Mining Ministry

The junior exploration sector feels there is a lack of support from the Colombian government and the Ministry of Mines and Energy. Despite the fact that mining is one of the “motors of development”, little assistance or encouragement is given to explorers to overcome the issues they face. The government is doing less to promote Colombia as a mining destination than the previous government and explorers feel that their efforts to promote Colombia as a destination for mining investment are not being matched or supported by the government. The Mining Minister has not attended various international events that he was reportedly confirmed to attend, which reflects poorly on him, and also means that he misses the opportunity to learn more about the sector.

The government should consider separating the mining and energy portfolios into two separate ministries due to the increasing workload of each sector and the fact that they are fundamentally different. Chile decided to do this under the Bachelet administration.

Bureaucracy

Explorers have experienced excessive government bureaucracy in order to obtain and maintain their concessions and advance their projects, when dealing with local or national, mining or environment,  agencies. Excessive bureaucracy dramatically extends the time it takes to complete processes which makes it extremely difficult for companies to plan and execute work programmes. Bureaucracy is excessive in terms of the number of processes that need to be completed, and government inefficiency that results in excessive times for agencies to progress processes and respond to information received. Bureaucracy is seen as excessive in particular for concession applications, drilling permits, water permits, forest reserve extraction and returning concessions.

Streamlining processes to reduce bureaucracy and better coordination between government agencies are the most cited factors when companies cited the one thing that the government can do to improve conditions in the exploration sector.

Specific Issues

Coordination in Government

Explorers experience a lack of coordination between government departments, agencies and ministries, and the national and local levels of government.  In part, this is perceived to be the result of a lack of clear policies or clear interpretation of the mining law by the different agencies. For example, a lack of clarity about if/when the mining authority and the environmental authority will be centralized means explorers are never clear on when this will be done and with whom they will have to work with in the future. Lack of coordination is seen as a lack of political will. While explorers feel the government is sincere that mining is a motor of the economy, this message does not penetrate to middle level government officials and local government officials that lack the competence or will to expedite things. Better coordination would reduce the time to process permits and ensure more consistent action by government agencies, and clearer processes to follow to expedite things.

Concession Applications

The length of time taken for concession applications to become concession contracts has been damaging to many explorers, particularly as there is limited exploration they can be undertaken until they have a concession contract. This has caused Colombia to be viewed less favourably in financial markets as it has created doubts about the efficacy of the regulatory system governing the mining and exploration sector. Many exploration companies raised capital against the potential of packages of concessions and applications. They have then had to inform shareholders that they cannot work because of delays in processing concession applications.

These delays mean explorers have been unable to work on areas that are of special interest to them and it has prevented exploration companies from conducting business with other exploration or mining companies as investors now want to see concession contracts before they will invest. One company reported that the delays in turning its applications into concession contracts caused a major mining company to terminate a joint venture agreement it had for a particular project.

The fact the moratorium on concession applications has been repeatedly extended has created the impression that the government does not know what it is doing, that increases the perceived risk of doing business in Colombia. Most juniors feel the government will miss the next date it has given for receiving application requests again. Now, with the additional concept of creating strategic reserve areas, explorers feel their applications will not be made into concession contracts, even when they have made the canon payment.

There is also a perceived lack of transparency in the evaluation of concession applications by the mining authority as some are rejected without the mining authority undertaking the various technical, legal and economic studies that they are required to make.

Companies also report that the process for returning concessions to Ingeominas is also very slow and bureaucratic.

However, it was seen  as an excellent idea to cancel the "technical studies" mechanism that allowed speculators to put  tie up concessions without spending anything (albeit that this was possible due to government agency inefficiencies and under resourcing). This was anomalous to the rest of the world and removing it will free up ground and increase exploration attractiveness.

Integration of Contracts

The integration of contracts is a mechanism that should make things easier to administer for both the government and the exploration companies, however, it does not work. Often, the government agencies want to continue to treat each individual concession contract as a stand-alone property when in fact they are part of an exploration project. This approach does not may work for modern large scale deposits. Law 1382 of 2010 began to recognize this, by allowing consolidation of the contracts into a single exploration license but the process to do so from multiple owners or multiple levels (exploration vs production contracts) is cumbersome. In Canada and the US, multiple independent contracts that form a single project can be managed expeditiously as a single operating unit without having to go through an exhaustive process of technical reports and multi-level government approvals such as are required in Colombia to integrate individual contracts into a single contract. It took one company over a year to integrate a group of contracts acquired from a single family.

 

Lack of understanding

There is a lack of understanding by government agencies about the nature and stages of modern exploration, particularly in the exploration of big projects. Large exploration projects often need to explore for more than the initial three-year period stipulated in the Mining Code. However, while the Mining Code states that the exploration phase can be extended to eleven years with justification, the mining authorities do not always accept the justifications often on spurious or overly dogmatic grounds.

PTAs and PTOs

The completion of annual work plans (PTAs and PTOs) for each individual concession are an excessive administrative burden, particularly when exploration is generally conducted on various concessions at the same time. Explorers request that one work plan suffice for each project rather than each concession. Further, work plans typically take one to two years to be approved. Explorers request that the content be simplified to make the process quicker and easier for both explorers and government agencies.

Environment

Explorers are very concerned at the lack of coordination between the ministry of mining and the ministry of environment. The environment ministry shows few signs of acknowledging that mining is a motor of development or facilitating its progress. Explorers expect the environmental authority to work with to create environmentally sustainable projects rather than  being an obstacle to project advancement. The fact that a Vice Minister for the Mining Environment has an aggressive record of not trying to find the middle ground, does not instil confidence, particularly when the environmental authorities seem to have unlimited authority to stop or delay any project with no oversight, responsibility or liability for their actions. The environmental ministry is stopping the mining locomotive dead in its tracks.

 

Forest Reserve Extraction Process

Junior explorers agree with the need to protect the environment, and specific areas of environment interest in particular, but the issue of what constitutes a Forest Reserve Area (or similar) and how to work there has been frustrating and unsatisfactory. For example, after one company was awarded concessions it learnt they were in a forest reserve area.

The extraction process required under Forest Reserve Law 2 from 1959 and Law 1382 of 2012 to undertake temporary extraction for exploration activities has created problems and delays. Explorers feel that temporary extraction for exploration should not be required as it is an activity that is minimally invasive. The timescales taken to process such requests are damaging to exploration companies that depend on equity financing during the initial stages of their life. For exploration purposes, where there is minimal disturbance such as drilling, a process similar to the "Notice of Intent" level operations in the US should be developed that could allow permitting within 2 - 4 weeks of the submission of a drill plan. AngloGold Ashanti had to stall its exploration programme at La Colosa in Tolima for 27 months due to the need of an extraction permit. Another explorer found that it took six months to complete the requirements imposed by the Ministry of Environment to extract a forest reserve area for exploration.

The purpose of many forest reserve areas has been defeated by the encroachment of agriculture and livestock  farming, to such an extent that the designation “Forest Reserve” is meaningless and inappropriate. Explorers request that forest reserve areas are reviewed to ascertain whether the environment they are intended to protect still exists and if not, the area of the reserve should be reduced. For example: The Pacific Forest Reserve was established in the 1950s based on 1940 vintage air photos. The reserve was intended to protect "virgin or old growth" forests throughout much of western Colombia. Unfortunately this happened too late to achieve its purpose as most of the zone had been clear-cut by the time the reserve was established and there was virtually no enforcement until around 2000.  Most of the land is now used for agricultural purposes with little if any old growth forest remaining. 

Water permits

Water permits have been a major problem for companies trying to conduct exploration drilling, producing multiple months of delays in many instances, for what is essentially minimal water usage. The Environmental Ministry and/or local environmental authorities told at least one operator that it cannot catch rainwater to use for drilling, which is illogical in a country with such high rainfall. As a result, many companies purchase water from industrial or municipal sources and truck it to site to  be able to undertake drilling while they wait for water permits to be approved.  Modern drilling commonly uses a water recirculation circuit to make efficient use of water and prevent any run-off. Companies fear this situation is only going to get worse with the proposal by the Environmental Ministry about the need for water discharge permits as well. It is expected that these will take as long as water permits to obtain, even for recirculating systems. The water permit issue clearly shows the lack of coordination between the mining and environment authorities. Delays to obtain water permits have seen analysts change their ratings of some companies from BUY to SELL recommendations. 

Other issues specific to drilling include the prohibition of drilling within 30m of a stream, which in some parts of Colombia is nearly impossible. The act of drilling next to a stream does not damage the stream; the potential problem is the runoff or discharge of drilling fluids or hydrocarbons directly into the stream.  As containment processes are readily available and routinely used by most explorers and drilling companies, a better solution would be to require drill sites within 30mof a stream to capture runoff and discharge to an approved disposal site more than 30m from a stream.

Explorers feel that there should not be a prohibition of drilling on concession applications as in this instance the risk is with the companies in the event that a concession application is not subsequently granted. If a company is willing to accept the risk that it might not be granted a contract, there should be no restriction on the exploration it can do on the application. 

Security

Criminal & Illegal Miners

Criminal miners are a huge problem for the junior exploration sector as their presence opens the door to many subsequent issues including: environmental, safety and health. Lack of government action against illegal or criminal miners has a devastating impact, leaving areas highly susceptible to erosion at incredible rates during heavy rains.

Invasions by illegal miners add more delays to exploration projects as they have to be removed by legal actions tend to be inefficient, and where the local political will to take action is often lacking.

Traditional Miners

Traditional miners have often been in an area for many years and exploration companies often want to make exploration agreements with them to explore nearby. However, the government has shown no respect for traditional miners and has used the lack of state presence in such areas against them, which impedes attempts by junior explorers to work with traditional miners. The government often ignores traditional miners because they lack paperwork such as a formal mining title or birth certificates and therefore will not work to legalize them. Little medical support is given to the mining areas and often no government health and safety programs exist.