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• Comment Link 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.