Colombia's new mining vision

Pardo's presentation, and that of mining and energy minister Andres Camacho, during his opening address, struck a much more conciliatory and even welcoming tone towards the mining sector than has predominated during much of Petro's first year in office. Government discourse is now more focused on modelling mining to its economic vision rather than opposing natural resource extraction."We want mining for life, moving from extractivism to a productive economy, with equitable distribution of the benefits of mining, and the basis for a just energy transition. We want mining to become an instrument of equality. Mining is fundamental for this government and the economy," Pardo told delegates.Pardo said mining development must be accompanied by verifiable and tangible social development, coexist with the economic development of the territories without exclusion or detriment to the traditional vocation of the communities, and communities must have active participation in decision-making for the management of social and environmental impacts of a mining project.Ensuring such aspects is a key focus of the government's proposed mining law reform, and one of the mechanisms the government wants to use to achieve this is the development of a national mining company called Ecominerales.Pardo said the model for this would be Ecopetrol, Colombia's quasi-private-public oil producer, which manages oil assets, undertakes exploration and seeks development partners. Depending upon how Ecominerales is funded, it could function more like Chile's national mining company Enami, which operates processing facilities in addition to advancing projects and finding partners, or even Ecuador's state mining company, also called Enami, which has a similar role on paper but lacks the funding to complete many of its functions.Thermal coalPresident Petro is critical of Colombia's thermal coal sector due to its contribution to global warming, although the sector generates considerable tax income for the country. Pardo convened a more relaxed attitude towards coal, perhaps based on the fact that coal production may naturally extinguish without any effort by the government, noting that there are no proposals on the government's table to develop new large-scale open pit coal mines. Changing trends in market demand and pricing as the global energy transition advances will likely take their toll on Colombia's coal sector."The market will fall due to changes in energy generation. Companies with coal contracts will enjoy them to the end of their contracts, nothing bad will happen to them. The International Energy Association sees thermal coal prices stabilising at US$100/t. Colombia's mines have a problem with costs. The average extraction cost in Colombia is $70/t. Add on $15/t for transport and taxes, and that brings you to $80-90/t. The margins are low, and there will come a time when the international price does not cover the costs," Pardo said.In previous times of low thermal coal prices, the coal industry, through the ACM, has lobbied the government hard for tax breaks or other assistance to reduce costs. Such requests made to the current government would likely be brushed aside.Pardo also implied the government would let coal miner's contracts run their course but not renew them. "Some mines will finish their contractual terms soon. In 10-15 years, a lot of companies will exit the market," he said.CopperThe energy transition and how to position Colombia for it occupies part of the government's dialogue, both at the ministerial and presidential levels. Colombia has a nascent copper industry with considerable growth potential. The question has been, and continues to be, to what extent or not the government will facilitate exploration for copper deposits and then permit mines.While showing the decline of thermal coal's contribution to Colombia's earnings, Pardo used the increase in anticipated copper income as a counterpoint. "Coal and copper income will be almost equal in 2030 and then copper takes over. By 2040, thermal coal almost disappears," he said.Productive chainsThe Petro administration wants the new mining to help establish new production chains and the reindustrialisation of the country. Its vision includes producing fertiliser instead of exporting phosphate, making steel instead of exporting metallurgical coal, using copper for energy transition uses rather than exporting concentrates and making glass and solar panels rather than exporting silica.This aspect of the government's vision represents an overreach of ambition for some, given that it does not fit with certain market realities, such as why copper concentrates are exported to Asia, and that only the purest silica is used to make solar panels, which Colombia may not have.

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