Updates from the Peruvian mining industry

The largest rare earth metals discovery in Peru was announced on Tuesday by the U.S.-based company RioSol and its Peruvian partner Compañia MInera Rio Sol. The report cautioned that although initial investigation reveals that the holdings are 10 kilometers long, additional exploration is needed to determine its precise extent. The discovery is located about 100 km outside of Cusco and reportedly has both light rare earth elements and heavy rare earth elements, as well as copper, zinc, aluminum, and other bas metals. According to Rildo Oscar Rodgriguez, one of the geology consultants that spearheaded the project, “It proves that the potential for rare earth elements exists outside of China with significant opportunity for development of new production in a mining-friendly country.”

Three special Peruvian courts will be created to deal with the backlog of environmental cases in the mining, fishing, and manufacturing sectors, announced the Agency for Assessment and Environmental Control of Peru (OEFA). This is a welcome development for both mining companies and environmental activists. Mining companies should experience an expedited resolution of permitting and licensing problems, while environmentalists will be reassured that judges trained and experienced in the issues will lead to better decisions in the environmental court. According to the report, the OEFA is an effective regulatory agency, having already closed major mining projects in 2014 for polluting and damaging the environment.

The debate continues over mining in Santurban

Environmental activists are not satisfied with the government’s ruling on the paramo of Santurbán, which set aside almost 100,000 hectares as a protected ecosystem. Though the Colombian Ministry of the Environment argues that it “bullet-proofed” 76 percent of the paramo, which produces water for 2.5 million people in eastern Colombia, environmentalists insist that the ruling left important “holes” that allow for mining exploration in extremely sensitive parts of the high-altitude ecosystem.

Erwin Rodríguez-Salah, a cofounder of the Movement for a Conscious Citizenry, called the delimiting of the paramo “the largest deception in the environmental history of the country,” as the ruling allows for mining companies that have current mining titles to keep operating in the paramo. The activist questioned the need to consider mining companies’ interests and rights when adjusting the border of the paramo. He insisted that Colombian President Juan Manuel Santos’ original Development Plan said that the borders of the paramos would be based on social, technical, and environmental studies. At no time did President Santos say that mining companies would be taken in account.

The Union of Miners in Santander criticized these opponents of large and small mining projects in the paramo, labeling the leaders of the campaigns against gold mining in Santander “persona non grata.” This battle between competing environmental and commercial interests, is playing out just as intensely in Colombia as it is in Peru.

The Peruvian extractive sector in 2015

Peruvian Economist Jorge González Izquierdo told Peruvian news outlet RPP that he does not expect the Peruvian mining sector to recover in 2015. He said that the 1 to 1.5 percent GDP growth that the Peruvian Economy and Finance Ministry is expecting from the mining sector for 2015 likely will not happen. Izquierdo explained that this disappointing news is because various problems regarding the large mining projects in Peru still have not been resolved, such as cutting the mountains of bureaucratic hurdles required for the projects to move forward.

Diario Correo published an interview with hydrocarbons lawyer Germán Barrios discussing the effect that lower oil prices will have on foreign investment in Peru. Barrios, a lawyer with Barrios & Fuentes, explained that the lower prices will principally affect oil exploration. Lower prices mean that the oil companies have less money to spend on exploration, and seeing as how Peru was already an unattractive exploration prospect, oil companies will likely go elsewhere. Barrios recommended that, in order to combat these pressures, the Peruvian government change the regulatory environment in Peru to encourage oil exploration and thus be more competitive in attract foreign investment for the oil industry.

Mining news from Colombia

Over the weekend, while dedicating a new national park in Colombia’s Guajira region, President Juan Manuel Santos declared that biodiversity is to Colombia is oil is to the Arabs, emphasizing the importance of conservation. Unfortunately, Colombia has not yet found a way to commoditize its biodiversity the way Saudi Arabia has with its vast oil resources. Nonetheless, this environmentalist spirit is spreading to how Colombia deals with its traditional heavy industry.

The Colombian Environment Ministry launched its National Mercury Plan to gradually but decisively eliminate mercury use from mining and industry in Colombia. Environment Minister Gabriel Vallejo López explained that the plan is a joint effort between many different sectors of the Colombian society – the government, the mining industry, the health sector, environmental activists, business interests, and civil society in general – to have everyone work together towards the same goal. The plan has between criticized for not being ambitious enough, so its success will depend primarily on its implementation and what follow-up efforts this new, broad alliance can agree upon.

In related news, CB Gold, Inc. breathed a heavy sigh of relief when the Colombian Environment Ministry released its newly updated map delineating the Páramo of Santurbán. The updated páramo boundaries will have no effect on CB Gold’s projects in the area. However, other mining companies were not as fortunate, and will decide in January whether to scale back their mining activities or leave the area altogether.

Updates on (legal) mining in Peru

Peru’s export numbers for the month of October were recently released, and they don’t look good. In terms of mineral and metal exports, Peru’s exports have fallen drastically, due to both a decline in production and a decline in prices. The worst performers were gold and silver exports, falling by 23.2% and 74.3% respectively from their totals in October 2013. To provide some context, Peru was actually the worst performer in Latin America, with exports falling overall by 10%. However, there was a hint of good news. While exports of raw commodities were down almost across the board, non-traditional exports actually increased 6.9%. Nonetheless, the mining sector by is the main driver of Peru’s economy, so the Peruvian government will be hoping that the industry’s numbers are better for the rest of 2014.

In related news, the Presidency of the Peruvian Council of Ministers met in Lima on Monday, and was attended by Peruvian President Ollanta Humala, President of the Council of Ministers Ana Jara, Interior minister Daniel Urresti, Justice minister Daniel Figallo, Congress President Ana Maria Solorzano, Judicial Chairman Enrique Mendoza, Attorney General Carlos Ramos Heredia, Comptroller of the Republic Fuad Khoury, and Chairman of the National Elections Jury Francisco Tavara. At the meeting, the assembled officials discussed enforcing laws related to national security, specifically combatting illegal mining and drug trafficking.

Oil and its effect on the Colombian economy

In the Colombian finance world, everyone is debating what the Colombian Central Bank will do regarding the country’s interest rate it its meeting today. On Wednesday, we talked about the depressing similarities between the Colombian Peso and the Russian Rouble, and Russia dramatically raised its interest rates by 75% this week. Will Colombia do the same? According to most observers, the Colombian Central Bank will likely do nothing. Reuters explained that despite a 40% fall in oil prices since June, Colombia’s oil income, when converted to U.S. dollars, has only fallen by 4.5%. The country’s economy grew by 4.2% this quarter, making it the fastest-growing major economy in the region. In addition, inflation in Colombia is well within the Bank’s target range. In fact, the Central Bank likely views the devaluing of the peso as good news, though its volatility is certainly a concern.  The Financial Times agreed with Reuters, and added that the only decision to expect is an end to the Central Bank’s program of buying U.S. dollars.

El Colombiano reported that investment in oil exploration will likely fall by 50% in 2015, a development that is really worrying the Colombian oil industry. The report noted that Colombia’s reserves are already dangerously low for a country that depends so heavily on oil for government revenue. However, just between the two largest oil companies in Colombia, Ecopetrol and Pacific Rubiales, investment in exploration will decrease by $1.35 billion. Many industry observers are hoping that that the large players in the industry will look to cut costs and save money on other aspects of the operations, not production.

Colombia’s eastern plains region, known as “Los Llanos,” is already feeling the effects of the fall in oil prices. This region, one of the primary oil-producing regions in Colombia, has benefited greatly from the oil boom, so it makes sense that it would be equally hurt by the troubles besetting the industry. However, this region is also working to overcome its troubles with the FARC and other illegal armed groups in Colombia, so this hit to the region’s economy comes at a particularly bad time.