Mining News

Goldman Heading out of Colombia

Posted by Cheryl Rutledge on 5/12/2015 12:08:54 PM

By Kristine Ramsbottom, Taylor Jackson and Kenneth P. Green

This past week, investment banking giant Goldman Sachs announced a planned divestiture of its mining holdings in Colombia. Partial justification for the proposed sale arises from claims of “operational difficulties.” According to the Wall Street Journal, these included the forming of a human blockade to protest labour issues, rapidly falling coal prices, and the effects of an environmental law that shut down production for almost an entire year.

Other issues specific to Goldman’s measures are pressure from social movements and protests that had the ability to shut down production at the La Francia mine for over nine months in 2013.

The world’s largest miner—BHP Billiton—also recently had one of its Colombian mines shut down temporarily due to labour strife.

Other reports note additional concerns over Colombia’s security situation, policy uncertainty, the impact of small-scale mining, and mobilization of anti-mining groups as risks towards industry development.

This retraction of foreign investment from Goldman Sachs may not bode well for Colombia, as according to the Fraser Institute’s 2014 Annual Survey of Mining Companies, the region was already ranked modestly on the Investment Attractiveness Index—a combination of policy and mineral potential—with a score of 55.2, placing it 58th out of 122 jurisdictions included in the survey.

Colombia’s Investment Attractiveness rank appears to be higher than other comparable jurisdictions due to the country’s expansive mineral potential. The region is said to have 5,557 million short tons (MMst) of probable coal reserves, the largest in South America. Additionally, Colombia has the 4th most attractive mineral potential when compared to other Latin American countries, behind only Chile, Peru, and Brazil.

In the 2014 Survey, the category of labor regulations/employment agreements and labour militancy/work disruptions showed respondents ranked Colombia at 5% on encourages investment, where 32% highlighted that it is a mild deterrent to investment. 5% of respondents also indicated that this category is a strong deterrent to investment in Colombia’s mining sector.

With regards to the survey’s security rankings, 44% of respondents indicated that Colombia’s security was a mild deterrent to investment, 31% a medium deterrent, and 11% indicated that they would not pursue this investment due to Colombia’s standing in this category. Contributors to the survey noted that there is “so much red tape” coupled with a “lack of permitting” in the Colombian mining environment making it difficult to operate in.

Colombia may need to look at refining their mining policy, which might be a good step in the right direction to encourage future investment.

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