Wednesday, 3 August 2011

April 2011 PDAC Colombia day

It was standing room only at the Colombia Day event organized by the Colombian Government and Colombian Canadian Chamber of Commerce on Tuesday 8 March. In part, this was due to the increasing amount of people interested in investing in exploration projects in Colombia, and investors in Greystar Resources keen to get a bead on whether the government will allow the company to proceed to develop an open pit mine at its Angostura gold project in Santander department.

Mining and Energy Minister Carlos Rodado was unconvincing and mediocre. By contrast, deputy mining minister Tomas Gonzalez came appeared as a bright, sharp and eloquent intelligence, and that understands the mining sector and its needs. Gonzalez is someone that the mining sector will be able to work well with. Unfortunately Minister Rodado has the power.

After beginning by saying how important foreign investment is and how the government has created the conditions for it to thrive: “we have put in place an institutional framework with clear rules of the game,” and “we have to guarantee a speedy licensing process”, Minister Rodado spent an awful lot of time talking about the biodiversity of Colombia and plant and animal species that need to be protected. Maybe he is eyeing the environment minister job! Then a shudder went around the room as his penultimate slide talked about the need to obtain a ‘society license’ (licencia societal) describing it as “not something that is regulated but that is necessary” and that “one can assume that if you respect the environmental codes and use of best practice processes, that it will be obtained”. Clearly this is misleading as there is no guarantee about anything left to the will of public opinion, prompting the CEO of a Colombia gold exploration junior to comment, “there is no list of boxes that you can tick to show you’re safe”.

Deputy minister Gonzalez gave a strong presentation that began by saying that “the interests of government and investors are aligned” and that one big problem for all is that “obtaining licenses and permits is taking too long,” which the government is addressing by hiring more people and providing more funding to improve the process so that by year end the backlog of license applications will have been dealt with. Looking to the future, the government is creating the National Mineral Agency (Agencia Nacional de Minerales) to centrally administer the minerals sector and ensure that the same rules are applied in the same way across the country, acknowledging that “institutions are weak and not at the level we want to support the mining boom”. The design of the new agency should be presented to Congress in September and could be implemented for 2012.

Then things got really interesting. The audience picked up on the minister’s comments about Colombia wanting to attract foreign investors and then asked him for clarity about how holding public hearings to decide the future of a project gives that, when public hearings are not specified in the law. People wanted to know “why the government has sat back and done nothing to counter the lies written in the press about the Angostura project.” Deputy minister Gonzales said “It is frustrating to have the pressure of debate we are having in Colombia now as we are fighting a war with public opinion to demonstrate that we can have sustainable mining”.

Finally, the minister lost his cool and said “don’t confuse changing rules and government back-tracking with a company that has not presented a project well,” and as the furor increased he said “if this is how you are going to act I am not sure we want you in Colombia anyway”.

Earlier, Rodado said that a reduction of income tax is being considered for mining companies to compensate for increases in other taxes. Fine, but if the government continues its watery management of the sector, it will be irrelevant as there will be few companies that progress to the mining stage.

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