production, is required to:

    • Simplify the regulatory environment and promote foreign involvement in exploration as well as production;
    • Help regulators recognize that foreign involvement is the surest path to developing local personnel with experience in mineral exploration and advancing safety and environmental methods;
    • Help regulators recognize that the small “traditional” mining sector needs to be flexibly addressed to bring traditional mining into compliance- and thereby with foreign assistance increase production;
    • Improve security for the mining sector. This should be standardized and be given a greater priority even if this requires a specific tax on the mining-resource sector.

    Such strategic models already exist in Mexico, Peru and Bolivia, providing a pathway on how to create a more vibrant mining sector in Colombia.

    I have not the slightest doubts that the mining sector could create an economic boom in Colombia in a responsible manner. Expecting small miners to have funds to contract law firms and consultants with uncertain returns or even to jeopardize their business won’t work. The more compliance is enforced, the less the problem will be solved. Flexible transition is needed, and why not have a foreign company provide the risk capital to do so?

    To quote one example: We entered into discussions with a small miner whereby we would provide capital for equipment and expertise to expand the production, and at the same time explore the property. In terms of the costs and time to complete the requisite studies, it would have cost four times as much and taken up to five times as long to get permits if properly applied, compared to what’s required in other Latin American countries. A dynamic strategy to address these issues -- implemented to benefit the poor, the country and environmental management -- would address these issues quite rapidly, if the will is there.

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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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