Rocky road ahead for Colombia's mining sector as reform looms

Despite the limited development of the mining industry in Colombia, it is still one of the sectors that contributes most to public finances.

Even though Colombia has exceptional geological conditions for mining, the industry faces a series of challenges to achieve greater progress.

High prices of metals have provided a welcome boost to miners, but the industry has encountered problems in recent times due to illegal mining linked to heavily armed criminal groups, particularly in Antioquia and Córdoba departments. 

In addition to these difficulties, this year the mining sector will have to address the challenge created by the reform to the mining code that President Gustavo Petro's government is preparing to send to congress. 

The announcements made regarding the reform have created uncertainty, despite the fact that the president has promised to support the development of critical minerals such as copper and nickel in the national energy transition agenda.

Although the draft text of the reform has not yet been made public, several government officials have spoken publicly about the changes to be proposed, which would include the creation of a state-owned mining company, alterations to the system of allocating areas for mining, policies to protect, formalize and support artisanal mining, and even halting the awarding of open pit mining contracts.

“The government's announcements about the new regulations generate uncertainty and keep the private investment sector awaiting clarity about the future before making decisions,” Juan Camilo Nariño, president of Colombian mining association ACM, told BNamericas.

Last year, Colombia collected over 9tn pesos (US$2.3bn) in mining royalties, exceeding the target established for 2023-24 by 27%, according to data from the national mining agency.

Royalties in 2023 were also the highest in the history of the local mining sector, exceeding those recorded in 2022 by 50%.

NO PROGRESS AT BIG PROJECTS IN 2023

In 2023, two important projects, the US$700mn San Matías copper, gold and silver project owned by Cordoba Minerals, and the US$1.4bn Quebradona copper project, owned by South African miner AngloGold Ashanti (AGA), did not achieve any significant progress.

Quebradona, located in Antioquia and considered by the government to be a project of strategic national interest (PINE), has had its environmental permit delayed since October 2021 after a decision by environmental review agency ANLA.

The company is now conducting an optimized feasibility study to implement improvements in its planned water management to enable it to move forward.

Meanwhile, San Matías, which contains the Alacrán deposit and other satellite deposits, completed a feasibility study for the open pit mine last year, but it will be difficult to meet its aim of starting construction of the mine in the first quarter of this year. 

With the lack of progress at these projects and others, Colombia has failed to take advantage of positive metals prices to launch new projects or encourage exploration, experts say.

Nariño highlights the need to promote exploration to determine the mineral resources that Colombia possesses, considering that there are mining titles for only 2.7% of its territory.

“We need a policy that encourages exploration – 2024 is a decisive year for Colombia's public environmental institutions to understand the need to produce and carry out new projects, particularly copper, which is essential for the government's policies on energy transition and electric mobility," said the ACM president.