BHP Coal Mine Meeting Relocation Resistance in Colombia

 

Andrew Willis, Bloomberg, 11th November 2014

Latin America’s largest open-pit coal mine is struggling to persuade some members of a small community in northeastern Colombia to relocate and may have to alter its mining strategy.

The Cerrejon venture – owned by BHP Billiton Plc, Anglo American Plc and Glencore Plc – is in relocation talks with residents of Las Casitas, where dust is approaching levels set by the World Bank, Vice-President of Public Affairs Juan Carlos Restrepo said in a telephone interview.

“We have until 2016,” he said from Bogota on Nov. 7. “Otherwise we’ll have to change our mining plans, expand the pit in a different direction or mine in other areas.”

Cerrejon has been negotiating for six years with residents in the Las Casitas area, near the Oreganal pit, and has reached a deal with 26 out of 64 families, Restrepo said. Resistance from some residents comes as Colombia’s government looks to boost coal production to counter a drop in revenue as thermal coal prices this month dropped to at least a seven-year low.

The complex temporarily halted operations at several pits this year amid a severe drought in the northeastern province of La Guajira. Last year, the company exported 33.5 million metric tons of thermal coal, with the majority of Colombian coal exports going to European power producers including Electricite de France SA. (EDF)

Colombia’s Mining Code allows authorities to expropriate houses and land from families that fail to reach an agreement, with both voluntary and forced moves compensated with new homes and land, Restrepo said.

Price Slump

The community was visited twice in October by officials from Colombia’s mining agency, Luz Sarabia, a negotiator for the local community, said in a telephone interview.

“Some have accepted they may have to move because of the contamination, but have doubts over how the land issue will be resolved,” Sarabia said. “Others simply want to stay where they are. There’s a lot of conflict. I don’t think there’ll be a solution in the coming months.”

Non-governmental organization London Mining Network said rural families have been moved to semi-urban areas under previous Cerrejon relocations, meaning they can no longer continue their farming way of life. The company denies this.

Colombia’s government, faced with a 2015 budget shortfall of 12.5 trillion pesos ($6 billion), is attempting to increase production and royalty payments from resources industries amid slumping prices of oil and coal, Colombia’s two main exports.

Output Target

Next-month steam coal for Amsterdam, Rotterdam or Antwerp has fallen 10 percent in the past year as supply growth outstrips demand. Colombia, the world’s fifth-largest coal exporter, aims to produce about 95 million tons this year, up from 85.5 million tons in 2013.

“Clearly, there’s a risk of no deal with the community,” Eduardo Chaparro, head of mining with Colombia’s business association ANDI, said in a telephone interview. “With coal prices on the floor, more than ever it’s necessary to have developments that increase productivity.”