Behind Gran Colombia Gold’s Dispute with the Colombian Government: Is There a $700 Million USD Lawsuit?
Gran Colombia Gold is in the middle of a grievance with the Colombian government. The Canadian-registered gold and silver mining firm has been struggling to manage what some would call “illegal mining” and others might call “informal mining” on its holdings. Dating back even further, the company has encountered controversy and resistance to a plan it had to create a large open-pit mine in central Colombia.
Now, Gran Colombia Gold is seeking more support from the Colombian government to deal with its concerns, and a recent report from Canadian publication the Financial Post claims that the company has already filed a massive $700 million USD suit against the state, alleging a violation of the free-trade agreement between Canada and Colombia.
To add some context and clarity to the headline-making dispute, Finance Colombia Executive Editor Loren Moss recently sat down to talk with Colombian mining expert Paul Harris. In addition to being the organizer of the Colombia Gold Symposium, editor of the Colombia Gold Blog, and publisher of the Colombia Gold Letter, Harris serves as a consultant in Colombia on gold and copper mining, mining information analysis, and project identification, among other subjects.
Loren Moss: Reports have surfaced about Gran Colombia Gold filing a $700 million USD suit against the Colombian government. It seems that they’ve had some struggles here in the past locally where they’re operating. What’s behind that lawsuit and what is their grievance?
Paul Harris: Well, first off, I think we need to be very clear. As far as I understand, Gran Colombia Gold has not yet filed suit. So, in Trump parlance: There’s fake news going around.
Where there’s smoke, there’s fire — there’s certainly fire here — but as things stand, and as far as I’m aware, Gran Colombia Gold has not filed suit. If they did, that would be a material fact, and they would have to issue a press release on it. If you look at their website, there’s no press release yet.
So, this story stems from something published in the Colombian media several weeks ago that was not factually correct, and somehow that’s been picked up and reported on and reported on, most recently by the Financial Post in Canada — and that piece had errors in it in addition to this one.
After I initially saw and heard about this in late February or early March, I had the privilege to go to the PDAC in Toronto — a big exploration conference — and I sat down with the CFO of Gran Colombia Gold and I asked him that very question you just asked me.
He said: Look, we haven’t filed suit yet. We’re in conversations with the government. We’ve got a problem. We’ve got a dispute. We’re in conversations with the government about how we can possibly remedy that dispute. And if we’re unable to remedy it, then one possible solution is to file suit — but we haven’t done it yet.
So, the figure may or may not be $700 million USD, and they may or may not file suit. They’re claiming that government policy — or lack of government intervention — has hindered their ability to develop, advance, and expand their operations in Marmato, in Caldas. And also issues related to their Segovia operations in Antioquia that have to do with dealing with local communities, local groups of artisanal miners, and things of that nature. Gran Colombia Gold has seen the government act to help other companies with those kinds of issues. Continental Gold Buritica, for example.
Loren Moss: There were hundreds of troops, I think, sent out there.
Paul Harris: They went in to help clear it out. So, Gran Colombia, I guess, is arguing: You did it for these guys, why aren’t you doing it for us? Why aren’t you helping us?
That seems to be the basis of their dispute. But, bearing that in mind, it still didn’t stop them having record production last year in 2016. So, we’ll see how that evolves.
Loren Moss: They’ve had problems with violence before. I think I remember there was a death at one of their facilities. They’ve had problems with some of the armed groups and some of the criminal gangs. How much of a factor is that? Obviously, it has not impeded them from operating completely. Is that a big hindrance? What are their challenges right now?
Paul Harris: At Segovia, I think, when they originally got the mines in 2010, they were already going into a very difficult social situation. As you mentioned, you had all the illegal armed groups there. The FARC, plus the ELN, and others. You also had the armed criminal groups — or BACRIM — and you had a widespread culture of illegality or informal mining.
One of the solutions they have tried to develop is developing third-party contracts, so that they basically buy the ore that the third-party traditional artisanal informal miners produce and they put that through their mill. That currently is about somewhere between 70% and 80% of their production in Segovia, and to a certain extent that has worked very well for them.
But I think it’s always been a difficult situation for them to manage. They’ve been seeking government assistance to help advance and deepen that program to help formalize some of these informal miners, to bring them into their business model, and it seems that the government hasn’t really been supporting them enough.
Loren Moss: We’ve seen where mining companies have had success in going out and reaching and working with local populations. It seems that in this case, Gran Colombia Gold hasn’t really gotten their support. There are some families that are upset and feel like their rights or their claims have been violated. Are they making any progress? Are they doing anything to try to work locally, or is their strategy just dealing with officials in Bogotá and trying to solve that conflict that they have?
Paul Harris: I think their strategy is very much focused on the local area. When they had the change of their presidency a couple of years ago, the former presidency that was based in Bogotá really came to Medellín. Lombardo Paredes, who was the new CEO a couple of years ago, is located in Medellín, so he can be hands on with the communities, with the municipality, and with the mayor’s office. So the focus really is on local.
But obviously, you’ve got to deal with the national government as well through the Ministry of Mines. And they’re looking to use the tools at the top level of government in addition to engaging very much at the local level of government.
Loren Moss: Where I’m from, in the Appalachian part of the United States, we have what we call “mountain-top removal,” which is very controversial to this day. If I understand correctly — and I’m not an expert on mining — they want to bring that technique into some of their areas where they want to re-shape the geography. Are they getting resistance from that, or is that not part of their plan?
Paul Harris: No. Mountain-top removal is a very specific method, specifically for coal in the Appalachians. I don’t think that was ever the intention here. At Marmato, in Caldas, which I think is the project or deposit you’re referring to, the original plan — way back in 2010 or 2011 — was to do an open-pit mine, which you could argue is effectively mountain-top removal. I’m not going to get into that.
But they encountered a lot of resistance to that idea, and so I would say, way back in 2012, they changed strategy to just focus on underground mining development. That hasn’t been that company’s strategy for probably about at least five years now.
Loren Moss: This is why we wanted to talk to an expert like yourself. Speaking of that, your organization has an event coming up later in the year. Who is that directed toward, and how can readers who are in that sector could get more information?
Paul Harris: Yes. The Colombia Gold Symposium from November 14-15. We did the first one of these last year, last November. We had over 200 people participate. A great success. So we’re repeating this year, and we’re expecting 250 to 300 people.
It’s focused on anybody that really either wants to invest in or work in the Colombian gold and copper sector. We don’t deal with coal. We don’t deal with emeralds. We’re focused on gold and copper. So, it’s targeting investors, mining analysts, exploration companies, major miners, equipment providers, and service providers.
It’s a two-day event. The bulk of the program focuses on the companies and their projects, so the companies present the projects and tell people what they’re doing. There will be anywhere between 10 and 15 of those, plus sessions on government and regulation, mining and mining finance in South America, and there will be an adhoc or miscellaneous section, which will probably focus on issues related to the peace process and the implications and impacts that that will have for the mining sector.
We’ve already got a lot of companies that have agreed to give presentations. We’ve already got two field visits organized. And we’ve also been fortunate that Rick Rule, the CEO of Sprott U.S. Holdings Inc., one of the big investors in the junior mining space, has agreed to be the keynote speaker. So, it’s going to be a very exciting event this year.
This interview has been edited for space and clarity.