Colombia looks to recover $181.5m in alleged unpaid royalties from South32

Cerro Matoso nickel mine – Image courtesy of South32

Colombia has launched an investigation over alleged unpaid royalties of 619 billion pesos ($181.5 million) from iron and nickel production at Australian miner South32’s Cerro Matoso mine between 1982 and 2012, the country’s comptroller said Wednesday.

According to initial findings the Australian miner applied incorrect discounts and deductions to the detriment of the Andean country’s resources, the comptroller said.

“An investigation has been opened following an audit and preliminary inquiry because there are strong concerns about whether royalties which belong to the Colombian state are being adjusted correctly or incorrectly,” vice-comptroller general Ricardo Rodriguez said in a statement.

He said a review found the mine’s operator to have applied certain deductions which have nothing to do with production processes, including for journeys, hotels, clubs, transport and port costs that should not have been deducted.

Cerro Matoso, one of the largest open-pit ferro-nickel mines in the world, is located in a rural part of Cordoba province, in the north of Colombia. During the 2019 financial year Cerro Matoso produced 41,100 tonnes of nickel.

In an email to Reuters, South32 said the attempt to retrospectively recover royalties was both technically and legally invalid as it concerns two concession contracts which were finalized in 2012 and are being settled in Colombian courts.

The Australian miner said the figure quoted by the comptroller is not based on the contractual royalty formula.

“We will take all necessary legal action to defend our legitimate interests and provide the necessary legal certainty to promote and protect foreign investment in Colombia,” the company said.

The investigation also concerns officials from Colombia’s National Mining Agency (ANM), who are in charge of overseeing royalties are administered correctly, the comptroller said.

“If this is found to have negatively impacted the state, this damage will have to be compensated,” Rodriguez said.

($1 = 3.410,24 pesos)

(By Luis Jaime Acosta and Oliver Griffin; Editing by Alistair Bell)

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