Mining Permit Fragmentation: A loss to the National Treasury that Raises Questions about Responsible Mining

Translated by Leo Torres, a CSN volunteer translator. Edited by Nora Walker.


Amounting evidence suggests that large mining companies consistently use the same old con trick: they dismantle mining permits in order to pay a lower surface fee. The mere idea of such a large loss for the nation’s treasury causes apprehension in regards to a few dangerous partners with whom the Nation entrusted with conducting its mining enterprise.


A Necessary Discussion

There is a debate under way concerning the importance and magnitude of investments during the exploration stage of mining. Entrepreneurs, and other mining sector organizations, experts, and researchers are all beginning to look more closely at mining regulations in the exploration stage and particularly at the so-called “surface fee”, that is the payment that an interested party ought to give to the State for the right to explore a specific area.

After conducting analyses on figures based in the titled area, the numbers simply do not add up, which might indicate a possible loss to the national treasury. Particularly relevant to this discussion is the dismantlement of concession contracts, in direct relation to government revenue, which could be hiding harmful practices by the mining exploration companies.


A frustrating legal goal

The surface permit fee is paid each year during the exploration stage and its amount depends on the size of the permitted area. Article 230 of statute 685 (Mining Code, 2001) establishes that the annual amount will be equivalent to the minimum premium per day per hectare if the area does not exceed 2,000 hectares; the amount is doubled if the permitted area is between 2,000 and 5,000 hectares and is tripled between 5,000 and 10,000 hectares.

This measure was put in place to favor small-scale domestic or foreign miners and had the specific objective that major mining companies such as AngloGold Ashanti, BHP Billiton, Anglo American, Rio Tinto, Xstrata, Holcim, Cemex, Vale or Votorantim – all of which operate in Colombia – would pay more for the acquisition of mining rights in large areas.

Note that the section of the Mining Code cited above was amended by Article 16 of statute 1382 of 2010, and the new standard does not take into account the size of the area (which could be considered a step backward and harmful to all Colombians as a whole). The practical effects of the new law have been deferred for a period of two years, as it was declared unconstitutional by the Constitutional Court Ruling C – 366 – 11 last year.


The case of AngloGold Ashanti

Based on information from the Colombian Mining Registry for December 2010, (it has not been possible to obtain more recent data, despite the request for information to the Colombian Geological Service [formerly INGEOMINAS]) the largest holder of mining permits in Colombia is AngloGold Ashanti.

A review of the area awarded to that company – all of which must be in the exploration stage, as there are no exploitation permits registered on behalf of AngloGold Ashanti – provides the following data:

It is noteworthy that three quarters of these permits fall into the range of areas that pay the minimum surface fee. An expert geologist would understand that you can start exploring and, after establishing the shape of the area of the deposit, request a license for the entire potential area. However, comparing dates and sizes of the adjacent titles to those covering less than 2,000 hectares, it is clear that many of these cases indicate a systematic breaking up of the area, which in a good portion of the cases has resulted in a lower surface fee.

In fact, more than half of these small permitted areas are situated right next to other areas with less than 2,000 hectares.

Given that the issuance of the statute 1382, which amended the Mining Code (February 9, 2010), eliminated any reference to the size of the permitted area, it is pertinent to note that the permits cited above are prior to this date, meaning that the statute 685, 2001 was then in full force.

One can see a concrete example of this in the Chocó area, where there are grid maps of adjacent permitted mining areas belonging to AngloGold Ashanti show that six of them were approved the same day (see Figure 1).

A review of the applications by AngloGold Ashanti up to December 2010 shows that, for example, in the area of ​​Tado (Chocó), 13 claims adjacent to each other were all requested in the same day (March 14, 2006), all of which have less than 2,000 hectares. All were located in protected or black-community areas (see Figure 2).

In the case of Cumaribo, Vichada, curiously there are 20 adjacent applications, each for 4,990 hectares (obviously totaling about 100,000 hectares) requested from 30 March to 4 April 2007, and surrounded by another 56 applications with areas between 1,850 and 1,950 hectares, between the 12th and 13th of July 2007 (see Figure 3).

It was not confirmed whether the aforementioned applications were approved over the past thirteen months, but clearly the mining company needs to provide a convincing explanation for this phenomenon. It should be noted that other companies have also requested – and in some cases obtained – mining permits on areas adjacent to each other on the same date (Muriel Mining and Votorantim, among others).


The Nation without sorrow

As a result, there exist legitimate concerns about a large-scale loss to the national treasury on the part of the legal mining sector through breaking up permits to pay a half or a third of the fees required by the Mining Code.

For this simple reason, the competent authorities ought to start investigating possible irregularities in surface fee payments; if they find them they must intervene as mandated by law (or adjust the laws such as the Mining Code) if they should find them.

The mere suspicion calls into question the reliability of the nation’s “partners” in the afore-mentioned mining enterprise and raises serious doubts about whether “responsible” mining is possible.

Moreover, it is noteworthy that Rafael Herz, representing AngloGold Ashanti, revealed that many of the concessions are “obtained in force majeure” (emphasis added), which may indicate that there are areas in the country in which conditions are not suitable for mineral exploration (unless you are committing speculative practices, such as the so-called freezing of certain areas).

This situation justifies the request of many well-informed Colombians, such as former Minister Manuel Rodriguez, for full or partial moratoriums on the national territory or the exclusion/restriction of mining in entire areas with serious security problems, internal conflict, or violence, where governance by the state is insufficient.

The Mining Code – issued in 2001 under President Andres Pastrana – qualifies mining as “a public utility in common interest”, a premise that has allowed foreign companies to own hundreds of thousands of hectares of land in Colombia (including expropriation, as in the case of El Cerrejón in Tabaco, Guajira).

This issue deserves an open, technical, and democratic debate, as it is a topic of general interest and of crucial importance for the country, more so when the National Development Plan gives priority to large-scale mining as the main “engine” of growth.

The Comptroller General’s Office and the National Mining Agency should investigate these alleged irregular situations: a grey area of permissiveness and limited legitimacy existed during the two previous presidential periods, which Colombian society thought had been overcome by the principles of “Good Governance”.


Title: Mining Permit Fragmentation: A loss to the national treasury that raises doubts about responsible mining.

Author: Julio Fierro

Date Published: February 5, 2012

Source: Razón Pública



(This translation may be reprinted as long as the content remains unaltered, and the source, author, and translator are cited.)

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