Colombian government declares war on illegal mining

On Friday, Colombian president Juan Manuel Santos announced that Colombia would create special military units to combat illegal mining. Leftist guerrillas and criminal organizations in Colombia have become actively involved in the illegal mining industry in the country, deriving even more profits from mining than they do from drug trafficking. According to the government, illegal mining generates more than $2.5 billion in revenue.

From the department of Putumayo, President Santos said, “I want to announce to the country that today we are declaring war and placing as a high priority objective illegal mining.” Santos explained that, “It is a business that moves much more money than drug trafficking. It is a much more dangerous enemy than what we thought, and it does much more damage than we thought.”

In addition to the social damage, illegal mining also causes tremendous environmental devastation. President Santos noted that the department of Antioquia has the highest concentration of mercury in the air in the whole world.

In addition to creating these special military units, the Colombian executive will also propose a package of new laws to the Colombian Congress to strengthen the states’ ability to combat illegal mining.

Expect 3.5% growth for Peru, thanks to the mining sector's recovery

Fernando Iberico, a senior analyst with Intéligo, predicted that the Peruvian economy would grow by 3 to 3.5 % in the second quarter of 2015. He explained that this growth has been fueled by the rebound in the mining and fishing sectors. Increased mining production and a gradual acceleration in the global economy will help Peru consolidate its recovery for the rest of 2015.

Other experts have settled on similar predictions for Peruvian GDP growth in 2015. The Central Reserve Bank of Peru lowered its estimate to 3.2%, while the UN-affiliated Economic Commission for Latin America and the Caribbean estimates that Peru will grow by 3.6% this year.

In related news, international consulting company IHS published a report highlighting the long-term growth potential of Chile and Peru, the two mining leaders in South America. IHS predicted that Chile would grow at 4.4% per year over the next 30 years, just below China at 4.5% and Peru at 4.3%.

In other news, Peruvian economist and director of Macroconsult Elmer Cuba criticized Peruvian president Ollanta Humala for supporting policies that favor rural Peruvians at the expense of city dwellers. He faulted Humala for not sufficiently supporting mining and the role that it can play in Peru’s economic growth.

Colombia's oil industry looks to the Carribbean

Oil reserves in the Caribbean Sea represent the latest great hope for the beleaguered Colombian oil industry. Amid dwindling reserves and plummeting prices, the oil sector has been desperate for some good news. Late on Tuesday, Colombian state oil company Ecopetrol confirmed that it had discovered hydrocarbons at its Kronos-1 well in an extremely deep part of the Caribbean. Specifically, the discovery was located 33 miles offshore, at a depth of 12,200 feet.

Houston’s Anadarko jointly owns the well with Ecopetrol. The Colombian oil company’s president, Juan Carlos Echeverry, told reporters, “This discovery adds to the one accomplished in December at the Orca-1 well, located in the deep water of Tayrona Block offshore Guajira, where we are partners with Petrobras, Repsol and Statoil. These results are very important and confirm the potential of the Colombian Caribbean petroleum system in a vast area and are aligned with Ecopetrol's new strategy, in which one of the key areas is the exploration on high potential marine basins.”

Colombian business journal Portafolio cautioned that this announcement still falls well short of the miracle that the Colombian oil industry has been praying for. This is just a confirmation of the existence of hydrocarbons, and we will need to wait between 5 and 6 years to know whether the deposit can be commercially developed.

In other oil-related news, economic research company Fedesarrollo released a study predicting that Colombian oil production will start to drop in 2016. The climate of low oil prices and the lack of investor interest in oil exploration in Colombia, combined with the country’s small oil reserves, mean that oil production will start to drop in 2016.

Peruvian military razes town of illegal miners

Over the weekend, additional reports and photos came out about the Peruvian armed forces’ raid on the town of La Pampa. This “unofficial settlement” is located in Peru’s Madre de Dios region, which is rife with illegal mining. Telesurtv noted that the Peruvian government’s use of armed helicopters and 900 police officers to raze the settlement was unprecedented.

The Peruvian high commissioner again illegal mining, Antonio Fernández, emphasized to reporters the tremendous environmental damage caused by illegal mining. According to a study by the University of Puerto Rico, between 2001 and 2013, illegal mining destroyed 1,680 km² of tropical forest.

One former resident of La Pampa told a reporter that, “They don’t treat us like human beings, they treat us worse than animals. What are we going to do now? We don’t have where to live and there is no way to move forward. But they don’t care. The fact that hundreds have been affected so does not matter at all.”

In Peruvian oil-related news, Gestión reported on the collapse of Peruvian oil production so far in 2015. Production for the first half of the year, totaling 10.6 million barrels was almost 60% than production for the same period last year, falling to a level not seen for at least 10 years. According to Gestión, the poor production is due to the collapse in oil prices and the lack of new projects in the Peruvian oil sector.

Falling price of gold worries the Colombian mining industry

Although most of the media’s attention has been focused on the Colombian oil industry as it weathers one of its toughest crises ever, the Colombian mining industry has also been severely affected by falling process. Santiago Ángel Urdinola, president of the Colombian Mining Association, told Semana that all of the mining companies would need to review their budgets and tighten their belts in order to remain profitable. The price of gold has plummeted from its 2010 high of $1,800 per ounce to almost $1,000 per ounce.

Urdinola warned, though, that the mining industry is even more worried about the problem of illegal mining than it is about falling prices. Just 12% of the gold produced in Colombia is mined by large mining companies; the rest comes from artisanal and illegal miners. It will be even harder for the Colombian government to push the industry towards formalization when the industry is already operating under such slim margins.

Continental Gold president León Teicher agrees with Urdinola’s analysis. He told El Espectador that, regardless of the price of gold, Colombia is not an attractive place to mine for gold because of the rampant problem of illegal mining. He called on the Colombian government to better regulate the gold mining industry in the country, which is currently rife with criminality and corruption.

Peruvian mining exports fall 12.7% year-on-year

Peruvian mining exports fell by 12.7% during the first five months of 2015 in comparison with the same period one year ago, according to recently-released statistics from the National Society of Mining, Petroleum, and Energy. Elmer Cuba, social director of Macroconsult, explained that the poor performance is completely due to the fall in prices, as gold and copper production has recovered strongly. In the last year, the price of copper has fallen by 23%, zinc by 13%, lead by 19%, and gold by 16%. In May alone, exports were down by 16% over the previous year.

In other mining-related news, Peruvian vice minister for Energy and Mines, Guillermo Shinno Hamaní, rejected the acts of violence perpetrated by some anti-mining protestors, drawing a distinction between legitimate anti-mining NGOs and those that simply wish to perpetuate a cycle of violence.

He told the press that, “There are some groups that manipulate the people of the communities. They tell them that mining will leave them without agriculture, that their livestock will die, and it is logical that this makes them very worried. In addition, opposing mining brings votes. As a result, that is the capacity that mining companies and government at all levels need to have: to bring correct information to the population.”

Although the protests over Tía María have dominated the headlines in recent months, other mining projects are also worried about protests. Congressman Alberto Beingolea told reporters that he is worried about rumors of a protest against Angle American Quellaveco’s mining project in Moquegua, even though that project had the full support of the local community.