Industry Trend Analysis - Cleaning Up Gold Mining To Drive Growth - FEB 2016

BMI View : Colombia's gold production will be supported by both a solid project pipeline and the government's proactive stance to shut down or formalise unlicensed gold miners.

The Colombian government's efforts to curb unlicensed mining, through evictions or formalisation, will improve Colombia's operating environment and support foreign mining investment. According to President Juan Manuel Santos, the illegal gold mining sector, which generates an approximately USD2.5bn annually, has surpassed cocaine trafficking as the key source of funding for violent criminal activity. As a result, the government will continue to ramp up efforts to evict miners associated with criminal activity or bring artisanal miners into the official sector. For instance, in January 2016, Colombia's National Mining Agency organised a coordinated operation between national and regional police to evacuate illegal miners from unsafe areas near Continental Gold's Veta Sur operations, part of the Buritica project. The effort, which did not affect the firm's operations, reaffirmed the Colombian government's support of licensed miners. Further, Colombia's Ministry of Mines and Energy will continue hosting training sessions to promote legal and safe mining as a part of the Mining Formalisation Program.

In light of the above, Colombia's (formal) gold mining sector will experience moderate production growth, as government actions will improve the country's business environment and encourage foreign investment in the sector. We forecast Colombia's gold production to increase from 2.5 million ounces (moz) in 2016 to 2.8moz by 2020, averaging 3.0% annual growth.

Legal Projects To Support Modest Growth
Colombia - Gold Mine Production (moz) & Growth (% y-o-y)
e/f = BMI estimate/forecast. Source: BMI, USGS

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