More than $7 billion in mining investments stalled in Colombia

More than $7 billion in mining investments stalled in Colombia

Over 4,000 mining jobs on the line due to ongoing suspension of Drummond’s exports.

Colombia, not long along 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 because its biggest trading partners, mainly the US, are still on the way to a strong recovery.

But Jimenez —who represents 13 of the largest miners of Colombia, such as Cerrejon, Cerro Matoso, AngloGold Ashanti 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 US 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 Jan. 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 hara-kiri 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 imply harming the economic chain, as it has happened because of 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 will not allow lay-offs as the company has had seven years to complete the upgrading.

Image: Colombian coal miner by Scott Wallace / World Bank Collection via Flickr.