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Latin American country’s decision to auction land in blocks isn’t suitable for mineral exploration, Canadian firms say
Canadian miners are feeling the growing pains of a mining industry in transition in Colombia, which is struggling to harness a frenzy of exploration activity as prospectors race to stake claims.
Facing a backlog of thousands of unprocessed mineral concession requests, the government has put aside 21 million hectares of mineral-rich lands to auction to the mining industry in blocks, instead of the usual first-come, first-served system of awarding concessions that is accepted globally, and used in other parts of the country.
Far from rubbing their hands over the plan, which copies a model that helped drive an investment boom in the country’s oil industry in the past decade, exploration companies worry the oil and gas exploration model is not appropriate for mineral exploration, which is done on a much smaller scale and focuses on narrow mineral veins.
“Really for juniors, they can’t take on these kind of vast areas because simply the cost of holding the land is so high,” said Colin Andrew, chief executive officer and director of Sunward Resources, a Vancouver-based gold exploration and development company with assets in Colombia.
Exploration companies have to pay a canon, or tax, of about $9 (U.S.) per year on each hectare of land in a concession. Mining executives like Mr. Andrew say the auction model will be too expensive for cash-strapped junior explorers, especially in an environment where credit and financing windows are virtually closed to them.
Market players have expressed some concern about government meddling in the private sector, and hope the auction process will not become a permanent model in Colombia.
“I think it’s going to become tough to see a lot of these areas really becoming of strategic interest or … rapidly accelerated,” Mr. Andrew said.
Few countries can boast as storied a gold tradition as Colombia, which has been attracting gold bugs since Spanish conquistadors came in search of El Dorado 500 years ago.
But the true exploration boom only began 10 years ago, when then-President Alvaro Uribe embarked on a U.S.-backed offensive on Marxist guerrillas, right-wing paramilitaries and a thriving cocaine trade. After that, the number of gold exploration companies ballooned from barely a handful to more than 70 over the decade, according to the Colombia Gold Report.
The boom has not been without its challenges as Colombia balances the need to attract investors with protecting its complicated terrain.
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