1Mining Leaders

2 colombia

2012

3Mining Leaders

Exploring a better way.

56,000 metre drill program.On time.On budget. Amid Colombia’s prolific Mid-Cauca belt, we have completed an aggressivedrill program to delineate gold and copper porphyry discoveries. A maidenNI 43-101 resource estimate is expected by the end of the year.

Strong growth platform. Favourable share structure. Our Batero-Quinchia project has earned the support of retail and institutional investors alike.

Socially invested. Environmentally sensitive. Our technical and management teams are building strong community support by hiring locally, investing in social programs and striving to exceed environmental standards.

TSX-V: BAT

www.baterogold.com

Disclaimer: Some of the statements contained herein may be forward-looking statements that involve known and unknown risks and uncertainties. Without limitation, statements regarding potential mineralization and resources, exploration results, and future plans and objectives of the Company are forward-looking statements that involve various degrees of risk. The following are important factors that could cause the Company’s actual results to differ materially from those expressed or implied by such forward-looking statements: changes in the worldwide price of mineral commodities, general market conditions, risks inherent in mineral exploration, risks associated with development, construction and mining operations, the uncertainty of future profitability and the uncertainty of access to additional capital.

Corporate head office: 3703-1011 W. Cordova StreetVancouver, BC V6C 0B2

info@baterogold.com

TSX-V: BAT

Tel: 604.568.6378Fax: 604.568.6834

5Mining Leaders

Publisher: Freestone Publishing

Editor-In-Chief: Mat Youkee

Country Editor: Alexandre Guyomard

Sub-Editor: Emma Tracey

Contributors: Peter Martin, Jennifer En

Art Director: Miguel Alejandro Camacho

Graphic Design Collaborators: Nuno Caldeira, Isabel C. Arias

Administrative Assistant: Silvia González

Printing: Printer Colombia

Email: info@mining-leaders.com

www.mining-leaders.com

Directors: Raluca Monac & Charlotte de Casabianca

PARTNERS:

POLITICS & ECONOMY

GOLD: CAUCA BELT

coal

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lead article: Do the Locomotionbox: A New Leafbox: M. Cárdenas, Minister of Mines & EnergyLeader Profile:

J. M. Santos, President of ColombiaQ&A: C. Díaz, Colombian Chamber of MinesJurisdiction Overview

Q&A: C. Rodado Noriega,Former Minister of Mines & EnergyLead Issue:

Risk ManagementLeader Insight: R. Mateus &A. Lemaitre, PortexCompany Focus: Asomineros Leader Insight:

C. Jiménez, Gran EscalaQ&A: D. Sullivan, AustradeCompany Focus: Colombia-China Commerce & Integration Chamber

lead article: El Dorado RevisitedQ&A:

R. Herz, AngloGold Ashantifeature interview: P. Dias,Minatura InternationalQ&A: B. Rook, Batero Gold CorpLead Issue: Mining Reformproject Focus:

Titiribí, Sunward ResourcesQ&A: I. Slater, Red Eagle MiningLeader Insight: S. Letwin, IAMGOLDbox: Major Oversightproject Focus: Anzá,Waymar ResourcesCompany Focus:

· Quimbaya · Colombia Crest GoldQ&A:

M. M.Williams, Continental GoldCompany Focus: Grupo de Bulletproject Focus: Marmato,Gran Colombia Gold

lead article: Red Hot Coalsinterview:

León Teicher, CerrejónQ&A: M. Puccini, Valemap: Coal Deposits Lead Issue: InfrastructureCompany Focus: Frontier Coal

Company Focus: . MILPA · Pacific CoalQ&A: I. Graham,Discovery Harbor Resourcesproject Focus:

Cañaveral, MPXLeader Insight: J. M. Sánchez, Carbocoque S.A

6 colombia

2012

7Mining Leaders

GOLD: OTHER regions base metals

ml recommends

MINING TECHNOLOGY& SERVICES

Financial& Legal Services

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lead article: California DreamingQ&A: F. Capponi, CB Goldfeature interview:

C. Johnson, B2Goldgeology overview

map: Colombia’s Gold DepositsCompany Focus: Norvista ResourcesQ&A: M. Escobar,Ashmont Resourcesproject Focus: Rio Pescado, Touchstone Goldbox: Of Paramo Importanceq&a:

R. Thibault, Antioquia GoldCompany Focus:

· Auro Resources· Quia Resourcesq&a: T. Russell, Trident Gold CorpLeader Insight:

A. Rendle, Cosigo ResourcesCompany Focus:

· Samaranta Mining· West Rock ResourcesCompany Focus:

Mineros S.A

lead article: Banking on Colombialeader insight: A. Correa,Beltrán & Correa LawyersQ&A:

G. Toulemonde, BNP Paribasleader insight: I. Zuluaga,ARP SURAcompany focus:

· Baker McKenzie· ME InvestmentsQ&A: E. Acevedo Schwabe, Correcol leader insight:

R. Stebbings, Celfin Capital

lead article: Basically IgnoredQ&A: R. Carrington,Colombian Minesmap: Base MetalsCompany Focus:

CuOro Resourcesbox: Pig-HeadedQ&A: A. Duarte, Brexia Resourcesmarket focus: Copperproject Focus: Berlin, U308box: Latin Powerproject Focus: Cerro Matoso

lead article:

A Fashion for Passionhotel listing

directory and Advertisers Index

lead article: Into the UnknownQ&A: S. Petrovich, AK Drillingfeature interview:

D. Fernández, Siemensmarket focus: Drillingcompany focus: · M&NC · CryogasQ&A: G. Escobar García,Geominas Ingenieroscompany focus:

· Atlas Copco· Logan Drillingproject Focus: SGS Assay Labbox: It’s a blast!company focus: Topen O&G

company focus:

·INMA·PMEcompany focus: Axesatmap: 3G Coverageq&a: R. Monrás, ABB

109

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Mining Leaders is a trade mark of Freestone Publishing Inc. Copyright Freestone Publishing Inc. 2011. No part of this publication can be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopied, recorded or otherwise without the prior permission of Freestone Publishing Inc. Freestone Publishing has made every effort to ensure that the conent of this publication is accurate at the time of printing. However, Freestone Publishing makes no warranty, representation or undertaking, whether expressed or implied, nor does it assume any legal liability, direct or indirect, or responsibility

for the accuracy, completeness or usefulness of any information contained in this publication.

Client: PDAC 2012Desc.: FP 4C

Live: 190 mm x 277 mm Trim: 210 mm x 297 mm

Bleed: 216 mm x 303 mmPub: Mining Leaders

International Convention,

Trade Show & Investors Exchange

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March 4–7, 2012 Toronto, Canada

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9Mining Leaders

LEAD ARTICLE

Colombia’s improving security situation has stimulated investment and allowed the economy to grow at a steady 5%. President Juan Manuel Santos has named the extractive industries as one of the five ‘locomotives’ of the Colombian economy. At present only the mining and hydrocarbons industries can provide the revenues, through taxation and royalties, which will make investment in the other sectors possible. As such, mining will play a key role in the future development of the Colombian economy.

In July 2011 Colombia discreetly marked the 20th anniversary of its 1991 Constitution. There were no public celebrations but it did give government figures and the media a reason to pause and reflect on how far the country has come since its creation. Drawn up at a time when the guerrilla conflict and the power of the drug cartels were at their peak, the 1991 Constitution has not fully achieved its goals of bringing peace to the country and reducing inequality but it has had a powerful net-positive effect. It has laid the legal groundwork to allow the government to tackle the longstanding guerilla issue and to create a more participatory democracy. Today the threats posed by the guerilla and

drugs cartels are limited, Colombia is a much safer place to live and the growth of the economy is providing higher living standards for millions of Colombians.

The military successes against the Farc that began under the administration of Alvaro Uribe with the implementation of Plan Colombia have continued under President Juan Manuel Santos. Shortly after his election in August 2010 armed forces were able to locate and kill Mono Jojoy, one of the Farc’s most feared generals. In November 2011 Alberto Cano, the group’s leader since 2008 was killed by a soldier in the department of Cauca. Cano was the fourth member

of the seven man 1993 Secretariat – the group’s core leadership – to be killed by government troops between 2008 and 2011. A fifth, Ivan Ríos, was killed by his own security guard. With the Farc at its weakest point militarily, the prospect of peace talks has been mooted.

Entering talks with the guerrilla is a difficult subject. In the late 1990s during the episode Colombians refer to as ‘El Caguán’, Farc forces led by Cano used a safe zone in the south of the country set aside for peace talks to train new forces. The abuse of the safe zone led to the loss of any residual sympathy the Colombian public had towards the guerrilla and was a major factor in the election of Uribe in

Do the Locomotion

10 colombia

2012

2002. Following Uribe’s two terms and the success of Plan Colombia, one of the most often aired criticisms of Santos is that he is weak on security issues compared to his predecessor. While his Law of Victims and Land Restitution has been praised by human rights groups, it has been attacked by figures on the right, including former President Uribe. Santos needs to avoid being seen as a ‘soft touch’ but from the start he has claimed that while the door to peace talks was currently closed to the Farc, the government had not “thrown the key to dialogue into the sea.” With his credentials as an effective Commander-in-Chief established, it would now seem more possible for Santos to offer an olive branch to the Farc. Whether the Farc’s new leader, nicknamed Timochenko, has built up the leadership credentials to accept it, however, is a different matter. Some experts fear that the country could be on the brink of an ‘end without closure’, whereby a small Farc force, living of its drug activities, lives on indefinitely, too weak to mount a serious military threat, but resilient enough to absorb large state military and financial resources. Nevertheless, the group seems to have very little public support. The February 2008 government-sponsored anti-Farc demonstrations attracted millions of Colombians to the streets. However, it was the October 2011 student protests that demonstrate the sea change most clearly. The mainly peaceful protests resulted in a victory for the demonstrators, with the government making a U-turn on its proposed reform to tertiary education. The hope is that, in the future, young Colombians will see such

actions as the favored mechanism for change and deny the guerilla a new generation of members.

A direct result of public opposition to the Farc has been the traditional weakness of the left in domestic politics. At present Santos heads up the National Unity coalition, made up of a myriad of groups including the Liberal, Conservative and Green parties and his own group, the Party of the U. The existing center-left opposition, the Democratic Alternative Pole, has been steadily weakened in recent years. However, it was a former member of the party, running as an independent, who won the race to be elected Bogota’s mayor in October 2011. Assuming what is widely regarded as the country’s most important political position after the presidency, Gustavo Petro, who was also briefly in the M-19 guerrilla group,

continues the recent trend for left-of-center mayors of the capital.

On the international stage, the new administration has focused on diversifying foreign policy. In August 2010, Santos re-opened negotiations with Venezuela, negotiated the payment of some $800 million of debts to Colombian exporters and labeled Chavez his ‘new best friend’. The country has also seen increased trade and investment from Asia. Whether by fault of by design, Latin America’s diversifying trade network has led the Obama administration to reassert US business ties in the region. In October 2011 the US signed a free trade agreement (FTA) with Colombia.

Expectations for the FTA are high. It is forecast to stimulate Colombian annual exports to the US from $17 million to $50 million. Fears persist that the Colombian agricultural sector is not prepared for the resulting inflow of

$8BillionU.s investment in plan colombia

2000-2010

Under Uribe, Plan Colombia - the donation of billions of US dollars of military assistance to tackle drug production - had a huge positive impact on the security of the country

LEAD ARTICLE

0

100

200

300

400

500 COLOMBIAN GDP (US $ Billions)

(Source: Indexmundi.com)

Mining Leaders

Just over a year into his term of office, it appears clear that Juan Manuel Santos aspires to be a transformative president. Although he has so far been modest in his stated intentions, it is widely assumed in the Colombian press that he intends to be the president to bring peace to the country. While the battle against the guerilla continues, it is his bold social policies that distance him from his predecessors.

There are over 5 million internally displaced people in Colombia as a result of the years of conflict, the highest number in the world after Sudan. In June 2011 Congress passed a key bill designed to compensate these refugees and turn over a new leaf in the country’s history. The Law of the Victims and Land Restitution aims to compensate 4 million victims of the armed conflict since 1991. An estimated $10 billion in cash will be given out and six million hectares of land returned to its original owners.

The plan is one of the most ambitious of its kind and Santos has stated that passing this one bill alone was enough to make his presidency worthwhile. Nevertheless the bill has received criticism from the political right for recognizing the past violence as an internal conflict rather than a terrorist insurgency and for compensating victims of state violence equally to those of guerilla violence. Less ideological criticisms point out that the bill is premature when the internal conflict is still not over and question where the funds will be found. The implementation of this law will be one of the most important political challenges of the coming years. A new office and special courts will be established to deal with claims and the law will apply to victims until 2021.

A new Leaf

12 colombia

2012

cheap US imports, but for many industrial sectors – including mining – the opportunity to import machinery with lower costs and fewer delays is a major boon.

Following several years of steady economic growth between 4-5% most analysts expect similar growth for 2011. Preliminary data suggests that total exports for 2011 could close in on $50 billion with a record $13 billion of FDI during the year. Projections for growth in 2012 are also rosy, or at least they were until the Eurozone crisis deepened in November 2011, jeopardizing the world economy. With strong domestic demand, plenty of foreign currency and gold reserves and a relatively unexposed banking system, Colombia looks well placed to see out an external shock. Indeed, it was one of the few Latin American countries not to fall into negative GDP growth in 2009. However, a decrease in global trade and a fall in commodity prices, coupled with a fall in investor confidence as a result of the Euro-crisis would surely prevent Colombia reaching the forecast growth of 5% for 2012. Should the worst happen, the government would likely stimulate domestic demand by stepping up its investment in infrastructure projects.

Meanwhile, with Chinese demand for raw materials keeping commodity prices high, the extractive industries sector was named by President Santos as one of the five ´locomotives´ of the Colombian economy in the national development plan. The other four – infrastructure, agriculture, housing and innovation – may be promising for the

economy but will need huge investment in the coming years. At present only the mining and hydrocarbons industries can provide the revenues, through taxation and royalties, that will make this investment in diversification possible. Extractive industries account for 85% of current FDI in the country. The importance of the mining and energy sector in this respect appears to be fully appreciated at national government level. However, there has been a recent rise in resource nationalism at the local level. This has partly been fueled by conflicting studies on the level of government take for mining projects. Industry associations estimate a 68% take on projects whilst a study by the University of the Andes concluded that government take was only 22%, one of the lowest rates anywhere. The reform of mineral royalty distribution has also

increased sub-sovereign political risk. Designed to spread mineral royalties more evenly across the country and avoid some of the accountability and transparency issues encountered at the local government level, the reform is to be welcomed. However, as local regions share of the bonanza drops it could make business with local governments more difficult. While increases to royalty and taxation rates are unlikely in the short to medium term, new Minister of Mines & Energy Mauricio Cárdenas has refused to rule out changes in the long term.

Despite these concerns, the future looks bright for the Colombian mining industry. The government is pro-business and has a history of supporting foreign investment. The reorganization of the mining institutions should bring much needed clarity to the industry. If in recent years the Colombian resources bonanza has resembled a runaway train more than a locomotive of growth, 2012 will be the year which puts it on the right track.

Worldwide5th

for Investor protection

Having signed a free trade agreement in October 2011, Obama’s administration has focused renewed energy on improving business ties with Colombia

LEAD ARTICLE

FORECAST INVESTMENT IN MINERAL EXPLOITATION(US $ millions)

(Source: Presidencia de la República de Colombia)

0

200

400

600

800

1000

1200

coal

gold

(Source: MME)

Mining Leaders

The appointment of Maurico Cárdenas as Minister of Mines & Energy in September 2011 marked a change of direction for the ministry. Following on from Carlos Rodado Noriega who was in his second spell in the post, Medellin born Cárdenas is more in the technocrat mold. A Senior Fellow and Director of the Latin America Initiative at the Brookings Institution, he has previously served both as Minister of Transport and as Director of the National Planning Department.

The Minister’s remit is clear, to create what President Santos has defined as “a new model for the development of a sustainable export industry.” In his first months in charge Cárdenas engaged in dozens of meetings with key public and private sector players to establish the priorities of his mandate. One of his most high profile engagements was a joint press conference with the newly appointed Minister of the Environment, Frank Pearl. A lack of coordination between the two ministries has been a common complaint of many investors in the country’s natural resources sector, especially with regards to understanding exactly where oil and mining exploration can take place and where it cannot. Cárdenas said that there were many titles in areas where the environmental conditions would not justify exploration. Those areas with particularly high mineral potential would be considered ‘reserve areas’ and would be subject to a different licensing process. Instead of continuing with the previous titling policy which operated on a first-come-first-served, companies will now be chosen based on their technical and financial merits. He concluded that 5,000 of the current 9,500 titles awaiting environmental licenses would be refused.

Welcoming Cárdenas

Cárdenas also took a hard line towards illegal mining, saying it should receive similar treatment to narco-trafficking. He said that drug gangs, guerrillas and criminal groups were using illegal mining to finance their operations and that on discovering such activities police should destroy all the machinery at the mine. While the new Minister’s clarity on the issues of environmental permitting and illegal mining was a welcome sign for investors he was more evasive on the subject of royalty reform in the mining sector. Following a reform to the way by which mineral royalties were distributed throughout the country, there has been speculation that the rates themselves could go up on coal and gold. But Cárdenas refused to be drawn, saying “I consider it inopportune to open the issue of royalties at the moment, the country still has to consolidate mining developments. The debate should be re-opened when the industry is more stable.”

14 colombia

2012

led to the death of the Farc’s second in command, Raul Reyes. The second, Operation Checkmate, led to the successful rescue of 15 high profile Farc hostages, including Ingrid Betancourt, a former presidential candidate who had been held captive for six years.

Given Uribe’s unwavering focus on subduing the country’s guerrilla groups, it was of little surprise that Santos, as his right-hand-man in this field, became his implied successor as the 2010 candidate for the Party of the U, a political vehicle designed to continue the mandate of uribismo. Just two months into his presidency, Santos resumed where he had

left off as Minister of Defence, ordering an assault on a bunker

complex in the Macarena region which

The sheer range and scale of the new reforms introduced during

the first twelve months of Santos’ presidency have been impressive.

When Juan Manuel Santos was elected as Colombia’s 17th president in August 2010 it was the first time he had stood before a public vote. However, the president comes from a distinguished political family - his great-uncle was a former president, his cousin a former vice-president and his family owned El Tiempo, the country’s most prominent daily, until its sale in 2007. Following nine years as Colombia’s representative to the International Coffee Organization in London, he served as Minister of Foreign Trade under President Cesar Gaviria and then as Minister of Treasury and Public Credit under President Pastrana.

Santos was propelled into the public consciousness, however, as Minister of Defense during Alvaro Uribe’s second presidential term. A central player in Uribe’s ‘Democratic Security’ policy - which aimed to re-establish state control in the areas worst hit by guerrilla and paramilitary violence - in 2008 he orchestrated two of the most successful strikes against the Farc. The first, Operation Phoenix, a series of air strikes a kilometer into Ecuadoran territory

resulted in the confirmed death of Mono Jojoy, one of the Farc’s most notorious leaders. But while Santos’ determination to ‘not take one step back’ in the fight against the guerilla was to be expected, it is the crucial moves he has made to ensure ‘three steps forward’ towards building prosperity for Colombians that have attracted the most comment.

Following eight years of Uribe’s presidency, Santos came to power at a time when Colombia had already enjoyed several years of strong economic growth and increasing foreign investment as a result of the significantly improved security situation. Nevertheless the sheer range and scale of the new reforms introduced during the first twelve months of his presidency have been impressive. The most resonant of these reforms is also the one which has most distanced Santos from his predecessor and revealed the extent of his ambition. The Law of Victims and Land Restitution, which passed through Congress in May 2011, was not a reform without precedent. Proposals to provide compensation and return displaced lands to victims of the country’s internal

Juan Manuel Santos has confounded pre-election predictions and emerged as a true reformer. Elected as the supposed continuity candidate for outgoing president Alvaro Uribe, Santos has introduced a raft of important laws that aim to boost prosperity, tackle corruption and finally turn the page on Colombia’s violent history.

Leader PRofile

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cometh the hour...

15Mining Leaders

While Santos has remained focused on security,his policies also aim towards more inclusive reforms

83%

conflict have been around since the 1940s and were most recently discussed in 2008, during Uribe’s final term. These plans were always abandoned, however, either for political motives or reasons of cost. Santos, however, was prepared to stake his presidency on this single reform and his determination to see it pass has led to success where previous attempts have failed.

Perhaps inevitably, the perceived distancing of the Santos administration from that of his predecessor led to accusations of him being a soft touch on security issues. It is obvious that Santos has brought about a change in focus in domestic policy. Whereas Uribe put the country on a quasi-war footing, Santos has focused on a more diverse set of deep-seated problems that the country needs to tackle, such as poverty, corruption and fiscal irresponsibility. But it would be hard to argue that displacing the guerrilla issue as the be-all-and-end-all of domestic policy has led to a worsening in the security situation. In addition to the elimination of Mono Jojoy, the military has killed or arrested numerous other senior Farc members, including Farc leader Alberto Cano, and the improved relationship between Hugo Chavez and Santos has led to greater cooperation with Venezuela. In June 2011, Venezuelan forces handed over Guillermo Enrique Torres, Raul Reye’s right hand man, after his capture in Venezuelan territory. The government has also maintained a tough stance towards peace talks with the Farc, refusing third party mediation. “We have not thrown the key to dialogue into the ocean, but the door is closed,” Santos said in June 2011. “[Guerrilla groups’] deceitfulness in the past has made us incredulous. Now the government is holding the key, and we won’t give it to anyone until the conditions we have outlined are met.”

In the international arena too, Santos has renewed friendships not just with Venezuela but also with neighboring Ecuador, a relation that had been strained following the air-strikes on Raul Reyes in Ecuadoran territory. Santos’ presidency has coincided with a renewed reputation on the regional

stage. The country was elected as a non-permanent member of the UN Security Council representing Latin America and the Caribbean in October 2010. In April 2011 Santos, along with Venezuela’s Hugo Chavez, was requested to broker the return of deposed Honduran president Maunel Zelaya to his country. With Dilma Rousseff, the current president of Brazil not showing the same flair for international diplomacy as did her predecessor Luis Ignacio Lula da Silva and with Mexico fully engaged in tackling a serious wave of drug-crime, Latin America’s two traditional regional powers have left the door open for Santos and Colombia to play a greater role on the world stage. It’s a role that Colombia’s president appears to relish.

While Santos is broadly committed to continuing the pro-investment policies of the last eight years, he is not opposed to tinkering with the rules in order to further his long term goals. The removal of tax exemptions for fixed-asset investments and the overhaul of the

mineral royalty system are two examples of such changes. And while the mineral industries were identified as one of the five ‘locomotives for growth’ in the country’s development plan, Santos told Mining Leaders that one of his principle economic aims was to diversify the Colombian economy, in part to tackle the threat of currency appreciation. He also accepted that the mining sector was in need of an institutional framework like the National Hydrocarbons Agency which governs the Colombian oil and gas industry. “We want to replicate this structure in the mining sector, one that allows us to regulate and promote investment in the industry, because we as a country are very rich in minerals.” He added that investment in mining projects was growing at such a rate that it was tough to control and that improving mining safety records would be a major challenge. Reforming a sector that has historically been a wild-west of land title speculation and illegal operations will not be easy, but Santos may well be the right man to achieve it.

President Santos’ Approval rating january 2012

Juan Manuel Santos

16 colombia

2012

What role does the Cámara Colombiana de Minería (CCM) play in promoting the industry?The CCM was formed just five years ago when the major international mining firms started to invest in Colombia. The Uribe administration allowed Colombians to return to the roads and countryside and it also allowed geologists to return to the field. The CCM was formed to defend and promote the rights of the mining industry in the country. Our policy is to ensure that all the companies we represent operate with high standards regarding the environment, worker safety and local communities.The best investment a mining company can make is to conduct itself well. We ask the government that they promote and assist those companies that are acting responsibly in the country and that they punish those that aren’t, either through fines or closure. We are also asking for more oversight of the mining sector.

To what extent has the image of the mining industry in Colombia been damaged and what can companies do to improve the situation?The reputation of the Colombian mining industry has undoubtedly been damaged by illegal mining and poor environmental practices. When people hear news of fatal mining accidents, they make no distinction between illegal mining and legal, responsible mining. In recent years Colombians have acquired a far more developed view of their responsibility towards the environment. In the past they had a habit of openly disposing with their waste materials, contaminating rivers and causing deforestation. In tandem with this changing attitude towards the environment, mining companies are now implementing best practices towards the issue. Today shareholders do not forgive environmental disasters. We are now entering a new era, where the majority of companies value responsible business.

To what extent are mining projects opposed by green groups in Colombia?In Colombia today there are powerful NGO groups who often consider themselves to be the only ones concerned with the protection of the environment, failing to recognize that all

Colombians are interested in preserving the biodiversity of the country. We need to bring the best models from around the world and implement them here. But often these groups are in opposition to mining outright, without reason. We all want to live in a healthy environment, but it’s a fact that everyone consumes mineral products every day. Living in an apartment, using a cellphone or catching a plane, all this is made possible by mining. Nothing is free. Of course mining has an environmental impact, the debate should be about how best to mitigate and compensate its impact.

How supportive of the mining industry is the current Santos administration? If the government wants the industry to fulfill its role as an economic driver then it needs to support projects which are environmentally sustainable. They need to provide technical and scientific studies of the key mining regions. The country has yet to understand how important exploration is. We need to promote it. Up until now we have lacked a strong institution such as the National Minerals Agency and we lack the articulation of policy. At the moment there are huge delays in titles because of confusion between the Ministry of Mines & Energy, the Ministry of the Environment, which supplies the environmental permits and the Ministry of Interior which oversees issues surrounding community relations. We need more interaction between the ministries. The current government has made significant steps towards this.

What key advice would you give to foreign firms looking to break into the Colombian market? Investors are in the right sector, in the right country at the right time. In 25 years working in the sector, I have never seen a better time to do business in the country. My advice is to do something very small which will have big effects. Open an office in the country, have a local manager and geologists, attend the local congresses and conferences. In the past those firms that have established a local presence have been the most successful. I say come to Colombia, get to know the country and the people and build the business relationships necessary to grow to the next level.

q&a

Uniquely focused on the mining sector, the Colombian Chamber of Mines has been defending and promoting the interests of local and foreign companies since its creation in 2005. The chamber has quickly established itself as one of the most important associations in the country and maintains a strict policy of promoting the highest standards of responsible mining amongst its members and the sector at large.

Responsibility PaysCésar Díaz, PresidentColombian Chamber of Mines

POLI

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MY

17Mining Leaders

royalty rates

strength of investorprotection

10%

33%

COAL PRECIOUSMETALS

NETPROFITS TAX

BASEMETALS

4% 5%For operation producing >3Mt,

5% for operations producing <3Mt

Emeralds 4%Platinum 5%

Radioactive Materials 10%Alluvial Gold and Silver – 6%

jurisdiction overview

COlombia: AN IMPROVINGJURISDICTION

The 2011 Fraser Institute survey of mining jurisdictions reported that Colombia has become the third most attractive destination in Latin America for mining investment, trailing only Chile and Mexico. In addition, the country was ranked first in terms of geological potential. With a fair tax regime and excellent investor protection, Colombia has laid the regulatory groundwork necessary to attract long term investments.

worldranking country

Colombia

Peru

Chile

Mexico

Brazil

Argentina

Panama

Venezuela

5

20

28

44

74

109

109

179

(Source: Fraser Institute)

(Source: WB Doing Business 2011)

“The new ‘BRICs’ are Colombia, Indonesia,

Vietnam, Egypt, Turkey and South Africa (CIVETS). They are countries with major

populations, dynamic, diverse economies, political stability and

each of them has a brilliant future.”

Michael GeogheganCEO HSBC

RAnking of mining jurisdictions

Brazil 34%Chile 17%

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You have said that despite the oil boom, Colombia’s future is as a mining country. What underpins that belief? Colombia has a great mineral wealth which if we can convert into production will become one of President Santos’ locomotives of the economy. In August 2011 former president of Brazil Luiz Ignacio de Silva visited Colombia as part of an international forum to promote business between the two countries. At the event I said that Colombia was like a smaller Brazil. All the elements of the periodic table can be found here. Both countries have such a rich diversity of natural resources, but Colombia’s are usually on a smaller scale. The exception to this is coal. Colombia has half the reserves in Latin America and it’s of a great quality. Cerrejón in La Guajira is the largest coal open-pit mine in the world. The petroleum industry has been growing rapidly, but the country’s oil reserves are only slightly over 2 billion barrels. This would last us around ten years at our current rate of consumption and export. On the other hand, we have potential coal reserves of 17 billion tons, enough to last us a century. We have sufficient gold to carry on producing for several decades. We also have nickel, copper, platinum and of course our famous emeralds. All these minerals are waiting to be developed. Colombia is a country to explore. Only 51% has been mapped out geologically, only 30% has been studied with geochemistry and only 4% has been subject to geophysical tests. It’s a treasure waiting to be discovered.

What effect will mining have on development in the country? Colombia has a great potential in mining. In the last six years the sector has grown at 3.2% per year, with GDP growing at a rate of 4.5% and the petroleum industry at 13.9%. Mining is still not a locomotive of the Colombian economy. If the mining sector continues growing at 3.2% by 2020 it will contribute $5.2 billion a year to Colombian GDP. However, if we undertake all the expansion projects currently on the table we expect to see the industry grow at an annual rate of 9.5%. In this scenario we would generate $12 billion in royalty payments from mining in the coming ten years. This is dependent on the improvement

of regulations and institutions. In 2010 the sector directly employed 227,000 workers, but this will grow significantly.

Why reform the country’s mining institutions? One of the main barriers that has led to the underdevelopment of the mining sector in Colombia has been the weakness of our institutions. There have been attempts in the past to reform the sector, but they were not successful. With Ecocarbon, Mineralco, Minercol and then Ingeominas, one centralized body has always replaced another. Centralized institutions have many limitations. They don’t have flexibility in terms of contracts and salaries. Logically, lower salaries do not attract the best human resources. Ingeominas is nearly 100 years old and during its history it has done a great job providing basic geological information on the country and managing seismic and volcanic risks. However, it did not have experience in studying and approving applications for mining titles or supervising the development of projects. As well as institutions, we needed to improve regulations. The previous mining code made no requirement for technical or financial capacity in order to apply for a title, it was basically done with your identification card. It was run on a first come first served basis and led to huge speculation on titles. There were also some perverse rules, for example one could apply for a mining title to a land package of any shape. The result was that there are many areas left between two exploration zones leading to awkward negotiations. The new mining code will resolve a lot of these issues, most importantly allowing the government to award permits to only those companies that are technically and financially capable of developing the property.

What role will the ANM play in the administration of the mining industry? The ANM will be the only institution in charge of administrating the country’s mineral resources. It will also supervise the technical and economic requirements of mining concessions and promote the sector. It marks a major overhaul from the

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Hailing from the department of Atlántico, Rodado Noriega was appointed Minister of Mines & Energy by President Santos in August 2010 having previously held the position in the 1980s. He has also served as President of state oil firm Ecopetrol and as Colombia’s ambassador to Spain. He was a central figure in the recent reform of the country’s mining sector before vacating the post in 2011.

With Open ArmsCarlos Rodado NoriegaFormer Minister of Mines & Energy

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19Mining Leaders

“Colombia has become an attractive destination for foreign investors in recent years, but we still need more companies. We need junior companies, they are fundamental to improving our

geological knowledge.”

previous system and makes a separation between the licensing process and the oversight of the sector. There has never been a diagnosis of the mining sector like this before, with the support of McKinsey, the World Bank and world-class consultants. Having an accurate diagnosis of the problem is 70% of the solution, now we have to focus on implementation, making these proposals become a concrete reality.

How can interaction between the Ministry of Mines & Energy and the Ministries of the Interior and Environment be improved? With the current reform a Directorate of Environment and Communities has been created under the Ministry of Mines. Its role will be to work as the interlocutor with the Ministry of the Environment in the area of environmental permits. It will also work with the Ministry of the Interior on the topic of ‘prior consultation’ which is needed for mining titles in indigenous territories. There will be a dedicated professional in the Directorate responsible for this issue, acting as the interlocutor between the Ministry of the Interior and the mining associations.

How important is foreign investment to the Colombian mining sector? Colombia has become an attractive destination for foreign investors in recent years, but we still need more companies. We need junior companies, they are fundamental to improving our geological knowledge. Here in Colombia there are already over 50 juniors, but in Peru there are over 300. We also need to attract more big-leaguers. We currently have only three of the ten largest coal companies worldwide and two of the largest gold companies. Perhaps these large companies still have a wrong perception of the country. The improvements in security in recent years have been well documented. But I would also stress that Colombia has the best legal security that an investor can find anywhere in Latin

America. In Colombia there has never been an expropriation of a foreign company and it was the only country in Latin America not to default on its loan payments during the crises of the 1980s. We respect the rules of the game and honor our commitments. Mining is set up for private investment. There is not a ton of coal or an ounce of gold that is taken by the state. There are three things that you can’t undo in life: the arrow shot, the word spoken and the opportunity lost. There are opportunities in this country that you shouldn’t let pass by.

What can be done about mining related fatalities? Mining is a very risky business in whatever part of the world and there will always be accidents. But with good supervision

we can minimize these occurrences. I personally fought hard for the formation of the government’s royalty policy to ensure that 2% of total royalties from mining and hydrocarbon projects are channeled to ensure proper supervision. Our goal is to halve the number of fatalities in Colombian mines by 2014. The main thrust of the campaign will be in Boyocá, Cundinamarca, Norte de Santander and Antioquia. Supervision is important, but it will never substitute the responsibility of the mining title holder.

What infrastructure projects are needed to ensure that the country benefits fully from the current resources boom? Mining requires a strong infrastructure network to ensure the flow of cargo and exports at competitive prices. In Colombia it is essential to improve modes of river, road and freight transportation and upgrade ports if we are to mobilize the growing production in coal, construction materials, nickel and gold. The Ministry of Mines & Energy has already undertaken a study of the sector with the aim of developing a multi-mode transport and logistics plan for the country.

Infrastructural improvements are essential to the continued growth of the sector

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Colombia has been cast into the center of the mining world’s attention. However, for all the excitement surrounding the potential development of the sector, difficult challenges lie ahead for mining companies – many of which seem to be rushing into projects and areas without the adequate risk management structures in place, particularly when it comes to managing local risks.

At the macro level, Colombia is a very attractive destination indeed. However, no activity is more grounded at the local level than mining, and this is precisely where most of the challenges to mining activities in the country will come from. To begin with, security continues to pose a credible and serious risk to mining operations in large parts of the country. Illegal armed groups and organized crime continue to operate in most of the mining areas of the country. They are active in extorting from companies, using kidnapping and potential attacks against personnel and assets as a threat.

Perhaps more concerning, as these groups get more sophisticated, setting up service companies that also act as fronts for their criminal activities and buying up gold from illegal miners, they are quickly turning into a legal and reputational risk for companies, particularly those more exposed to international legislation. The growing sophistication of the Farc also means that the old approach to mining, letting operations settle and develop before starting to raise extortion demands, has also changed, and now the group is actively targeting vulnerabilities, particularly at the exploration phase and seeking to extort companies in more diffuse ways.

Mining in Colombia is obviously also exposed to some of the same challenges that are present around the world, such as illegall mining and opposition from anti-mining and environmental activists, which are yet to form into well-organized groups but are certainly gathering strength. The current regional trend for changing the way royalties are distributed, together with the relatively unregulated push for prior consultation, will certainly provide an additional challenge for mining companies, throwing local politicians, business interests and NGOs into the mix of key stakeholders.

For all these challenges, the opportunities in Colombia far outweigh the risks, most of which can be effectively managed. In the meantime, companies should be looking at the three keys, outlined on the opposite page, to successfully develop projects.

lead issue

CASE STUDY 1: ILLEGAL MINING

Managing illegal and artisanal miners is a challenge across the world, particularly around large gold deposits. A large multinational mining company, understanding that most of the communities around its planned project made a living mostly out of mining, sought to develop a comprehensive approach to integrate their activities into their project – providing health and safety instruction and equipment, giving out advice on the use of mercury, and even offering to buy their gold production. However, the program proved to be a big failure when most of the miners where threatened by local criminal elements to prevent them from taking up the offer of selling their gold to the company. The company then sought the support of local leaders within the community only to discover that traditional power patterns had been eroded by the new wealth being generated by these same criminal elements. The company is currently working on a carefully crafted strategy that involves the national and local authorities and attempts to separate artisanal mining activities from illegal mining activities, aiming to provide support and security to the former and bringing justice to the latter.

CASE STUDY 2: FORMALIZED EXTORTION

As organized crime and the Farc become more sophisticated, extortion demands in some parts of the country are becoming more difficult to understand and manage. While in the past most “front” companies were just a paper trail used to hide criminal activities and launder money, most of these companies are now real entities that do provide goods and services, representing a serious legal and reputational risk for mining companies. Their appearance around mining areas is particularly troublesome, as they tend to combine the subtle application of pressure and implicit threats. A leading mining company with long-standing operations in Colombia was the subject of this new type of extortion demand. Individuals, thought to be members of one the Bacrims operating in the area, approached several of its employees and strongly suggested they use the services of a local hotel and a transportation company. This was a clear departure from the normal extortion patterns and as well as other problems ended up creating internal difficulties for the company as it sought to provide reassurance to employees over security. The company has implemented new communication policies and training programs for employees on their corporate protocol, as well as a vetting procedure for vendors and subcontractors. The policies are similar to those of the FCPA and the new UK Bribery Act regulations.

CHALLENGES IN THE LANDOF OPPORTUNITY

21Mining Leaders

RISK ManAGEMeNT

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Mine invasionDemonstrations at mine site

Theft of equipment from supply chainTheft of products from supply chainTheft of equipment at mine/exploration siteTheft of product at mineTheft of confidential information at mineTheft of materials from mineAssault or intimidation of employeeAssault or intimidation of contractor Armed robbery at mineRobbery at offices in main city Express kidnapping in main city

Damage to power/fuel/water supply at mineDamage/theft of equipment at mineBlockage of access/roads to mineIntimidation of employeesViolent demonstration at mine

Damage to property and equipment at mineSignificant earthquake at mineDisruption due to heavy rains/earthquake

Extortion of executivesTheft of product from mine Assault or intimidation of contractorTheft of equipment at mineAssault or intimidation of employeeTheft of explosives at mineAssassination of employeeUse of supply chain for smuggling narcoticsAssassination of contractorExtortion of employeeKidnap of contractor/employeeSabotage of supply chainDirect attack on mineKidnap of employee in main cityDirect attack on headquarters in main city

Accusations of local community Media campaign against mineSabotage of mine equipment or infrastructureDemonstration at headquartersDemonstration at mine

Involvement/accusation of corruptionInformal payments to military/police Informal payments to illegal groups

Theft of explosives at mineExtortion of mine management personnelExtortion of employeesExposure to indirect attackAssassination of employeeArmed confrontation at mineTerrorist incident affecting contractorKidnap of mining employeeDirect attack against mineAssault or intimidation of employeesDirect attack on headquartersOperational disruption due to an attack

1· Think local: go beyond the “communities” approach and think about other factors, including the illegal groups and local politicians. Remember that at the local level, the support of the national government might count for little.

2· Map stakeholders and plan your strategy: even before first contact, make sure you have a consistent, realistic and transparent message, that you share and shape with the different stakeholders. Most of the time is not even about the money - think more in terms of empowerment.

3· Integrate risk management: avoid approaching risk along internal business units or functions, or as a static issue that does not evolve with the different stages of the project.

three keys to succesS

Daniel LinskerSenior Manager, Global ServicesControl Risks

RISK MATRIX# RISK

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Your ReputationPrecedes You

Today Colombian business and society finds itself repeating the same discussions that were prevalent 30 years ago when the oil industry was taking off in the country. At that time the oil industry was relatively underdeveloped. The population didn’t know what to expect and segments of the media portrayed multinational companies as agents determined to steal the country’s natural

resources. Over time that perception has changed amongst most segments of society as people have come to understand the benefits the hydrocarbons industry brings in terms of jobs, development and exports.

The mining industry is still largely misunderstood, however. Colombia is not a mining country. In the past we have had small, often illegal mines which have had very poor social and environmental records. If this is what Colombians equate with mining, it is not surprising that many fear the growth of the industry in their country. The four major mines in the country, producing coal and nickel, inherited what were previously government projects. The firms involved bought into projects that already had a history of mining and where there was less need for grassroots social work at the outset. However, the current mining boom has seen hundreds of exploration companies enter the country, often in areas with little or no experience of formal mining. These companies need to undertake social baseline studies with local communities and explain how formal mining will affect their way of life.

When a company has good practices, it should communicate them. When a company communicates, it should have good practices to talk about. When Portex first started working in the country we found that many companies had huge media exposure but many of their claims on the social side were simply not true. We also found a number of smaller companies in the business to business sector which had excellent operating practices but didn’t talk about them. It’s important that we close that gap. The industry needs to develop good CSR practices and then publicize them. When an event such as the Macondo oil spill in the Gulf of Mexico happens, entire

industries can feel their reputation at risk. There are thousands of examples of environmentally and socially responsible mines around the world. We need to build awareness about these examples.

So how should mining companies focus their public relations efforts? At the early stage it’s important to prioritize local engagements ahead of national visibility. Firms need to start a sincere dialogue with communities, hiring Spanish speakers and respecting local customs. We are fortunate to already have some good examples of local communications. Both Cerrejón and Cerro Matoso have improved their local communication through radio stations and television placements, allowing them to spread the message about the work they are doing in education and health in the communities. You don’t

have to be an established multinational to undertake successful CSR projects. Junior companies can also make positive impacts on communities. They might not be able to fund a school or hospital on their own but they often have the connections and means of finding capital for such projects abroad.

These projects are often more sustainable in the long term, because the other actors maintain their presence. You don’t have to invest a lot of money to

have a positive effect, you need to do it carefully and intelligently. There are plenty of true mining companies willing to make these investments. It’s important that the Colombian mining industry attracts these sorts of firms rather than maverick investor companies only focused on maximizing share price in the short term.

There is no single recipe for maintaining good community relations. In Colombia, what works in one region will not always work in another. Similarly not every mining company has the same standards and experience when approaching social challenges. At Portex we analyze each situation individually to ensure a bespoke solution for every company and project. Sometimes the programs we recommend take time to implement, but when investing in a 20-30 year project it is worth taking the time to procure social licensing during the early days.

Established in 2005, Portex is a public relations firm dedicated to building corporations’ reputational value in Colombia. Combining corporate communications with corporate social responsibility (CSR) programs, the company also undertakes fieldwork such as social baseline studies and reputation diagnostics. In its short existence the firm has built up a strong portfolio of clients from the mining and oil industries.

Rafael Mateus & Augusto LemaitreDirectors

Portex

leader insight

“When a company has good practices, it should communicate

them. When a company communicates, it should have good practices to talk about.”

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Asomineros ANDI (1932)34 Asomineros members International Mining Fair, Medellin250 Exhibitors in 2011

In operation since 1932, the Colombian Mining Association (Asomineros) is the longest standing mining chamber in Colombia. Absorbed by ANDI, Colombia’s biggest business association and one of the most important in South America, Asomineros benefits from sharing resources with the larger organisation including centralized legal teams and economic analysts. Asomineros also organises the country’s largest mining show, the International Mining Fair, held every August in Medellin. The fair has grown in size in recent years and hosted over 250 exhibitors in 2011. Eduardo Chaparro, the president of Asomineros, says that the association plans to grow the fair into the third largest mining event in Latin America after Santiago’s Expomin and Arequipa’s Perúmin. Thanks to its long history, ANDI holds significant influence in the shaping of government

policy. The organisation’s participation in the current debate about the future of the Colombian mining industry is its top priority, “we are very concerned about the debate surrounding the possible revision of mining royalties and the restructuring of the autonomous regional commissions for environmental affairs,” Chaparro said, “we live in a democratic country with open debate, but we need to make sure that the environmental debate is not high-jacked by left-wing groups masquerading as greens.”

Chaparro said that more exploration firms are needed in Colombia if the country is to achieve its full potential in terms of production of not just coal and gold but a range of other metals including platinum, copper and lead. “In order to attract the foreign investment we need, we have to make sure the rules of the game are clear and consistent,”

Company FOCUS

“Colombia could become the Mecca for the mining industry in Latin

America over the next 20 years. The country has a unique geology and its metallurgical areas are ready for discovery. Although coal and gold have been the traditional minerals,

the future will be in base metals such as copper and lead.”

he said. In addition to lobbying for the mining industry’s economic interests, Asomineros also looks to promote responsible mining and corporate social responsibility projects. ANDI is a member of the UN’s Global Compact, which commits businesses to adopting universal principles regarding labour rights and the environment, and has signed up to the International Council on Mining & Metals ethical principles. Having previously worked to eradicate child labour in Colombia, Asomineros is currently advising how other Colombian sectors such as flower and energy industries can do the same.

In addition to the country’s geological potential, Chaparro points to Colombia’s unique positioning as the only country in the equatorial zone with both Pacific and Atlantic coasts as a major advantage for the mining sector, allowing exports to the Gulf of Mexico, Europe and Asia. He also said that skilled craftsmen in Colombia combined with its gold and emerald wealth could help the country develop a jewellery industry like that of India or Amsterdam.

AsominerosEduardo Alfonso Chaparro ÁvilaExecutive Director

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towards a unified sectorAs the industry association for large mining companies operating in Colombia, my organization’s mission is both to defend the competitiveness of Colombia as a mining destination and to improve the image of the industry nationally and overseas. Although these two challenges are distinct, they often overlap. When politicians or pressure groups attempt to provoke reform that would reduce the

competitiveness of the country and increase government take of profits they are often exploiting a lack of popular understanding regarding the industry. The Colombian mining industry needs to improve its public image, by showing the benefits that mining already bring to the country and we need to distinguish between illegal mining and well run projects that can benefit communities and minimize environmental effects.

So what benefits does the industry currently afford the Colombian state? The first thing to say is that our sector provides quality employment to many people who wouldn’t otherwise have it. In some regions of the country, for example in La Guajira, mining companies offer the only alternative employment option. Mining also provides direct economic benefit to the entire country which, through the centralized royalty system, also spreads to those areas without mining operations. The industry contributes 2.21% of GDP and 23% of all exports, but both of these figures are set to grow rapidly as the industry moves from exploration to production. The sector currently accounts for 30% of foreign direct investment into the country and is scheduled to attract over $8 billion in the coming five years.

Mining also requires roads, airports, ports, bridges and electrical networks, and we’re one of the few sectors with the capacity to build all these things. Over $300 million is earmarked for major infrastructure projects and we are not the only industry that profits from these upgrades when they are built. This contribution to national development is especially important for an emerging market like Colombia, since infrastructure is key to accessing international markets. Finally, in 2009, mining firms invested $16 million in corporate social responsibility projects in the areas in which they operate. Despite these contributions, the sector still faces an image problem. This is not a

uniquely Colombian phenomenon. The way to resolve the problem is not, as some powerful green groups would suggest, to ban mining projects in the country and turn our back on this powerful source of economic growth and employment. The debate is not about whether to mine or not, it is about how to ensure that mining is responsible towards communities and the environment.

One way to improve the image of the industry is to tackle the country’s illegal miners, who are often the worst perpetrators of environmental damage and social dislocations. Colombia is waging a serious battle against illegal extraction.Through responsible, legal mining our industry helps Colombia distance itself from its violent history, as many of the zones in which our companies operated used to be very complicated regions for security. We have done a great deal, and we continue to fight to provide people with stable, legal work, thus pushing out illegal activity and stabilizing the country. The fight against illegal mining is ultimately the responsibility of the government.We’re encouraged to see the steps being taken.

However, my organization’s main priority is to create a comprehensive policy for the sector. We need an institutional framework of laws and regulations and standards that everyone involved in the industry, companies, the government, the public and investors, understand and respect. Our industry is leading the push for better regulation and enforcement, because we understand how crucial these are to the long-term success of what we do. And we’re looking to develop a better culture of self-control and self-regulation by which, even without government oversight, our industry follows international standards, develops quality certifications and implements best practices.

Colombia must continue discussing the best way to take advantage of its natural resources. We believe that legal, responsible and productive mining is the best answer. Mining is sure to play an important role in the country’s development. Other Latin American countries, such as Chile and Peru, have proved it is possible so why can’t Colombia?

The Sector de la Minería de Gran Escala is the industry association for large-scale mining in Colombia. With 13 member companies, including some of the biggest names in the coal and gold mining sectors, the organization acts as an interlocutor between business, government and the public to promote the interests of the industry. Claudia Jiménez Jaramillo, the association’s director, explains that the largest priority for the association and the industry is to change the image of mining in Colombia.

Claudia Jiménez JaramilloDirector,

Sector de la Minería de Gran Escala

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“So what benefits does the industry currently afford the Colombian

state? Quality employment, 2.21% GDP contribution, 23% of all

exports, infrastructure and $16m investment in corporate social

responsibility projects”

25Mining Leaders

q&a

Australia is the world’s leading exporter of coal, iron ore and zinc and the second largest exporter of gold and uranium. Having successfully faced the issues surrounding land rights, profit sharing and sustainability, the Colombian mining industry can learn a lot from its Australian counterpart. From its offices across Latin America the Australian Trade Commission (Austrade) aims to boost Australian investment in the continent.

What has Austrade done in recent years to boost trade and business ties between Colombia and Australia? Our role in Colombia is to help Australian investors who are interested in entering the Colombian market. We aid them in understanding the challenges and opportunities and help them connect with the organizations and people they will need to know in order to succeed. We also want to promote Colombia amongst Australian executives. We are assessing the growth areas where we see the greatest opportunities, which include mining, mining services, infrastructure, water management and the oil and gas industry. While Australian executives are currently very focused on integrating with Asia, Latin America is also Australia’s neighbor in the other direction, across the Pacific. There are considerable growth opportunities here as well.

Are there any lessons from Australia’s development as a mining country that could be relevant to Colombia today?Australians have a sense of responsibility encoded into their DNA. We have the benefit of already having experienced many of the issues that Colombia is now facing itself: How do you balance the needs of indigenous communities? How do you protect the environment? How do you distribute mining royalties in a sustainable fashion? Australia spends around $4 billion a year - between government, industry and academics - on research and development. The University of Queensland Sustainable Minerals Institute is one of the most recognized sustainable mining institutes in the world. We have a lot to offer in terms of research and policy setting, our experience with closing and rehabilitating mines is particularly relevant for Peru, for example. Colombia wants to improve its mining policies to attract more investment while improving relationships with local communities. Australia has demonstrated that this is possible through a culture of commitment to sustainable mining. Mining and development is an emotional and highly politicized issue, particularly in Latin America. High commodity prices have further inflamed the issue. Australia would like to assist Colombia in its journey towards sustainable mining.

What role does Colombia play in Australia’s wider Latin American focus? Austrade is focused on what we call the Latin Six. The Latin Six are the half a dozen countries that we see having the strongest opportunity for Australia. There are no surprises in the list: Peru, Mexico, Chile, Argentina, Colombia and Brazil. However, Bogota is the only capital city of the six without an Australian embassy, so that gives you an idea of how much work needs to be done by Australia in Colombia, not just at the commercial level but also at the diplomatic level. Australian firms already have a presence in the country. BHP Billiton is the largest taxpayer in Colombia through its investments in Cerrejón and Cerro Matoso. That really gives a stamp of approval to Colombia for other Australians. But the relationship between the two countries is still young. It’s like a blank canvas and it’s an exciting time. The only problem is that of perception. When you talk to investors about Colombia, their first reaction is often skepticism. That’s the result of the lack of a historical relationship between the two countries. Colombia is unfamiliar to Australians and we need to update those perceptions.

How competitive is Colombia’s mining sector compared to other mining countries in Latin America?Colombia is very cost competitive. Everything is about risk and reward. Colombia is maybe a little riskier than places like Chile and Peru but the entry cost is lower too, so the reward is higher. However, I think most Australians would like a more predictable, stable mining framework.

What measures could the Colombian government take to make the mining sector even more attractive to investors?Everyone is waiting for the new mining code. It appears to be a big improvement on the existing regulations.The restructuring of the concessions to make them more exploration friendly and the focus on tackling illegal mining are positive steps. I think Colombia is looking to replicate and even improve upon Peru’s mining framework. Once this is implemented I think we will begin to see even more investment coming from Australia.

aWAITING wIZARDS

FROM OZ Daniel Sullivan, Trade Commissioner, Austrade

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Colombia-China Commerce & Integration Chamber (2004)500 membersBogota office and three Chinese offices

The entrance of Chinese firms into Latin American markets has spawned numerous articles and opinion pieces in the international press about south-south cooperation and the decline of US influence in the hemisphere. Historically trade between China and Colombia has been low in comparison with other Latin American nations. That changed in 2010, when Colombian exports to China grew 127% on the previous year’s figure and the Asian giant overtook Venezuela as Colombia’s second largest export destination. Raw materials have long dominated Colombia’s trade with China; for 20 years, ferronickel accounted for a full 90% of Colombian exports to the country. But 2010 saw a sharp increase in the volumes of Colombian oil, coal and scrap metal reaching Chinese shores. As trade between the two nations grows and diversifies, specialist organisations are establishing themselves as a conduit between them, building business ties and promoting investment.

The Colombia-China Commerce and Integration Chamber (CHICC) promotes integration between Colombia and China in a diverse field of activities

including commerce, academy, tourism, science, technology, culture and sports. Its underlying purpose is also to foster an environment of friendship. CHICC´s main goals are three-fold: to promote international trade, trigger investment and to encourage specialized fairs. Miguel Angel Poveda Mesa, the organization’s president pinpoints 2010 Shanghai Expo as the moment when Colombia-China relations experienced a paradigm shift. The government realized the importance of establishing a Chinese export market and started to draft a well-defined policy towards China. “Santos plans to establish China as Colombia’s main economic partner of the future”, says Poveda. In addition to establishing an office in Shanghai, CHICC has built up its presence among key Chinese industries and now boasts agreements with the Chinese Chambers of Mining, Jewellery and Construction as well as the Chambers of

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Commerce of 14 Chinese cities, including growing economic powerhouses such as Guangzhou. In Colombia the chamber has established links with eight universities outside of Bogota in order to foster academic exchanges between students.

Although it is currently the global leader in terms of coal and gold production, Chinese mining firms are increasingly looking for projects outside their national borders. The country’s coal imports increased by 31% in 2010 to meet industrial demand. Chinese delegations frequently visit Colombia to explore possible projects. In July 2011 a Chinese delegation arrived in Bogota to investigate Colombia’s world renowned emeralds. Collaboration with local providers of emerald treatment and certification laboratories could yield to a growing trade and knowledge transfer with one of the world’s fastest growing jewellery markets.

ChiccMiguel Angel Poveda MesaPresidentColombia-China Commerce & Integration Chamber

“The new ambassador is more business-oriented than the last.

Colombia is thinking about building a consulate in Shanghai and

increasing its civil servants at the embassy. Proexport wants to open

more offices, and we will follow suit. We are facing a unique moment.”

COLOMBIA TRADE WITH CHINA(US $ Billions)

(Source: DANE)

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