Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Colombia’s largest coal mine, Cerrejon, exceeded its export and output goals for 2012, reported local newspaper Qué Es.
The operation —a joint venture between BHP Billiton (ASX, NYSE:BHP), Anglo American (LON:AAL) and Xstrata (LON:XTA)— produced 34.6 million tons of coal last year, 4% more than the projected 33.3 million tons and exported 32.8 million tons, 2.5% over the 32 million ton target.
The company is investing $1.3 billion to increase annual production in Cerrejon, considered the world’s largest coal open pit, to 40 million tonnes by 2015.
From 2002 to date, the mine has exported 307 million tons of coal, helping Colombia consolidate its position as the world’s fourth largest exporter of the commodity.
The South American country’s mining sector has been hit this year by a spate of labour disputes, delays in environmental permits and an increase in attacks by rebel groups against installations.
A recent report by political risk firm Exclusive Analysis showed the Revolutionary Armed Forces of Colombia (FARC) and a new generation of drug gangs (known locally as “Bacrims”) have been increasingly turning to gold mining to finance their terrorist acts.
Worker unrest in the mining sector was partly responsible for the contraction of the economy by 0.7% in the third quarter from the second quarter.
The sector grew just 0.5% at an annualized rate while it tumbled 1.2% in the period from July to September compared to the previous three months.
Since 2002 Colombia’s government has stimulated the industry, increasing the distribution of mining permits in the country. Yet, some estimate that nearly half of all mining in the nation is illegal, or conducted by small-scale mines without formal permits.
Authorities have vowed to make it easier for explorers to acquire legal permits, but there are still at least 6,000 mines in Colombia currently considered illegal, according to a report by Insight Crime.
In November last year, President Juan Manuel Santos presented a package of measures, including a proposed bill before the Congress, aimed to make illegal mining a crime punished by the country’s penal code.
Apart from the bill, Colombia’s government said it would issue two executive decrees aimed at defining the concept of illegal mining.
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