Colombia, not long ago one of the favourite destinations for mining enthusiasts, is struggling to keep its resources sector healthy, with about $7.3 billion of expected investments currently stalled due to delays in environmental approvals and decreased demand from overseas.
In an interview with local paper Vanguardia.com, Large Scale Mining Association representative Claudia Jimenez blamed regulatory holdups for the declining growth of the sector.
Colombia’s economy, mostly driven by oil and mining, grew 6.6% in 2011 but has steadily declined ever since. That’s partly due to the economic state of its biggest trading partners, mainly the U.S.
But Jimenez—who represents 13 of the largest miners of Colombia, such as Cerrejon, Cerro Matoso, AngloGold Ashanti NYE:AU and Drummond—also thinks the decline is related to the lack of support for companies in the country. She told Vanguardia she hoped the situation would improve rather soon, as the country now has a National Mining Agency, created two years ago.
The Drummond effect
Some analysts believe the recent sanctions against U.S. mining giant Drummond, which saw its coal shipments frozen in early January for not complying with a new environmental law, may damage Colombia’s embattled mining industry even further.
The firm, Colombia’s second-largest coal producer, didn’t meet the government’s deadline for coal miners to build direct ship-loading facilities in their ports by January 1 this year.
“Whilst Drummond clearly overestimated its position as a big contributor for the Colombian arks, the decision to put a stop to the operations is an economical harakiri and demands a careful analysis,” said OPHIR Mining, Resources & Investment earlier this month.
The experts think Drummond negligence could have been managed through sanctions that didn’t harm the economic chain, as has happened with the interruption of all of Drummond’s shipments, which are equivalent to a third of the total coal production in Colombia.
Over 4,000 jobs could face temporary suspension, but the government has warned Drummond that it will not allow layoffs as the company has had seven years to complete the upgrading.
Reprinted by permission of MINING.com