MAC/20: Mines and Communities

Colombians pay the price of gold

Published by MAC on 2006-01-04


Colombians pay the price of gold

4th January 2006

Canadian junior mining companies are cock-a-hoop at the recently-revised Colombian mining law, which gives them unprecedented access to, and control, over the country's mineral deposits.

But, according to many human rights NGOs, these leases are being bought at the cost of unacceptable exploitation of Indigenous and other rural Peoples, backed by the Colombian government and its paramilitary (terrorist) supporters.


Colombia gold again luring miners

by PAUL HARRIS / Toronto Globe and Mail

4th January 2006

The kidnapping of a Canadian mining contractor by Colombian guerrillas was the last straw for Vancouver-based exploration junior Greystar Resources Ltd. Like many other miners, it packed up and abandoned the country in 1999, amid increasing danger and a plummeting gold price.

Horror stories such as Greystar's made Colombia a pariah for most mining investors. The Revolutionary Armed Forces of Colombia had waged a four-decade-long civil war, and had financed the conflict, in part, through kidnappings. Such was the fate that befell a Greystar contractor in 1998. He was later replaced by his boss who, in turn, was released in January, 1999, for a reported $170,000 ransom.

"We went in with a high degree of ignorance of the conditions. We had minimum security and worked on the 'good faith' principle," exploration vice-president Frederick Felder says of the company's early days in Colombia.

But Greystar knew there was gold there, and with a rising gold price, Mr. Felder returned with his exploration team in 2003 to find it. Greystar now has eight drill rigs working and the company's successful return has made it something of a poster child for Colombian authorities keen to show that the country is safe for investors and ripe for investment.

Since he was elected in 2002, President Alvaro Uribe has re-established government control through much of the country with hard-line military intervention. Murders and kidnappings have declined dramatically and the miners are returning.

"Colombia will be attractive for investors," Mr. Uribe told a mining industry conference in Medellin in November. "Colombia is ready to be a major mining country."

Mr. Uribe believes economic development, boosted by foreign investment, is a key part of achieving political stability. (He wasn't on the official conference program, but showed up to deliver a remarkable three-hour discourse, challenging delegates to tell him what needs to be done to make Colombia more attractive for miners.)

Colombia is beginning to catch up with its Latin American peers. Direct foreign investment grew 34.7 per cent in 2004 to $2.4-billion (U.S.), better than Peru and Venezuela but behind the growth rates of Mexico, Chile, Brazil and Argentina, according to ECLAC, the United Nations' Economic Commission for Latin America and the Caribbean.

Mining already accounts for 14 per cent of Colombia's gross domestic product, but coal dominates the industry.

But Colombia has always been gold country and has attracted adventurers, plunderers and pirates for almost 500 years. With gold at $500 and ounce and world production falling to an eight-year low in 2004, foreign miners are warming to the country.

Without modern mining techniques, Colombia produced about 50 tonnes of gold in 2004. "This 50 tonnes implies gigantic potential to develop gold mining activity," said Eduardo Chaparro, mining analyst at ECLAC. He added that Peru's gold production 20 years ago was 50 tonnes and today is more than 400 tonnes.

Colombia's three belts of Andean cordillera have not been tackled with modern technology, but they contain gold, silver, platinum, copper, tin and nickel.

It is "very probable that there exist large undiscovered reserves," says Archak Bedrossian, an international gold consultant and trader.

Canadian financier James Sikora, president and CEO of Primecap Resources Inc., is so impressed with Colombia that he relocated his family to Medellin in July from Edmonton so that he can work on the gold-silver Golondrina property the company acquired in the Narino department or state. "There are great projects at really great prices here. We think Colombia has so much potential that we are going to seek a listing here."

Good geology is seldom enough to attract mining investment. Miners want stable business conditions and a favourable tax regime, aspects Colombia has been working to improve. A new mining code in 2001 aimed to "bring legal conditions for mining in Colombia in line with world trends ... to obtain better competitiveness as a nation with other Latin American states," says Beatrice Duque of Colombia's Ministry of Mines and Energy.

Mining institutions have also been overhauled. For example, the government has created Ingeominas as an agency to regulate the industry. It unites resource administration and geological services in the same office to improve efficiency; as well, more services are being made available on-line.

Mr. Uribe, the country's President, has implemented some of the most competitive taxation conditions in the world, not just Latin America.
"Congress has approved a law so that we can form tax stability agreements with investors and we are working to reduce taxes," he said at the Medellin mining event.

Mr. Uribe's personal commitment is winning converts in many quarters of the international mining community. "Colombia is a lot better than I thought. Seeing President Uribe [in Medellin ] was impressive," says Peter Baxter, exploration manager of Vancouver's Bema Gold Corp.

Mr. Uribe's efforts are already bearing fruit. Colombia jumped seven spots in the World Economic Forum's 2005 Global Competitiveness Report, to 57 of 117 countries, placing it above emerging mining nations, such as Russia, Mozambique, Indonesia and Mongolia. Among Latin American countries, it ranks behind Chile, Uruguay, Mexico and El Salvador .

The mining sector's contribution to Columbia's GDP grew 7 per cent between 2003-2004 while the country's economy grew 3.5 per cent. Foreign investment in mining reached $1.25-billion in the same period, and mining exports increased 24 per cent to $3.1-billion.

Gold giant Barrick Gold Corp., active in Chile, Argentina and Peru, says it is "not ready for Colombia. It is the kind of place where the larger companies look to junior's to go in and see what is there. Large companies see what comes up and go in and either indirectly fund exploration or take a stake," vice-president Vince Borg says.

Colombia has strong competition for mining investment dollars but it is looking a better bet, according to Daniel Linsker, Latin American analyst of British-based consultants Control Risks Group. "Colombia is very institutionalized and offers a more stable political regime, lower taxes and the best security of tenure for mining companies" compared with Peru and Venezuela, he says.

Chile, with its political and economic stability, is the leading country in the region for mining, generating $16.9-billion in mining exports in 2004 from a total export value of $29-billion. Mining posted $6.9-billion in Peru from a total of $12.5-billion, but in
Colombia mining generated $3-billion of $16.5-billion in exports. Colombia also beats out most of Africa according to Mr. Linsker. "You face the same problems Colombia has in Africa but without the political stability," he says, and miners are coming around to this thinking.

"Whether or not kidnapping outweighs the dangers of malaria, AIDS ... or military action is a debatable point, but I would rate Colombia well ahead of much of west and central Africa in terms of its potential and ability to do work. If stabilization continues, [Colombia] will become one of the most sought-after addresses in the mining world," says Colin Andrew, managing director of London-based Cambridge Mineral Resources PLC, which announced during the Medellin event that it had signed options on several gold properties in Antioquia department.

The first major producer to engage in Colombia is South Africa's AngloGold Ashanti Ltd., which has amassed a "huge land package" in Antioquia and Bolivar departments through subsidiary Sociedad Kedahda, says exploration manager Chris Lodder.But it is a Canadian junior Greystar Resources that is in the vanguard of Colombia's gold mining renaissance, as it puts the troubles of the past behind it and works toward a feasibility study for its 10-million-ounce Angostura gold property near Bucaramanga, in Santander department, having so far spent $48-million on the project. "It is always good to be in a country that has been overlooked," Mr. Felder says.


KAIROS, the Canadian Ecumenical Justice Initiatives responded to the article above with a letter that has so far not been published:

5th January 2006

To the editor,
Toronto Globe and Mail

As Canadian gold companies celebrate their newfound opportunities in Colombia (Colombia's troubles pale next to golden opportunities -- January 4th), they risk overlooking the people most affected by their operations: Colombians.

Millions of Colombians have suffered unimaginable pain as President Uribe institutionalized "a more stable political regime, lower taxes and the best security of tenure for mining companies." Sadly, their pain continues.

Through its support of the paramilitary, the Colombian state has become the worst violator of human rights in our hemisphere, and the humanitarian crisis in the country is the America's largest with over 3 million people displaced from their homes.

In June last year, over 1500 delegates from over 250 communities in Colombia travelled to Bogotá to report their stories of pain and loss at the hands of state and para-state actors. Many families and entire communities have been cleared from lands where international mining companies operate, including areas around Medellin and
Bucaramanga, regions rich in gold and largely controlled by paramilitary groups.

Gold seekers like the new Colombian mining law, which grants mining rights to foreign operators for up to 30 years, with an option to renew for another 30 years. The law, written with the financial support of the Canadian International Development Agency, has been called one that "consolidates looting" by the Colombian miners union for its damaging affects on indigenous land holders, small mining operations, and unions, which have been systematically dismantled.

Mining has generated $3 billion for the Colombian state. While this money could have been spent on improving the lives of affected communities, the President has decided rather to spend the windfall on new army recruits for surveillance of gold, oil and energy facilities.

The Ministry of Defence added 79,000 men to the security force last year, bringing greater forces into conflict with the FARC (Colombia's largest rebel force). Large-scale displacement will surely follow.

So, while Canadians profit from mining operations overseas, many locals continue to suffer death and displacement. It's their stories that seldom get told.

John Lewis
Program Coordinator
International Human Rights
KAIROS: Canadian Ecumenical Justice Initiatives
129 St. Clair Ave West, Toronto, ON M4V 1N5
tel: 416.463.5312, ext.224 fax: 416.463.5569
email: jlewis@kairoscanada.org

Please visit our website at www.kairoscanada.org

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