Colombia Extractive Industries 2014

COLOMBIA EXTRACTIVE INDUSTRIES 2014

Economy | Metals and Mining | Oil and Gas | Finance | Services Dear readers,

Upon landing at Bogota’s El Dorado International Airport weary travelers are imme- diately cognizant of the two Colombias. My first impression was made through a sleek, efficient, modern airport that quite frankly outclassed my departure destination of Los Angeles International Airport. The airport is representative of a Colombia that surprises uninitiated visitors, like myself at the time, by the sheer progress the • GROWING RESERVES AND PRODUCTION country has made in the last decade and a half. While some of its Latin American neighbors have tacked towards protectionist policies that have deterred interna- - Targeting light oil and producing more than 5,600 bopd tional investment, Colombia, once a risky Latin American destination for foreign in ﬁ rst half of 2013 capital, appears to have gained an upper hand over neighboring jurisdictions. - 2012 reserves growth of 68% year-over-year Through the oversized windows in the international terminal the traveler’s attention is drawn to a smaller, decrepit terminal building that now only handles domestic • Active drilling program in exploration, appraisal and development flights. The paint is peeling, the sidewalk looks deserted and the lettering is fading • Looking to build on success to become one of the dominant light oil from the sings. The sleek, h-shaped terminal surrounds this building, as if the airport’s planners desired for the old terminal to simply be swallowed up by the much producers in Colombia more impressive new building. Nevertheless, the old terminal stubbornly remains and, consequently, the interior gates of the new terminal appear to sit incomplete and its potential underutilized. Colombia’s extractive industries face a similar story at present. A marked turn- around in the country’s security situation has enabled Colombians to once again control their future, and thus far few can argue that progress has been made. In- vestment dollars from abroad, like the terminal that welcomes international business travelers, have sprung up quickly and have outdone many expectations. How- ever, the vestiges of the old Colombia – characterized by dysfunction, inefficiency and insecurity – remain. Their days appear numbered, but like the old terminal building they remain stubbornly present in the form of a dragged out peace process with insurgent groups, unclear regulatory processes and oftentimes unnecessarily tenuous community relations. With these challenges creeping back into the consciousness of Colombians and foreign stakeholders alike, plus difficult international market conditions, some fear the extractive’s locomotora para el desarrollo has stalled. While this is certainly the case for some in these industries, the insights expressed in these pages also tell a different story. Despite issues, whether related directly to Colombia or external, the extractive industries are persevering. Through our research one overarching theme is strikingly apparent: Colombia is not a country for the undetermined. Those who are convoluted in their focus will not thrive. Colombia is for those who are hands-on and determined: as Paul Dias of Minatura conveyed in our interview with him, “successful mining companies in the next decade will need active boards that get out from behind their desks and gather intelligence on the ground.” The new Colombia wants to arrive at its full potential and there are Colombians and foreigners alike who can make it happen. They are willing to come out from behind their desks in order to advance their aspirations and the country’s stated aspirations simultaneously. The question is: when and how will the old Colombia leave for good? Petroamerica Oil Corp. ranked second out of the top 10 performing oil & gas companies on the 2013 TSX Venture 50®. TSX Venture 50 is a trade-mark of TSX Inc. & is used under license. Andrew Mason, Alice Pascoletti, Caroline Stern, Chloe Dusser, Suite 700, 520 – 5th Ave SW, Calgary, Alberta, Canada T2P 3R7 Joseph Hincks, Ramzy Bamieh CALL: (403) 237-8300 E-MAIL: [email protected] and Josie Perez TSX-V: PTA VISIT: PetroamericaOilCorp.com CONTENTS Industry Interviews

Exclusive interviews with the leading industry figures in Colombia’s extractive industries, including the Minister of Energy and Mines, Petrominerales and Gran Tierra FREEDOM AND ORDER REVVING UP OF OUT OF STEAM Energy Colombia. An Introduction to Colombia and its Colombia’s Mining Locomotive Chugs Extractive Industries Uphill

8. An Introduction to Colombia: A brief 48. Unclogging the Backlog: Colombia’s 10, 20, 22 overview of the country and economy mining industry 10. Interview with the Minister of Mines 50. Interview with Agencia Nacional de and Energy Mineria Analysis 11. Geological Wealth: The extractive 51. Interview with Arce Rojas Consultores industries in Colombia 52. Interview with EXSA Colombia An in-depth look at the role Venezuelan Interview with Control Risks 12. 53. Interview with Continental Gold Ltd experts have played in building Colombia’s Interview with Downing Teal & 13. 54. Interview with Sector de la Mineria de oil industry, and opinions on how to Estrategia Humana Gran Escala continue this collaboration, from our weekly 55. Interview with Suárez Zapata & Partners newsletter the GBRoundup. 54. Interview with Innoventé 56. In the Hot Seat: Coal Mining in Colombia 58. Interview with Golder Associates COLOMBIA’S HYDROCARBONS 59. Interview with Carbhid SAS 42 Continuing an Impressive Decade 60. Interview with John T. Boyd Company 61. Interview with Atico Mining Corp. 16. Maintaining the Million: Colombia’s oil and gas industry 18. Interview with Southern Cross Energy DIFFICULT TIMES Challenges 19. Leading the Push: An overview of the The Challenges Facing Colombia’s Two sections dedicated to exploring the main players Mining Industry 20. Interview with Petrominerales Ltd specific issue facing investors in Colombia’s hydrocarbon and mining industries 22. Interview with Gran Tierra Energy 64. Re-strategizing Investments: Colombia’s respectively, from bureaucratic processes to Colombia Ltd industry adapts to the market infrastructure concerns. 24. The Future: Unconventional and 66. Interview with Antioquia Gold Inc. offshore resources 6 7. Interview with Cordoba Minerals Corp. 25. Interview with Industrial Consulting Interview with B2Gold Corp. Group (ICG) 68. The Challenge of the Unofficial: Tackling 69. illegal mining 26, 62 70. Interview with Minatura 71. Interview with Gran Colombia Gold Corp. 72. Interview with Antiquia & Gecoisa Quantitative A UNIQUE COUNTRY 73. Interview with Jacobs Data Challenges and Opportunities in Colombia’s Hydrocarbon Industry The most relevant quantitative data presented in the most easily accessible AMOUNT (IN MILLIONS OF PESOS)280,000 BOLSA DE VALORES DAILY AVERAGE VOLUME AND 28. The Bottleneck: Environmental DAILY AVERAGE NUMBER OF TRANSACTIONS Source: BVC 240,000

MAGICAL REALISM format, allowing you to NUMBERview OF TRANSACTIONS economic 5000 permitting in Colombia 200,000 and market statistics, identify4500 trends and Business Travel in Colombia 160,000 4000

31. Interview with Omega Energy Colombia 3500 visualize infrastructure. 120,000 3000

80,000 32. Freedom to Produce, Freedom to 2500

76. Travel 2000 40,000

Protest: Community relations in 1500

2014 1000 2013 78. Events & Media 2012 2011 500 2010 2009 Colombia 2008 2007 80. Hotel Directory 2006 S 34. Interview with SAExploration ISSUERS WITH LARGEST STOCK EXCHANGE CAPITALIZATION Source: BVC

35. Monumental Backwardness Moving 9, 17, 37, 49 ECOPETROL S.A. 81. Index & Company Guide GRUPO AVAL ACCIONES Y VALORES S.A. BANCO DE BOGOTA S.A.

Forward: Infrastructure constraints for BANCOLOMBIA S.A. 82. Credits GRUPO INVERSIONES SURAMERICANA GRUPO ARGOS S.A. 150 140 3.0 130 Colombia’s industry 120 EMPRESA DE ENERGIA DE BOGOTA S.A. E.S.P. 10 1001 90 80 70 ALMACENES EXITO S.A. 60 50 40 30 20 10 COP$ 38. Interview with Petroamerica Oil Corp. millions )

39. Interview with Estrella International MOST TRADED STOCKS OF THE YEAR (IN COP MILLIONS Source: BVC

Energy Services Travel ECOPETROL PREC

PFCEMARGOS 40. Interview with Vertical de Aviación This research has been conducted by Caroline Stern, Chloe Dusser, ISAGEN Hotel guides, places to see, whereCEMARGOS to eat, Alice Pascoletti, Ramzy Bamieh, Joseph Hincks, Josie Perez, EXITO 41. Interview with GeoPark PFAVH

800 GRUPOSURA 750 700 Andrew Mason, Katie Bromley, Alexander Corbeil events to attend and other useful travel tips 650 600 PFBCOLOM 50 5005 450 400 350 42. A Place Like Home: Expelled PDVSA CLH 300 250 and Harry Thompson 200 50 1001 50 for the business travellers, takenCOP$ from our staff become a integral part of Edited by Mungo Smith and Barnaby Fletcher millions Graphic Design by Gonazalo Da Cunha on-the-ground teams own experience. Colombia’s hydrocarbon growth 43. Paying for Progress: Financing A Global Business Reports Publication For more information, contact [email protected] Colombia’s oil and gas projects follow us on Twitter @GBReports 45. Interview with PwC or check out our blog at gbroundup.com 76, 78, 80

COLOMBIA EXTRACTIVE INDUSTRIES 2014 Industry Explorations Freedom and Order: An Introduction to Colombia and its Extractive Industries

“Colombia is a country that had been sleeping for 20 years. During those decades we have lived in this country, but we have not had a country because of our internal problems. While the rest of the world was hard at work, it was considered too unsafe and impossible to develop large projects here. In the last 10 years this has changed. For the first time in my memory we look at the future as better than the past. I personally believe business will come to Colombia. What other countries in Latin America have taken 20 years to accomplish we will have to accomplish in five years if we want to be on the same level as other countries. If Colombian companies wanted to take advantage of the opportunity in front of us companies such as Global Motor should have started to think differently five years ago. In the past, all the companies in our kind of business were trying to maintain a low profile because large, high profile companies were seen to have had too much overhead costs with safety etc. Now this is changing.”

- Fredy Jacob Florez, Gerente, Global Motor

Image: Agencia Nacional de Minería EDITORIAL Global Business Reports Global Business Reports FACTSHEET

Caribbean Sea

Riohacha Santa Marta Barranquilla GDP GROWTH RATE An Introduction Source: World Bank Cartagena 7 Valledupar 6 to Colombia 5 4 Sincelejo 3 4.2% Monteria 2 1

0 Cucuta GDP GROWTH RATE -1 The islasnds of Malpelo, Providencia 2013 A brief overview of the country and and San Andres are not shown -2 economy Bucaramanga Arauca -3 Source: CIA World Factbook -4

% 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Medellin Puerto Carreno FOREIGN DIRECT INVESTMENT (NET INFLOWS) Quibdo Tunja Source: World Bank Pacic Manizales Yopal 16 Ocean Pereira 14 Armenia Bogota Ibaque Villavicencio 12 $17 Puerto 10 BILLION Inirida Cali 8 Neiva

6 Popayan San Jose del FOREIGN DIRECT INVESTMENT Guaviare 4 (BoP, US dollars - 2013)

Florencia 2 Source: World Bank Pasto Mocoa Mitu $B 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 UNEMPLOYMENT RATE Source: World Bank

16 14 9.7% 12

8 UNEMPLOYMENT RATE 2013 200km 6

4 Source: CIA World Factbook Leticia 2

% 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

The previous slogan aimed at promoting Colombia’s new tourism slogan, “Magi- just its increased security. After years of from an average of $3 billion a year in the POPULATION AND WORKFORCE COLOMBIA AT A GLANCE Colombia was “the only risk is wanting cal Realism”, makes no such attempt to trailing Argentina in regional economic 1990s to $17 billion last year. INFORMATION Source: CIA World Factbook Source: Various to stay”. There was an element of pos- address this issue. Yet this still tells us standings, this year Colombia claimed When Spanish conquistadors first ar- Population: 45,745,783 (July 2013 est.) itivity to this slogan; a justifiable hope much about views and the scale of the to have overtaken it as Latin America’s rived in Colombia in the early 16th cen- Capital: Bogotá Head of Government: President Juan Manuel Santos that the country’s vast biodiversity – it problem: namely, that it is no longer at third largest economy (after Brazil and tury, they heard stories of a fabulously Calderon ranks third in the world for number of the forefront of tourist and investor per- Mexico). While this is open to debate – wealthy king who covered himself in Currency: Peso (COP) GDP: $369.2 billion (2013 estimate) living species and first for bird species ceptions of the country. The conflict is, it depends on the methodology and ex- gold leaf and threw vast quantities of Growth Rate: 4.2% (2013 estimate) – and its vibrant culture would entrance unfortunately, far from over and violence change rates used – there is little doubt gold and precious stones into a sacred GDP per Capita: $11,000 (2013 estimate) and enthrall visitors. Yet there was also and kidnappings continue (five policemen that even if the announcement is prema- lake. They called this king El Dorado (the Economic sector breakdown: agriculture: 6.6%, industry: 37.8%, services: 55.6% (2013 estimate) an admission of the country’s reputation. were killed by FARC guerrillas as recently ture it will soon be certain: Colombia’s gilded one): a name that has since be- Exports: $58.7 billion (2013): petroleum, coal, emeralds, The long-running conflict between Marx- as February 17th this year). At the same economy grew by 4.2% in both 2012 and come famous in myths of hidden trea- coffee, nickel, cut flowers, bananas, apparel Imports: $53.5 billion (2013): industrial equipment, ist guerrilla groups – the best known of time, however, peace talks continue and, 2013 and is predicted to rise above 4.5% sure. For a long time, Colombia squan- transportation equipment, consumer goods, chemicals, which is the Revolutionary Armed Force although not free from problems, appear in 2014, according to the Economist In- dered its legendary former wealth, its paper products, fuels, electricity of Colombia (FARC) – and the govern- to have made more progress then any telligence Unit; Argentina’s economy richness of natural resources, and the Major Trade Partners: US, China, Mexico, Spain, Brazil ment and rightwing paramilitary groups previous attempt. Homicide rates have grew by 1.9% and 3.5% in the same pe- goodwill of its people with continued po- has dragged on since the 1960s, dis- fallen to below half their 2002 level, and riod, and is forecast to contract by 0.6% litical and opportunistic violence. Today, couraging not only tourism but also in- reported kidnappings fell from 2,122 in in 2014. the slogan “Magical Realism” seem apt: vestment. Indeed, some commentators 2003 to just 305 in 2012. Unemployment Furthermore, Colombia can boast of a new reality of relative stability, peace $369.2 have described Colombia as engaged is down, foreign direct investment is up inflation rates that sat at just 2.2% in and economic growth may indeed seem billion in civil war, albeit one of low intensity and Colombia as a whole is unmistakably 2013, unemployment rates that have unreal after decades of being perceived rather than one of explosive destruction, moving in the right direction. seen an almost constant decline since a as Latin America’s troubled member. Yet Unemployment Rate 2013: 9.7% GDP Poverty Line 2012: 32.7% (current US dollars 2013 estimate) a constant tragic background rather than The reasons behind investors’ renewed 1999 peak, a slight budget surplus, and there is little magic involved. Colombia is Labor Force 2013: 23,750,000 a single defined event. interest in Colombia are greater than foreign direct investment that has risen simply reclaiming its true potential. • Population 2013: 45,745,783 Source: CIA World Factbook

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 8 - Industry Explorations Industry Explorations - 9 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports EDITORIAL

Amilkar Geological Wealth Acosta Medina

Minister of Mines and Energy According to President Santos, mining is there is an opportunity for partnership be- The extractive industries in Colombia source of export revenue, thermal coal, COLOMBIA’S NATURAL COLOMBIA considered one of the five locomotives of tween large-scale mining and informal mining saw a 4% decline in production in 2013. Of RESOURCE PRODUCTION Source: World Bank development for Colombia. On the other whereby large companies can contribute to course, a major factor in this slow develop- hand, many leaders in the mining com- the process of formalization of the small-scale ment is the uncertain outlook of global mar- munity beleive they have received mixed mining sector. kets; gold prices hover around $650/oz be- COMMODITY 2011 messages from the Ministry of Mines and Over the last decade, Colombia has under- low their record highs, and cheap gas in the METALS Energy and the Ministry of Environment. One of our interviewees stated, “This is the gone a transformative age that has vastly United States is reducing the medium-term Copper, mine output, kg 4,042 Cu content What is the plan to improve communica- moment for Colombia to take advantage of enhanced the long-term prospects of the demand outlook for Colombian coal as well Gold 55,908 tion between these two ministries? the mining sector’s great potential.” In your country’s mining and oil and gas sectors. As as of its oil and gas. In 2012, foreign direct Iron and steel: At the moment, the President has given pre- view, what challenges are hindering this the administration of former-president Al- investment in Colombia’s mining sector Iron ore and concentrate tmt 174 cise instructions that mining policy should go potential and what are your main objec- varo Uribe aggressively improved the coun- declined 5.5% compared to 2011. The situa- Pig iron do. 295 hand in hand with environmental policy in a tives before the upcoming elections? try’s security situation between 2002 and tion is not improving; during the first seven Steel, crude do. 1,290 manner that creates a situation in which public We are in the last quarter of the recession cycle 2010, majors and juniors alike demonstrated months of 2013, investment in mining and Semimanufactures, do. 1,500 hot-rolled policy with regards to mining has the partic- for the mining and energy industries because unprecedented interest in the country in aggregates fell by 3.1% compared to the Nickel: ipation of the Ministry of Environment. The of adverse international circumstances; the the hope they could capitalize on the excit- first seven months of 2012. “We are in the Mine output, Ni content 70,000 Ministry of Mines and Energy is orientated European Union is in recession and the United ing geological potential of the “Last Andean last quarter of the recession cycle for the Ferronickel, Ni content 37,817 to bring into consideration the subject of en- States is slowly recovering. This influences Frontier.” mining and energy industries because of Platinum kg 1,231 vironment for developing mining in such a way emerging economies, such as Colombia, that According to Colombia’s National Adminis- adverse international circumstances. This Silver do. 24,045 that has not existed before in this country. In had been realizing their growth. Demand and trative Department of Statistics, foreign di- influences emerging economies, such as this moment of development for the industry, prices for raw materials have slowed. In these rect investment in the mining sector grew Colombia. The country is preparing for the the exercise of control, monitering and super- circumstances we have to redouble our efforts at an average rate of 5% per year between next boom because we recognize mining INDUSTRIAL MINERALS Cement, hydraulic tmt 10,777 vision of mining activity is part of the Ministry to continue to attract new investment and re- 2005 and 2010. Buoyed by the potential markets are cyclical,” said Amylkar Acosta Gemstones, emerald tc 3,402 of Mines and Energy, while we are also taking tain the investments that we already have. The Medina, Minister of Mines and Energy in an of the industry and the optimism derived Salt: into consideration the environmental compo- country is preparing for when we enter a new from high mineral prices and easy financ- interview. Marine 139,810 nent of mining. boom because we recognize mining markets ing, Colombia was already the darling of Fluctuating around the million barrel per day Rock 290,000 are cyclical. These cycles are ones of sowing investors on the TSX when Uribe’s defense mark, the Colombian oil and gas is also at Stone and sand, 13,000 Guerrilla groups such as the FARC and and harvest, and I believe this is the moment minister and successor, Juan Manuel San- a crucial point. Ageing oil fields, limited re- limestone for cement Sulfur; native (from ore) 58,073 ELN are using Colombia’s informal mining to invest in Colombia, to sow now and har- tos, took the reigns of the country in 2010. serves found in small deposits and a familiar sector as a way to fund their illicit activi- vest the rewards later. It is the hour to invest In an effort to capitalize on this momentum, host of social and environmental obstacles ties. How much is the government worried in mining because Colombia has prepared to Santos identified the extractive industries are current concerns. However, the game- MINERAL FUELS AND RELATED MATERIALS about these activities as the Santos gov- take advantage of the situation when the new (mining and hydrocarbons) as one of five “lo- changer in the coming years may well come Coal tmt 85,803 ernment attempts to negotiate with these boom comes. comotives for economic development.” from the results of exploration from uncon- Gas, natural, gross mcm 11,000 groups? We will not experience in the mining and hy- ventional and offshore resources. If such ex- In December 2012, the symbolic goal of Petroleum: It is necessary to separate informal mining or drocarbons industry what happened to Colom- one million barrels per day was attained, ploration proves fruitful, the funds and mo- Crude t42 334,100 traditional mining, which has a long history in bia with the coffee industry. For many years and 2013 marks the 10 year anniversary of tivation to solve the other issues should be Re nery products: Colombia, from the nexus of criminality. For we hoped that the prices of coffee would im- the establishment of the Agencia Nacional available and Colombia can move on to the Gasoline: informal or traditional miners, the government prove, but did not attract investment [in these de Hidrocarburos (ANH), the organization next stage as a significant player in the world Aviation do. 100 is working towards a process of formalization down times], and when the boom came we credited with rejuvenating the Colombian oil of oil and gas. Motor (extra) do. 2,200 for its legalization. However, for those miners did not produce enough coffee for export. In and gas sector. Now the focus turns to main- The initial burst of enthusiasm that greeted Motor (regular) do. 35,000 that have entered into the nexus of criminal- this sense, the government is making a great taining that level of production in the face of Colombia’s improved security environment Jet fuel do. 8,400 Kerosene do. 170 ity, there is no tolerance for this activity. We effort to not only ensure investors do not go aging oil fields and socio-environmental ob- is over, and now players are coming to grips Medium distillate fuel oil do. 36,000 are treating those miners who associate with away, but also continue to attract investment. with the all of the problems associated with stacles. Natural gas liquids do. 7,400 guerrilla groups differently. We have advanced We are optimistic that Colombia is still an in- As Santos’s first term reaches its twilight (he an immature market with emerging legis- (propane) in developing the mechanisms for this formal- vestment destination. This is proven by the is up for reelection in May) the mining sec- lation and a population un used to the ex- Residual fuel oil do. 22,000 (black oil) ization with the cooperation of big players in fact that, while in the last year there has been tor has faced a number of challenges, both tractive industries. Coupled with a dearth of Asphalt do. 1,300 the mining industry because many of these a drop in the influx of foreign direct investment internally and externally, that have slowed international finance and faltering commod- Total do 112,750 informal miners are conducting their activities in Latin America, Colombia has maintained a the country’s once robust locomotive. Many ity prices it is time for legislators and private

in areas entitled to large companies. This has similar investment level to last year. This is an proposed gold projects are stalled either players alike to consolidate and associate tmt: thousand metric tons been the conflict between companies and encouraging sign for the future. • by regulatory hurdles or internal financing together to build the sound foundations nec- tc: thousand carats mcm: millioin cubic meters the informal miners in these areas, but now issues, while Colombia’s second largest essary for sustainable harmonious growth. • t42: thousand 42-gallon barrels

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 10 - Industry Explorations Industry Explorations - 11 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

and community unrest was very low key, way to operate in some areas. In certain have any experience in training people for are bound to see the similar demand in- Daniel Linsker & but now they are coming to the forefront places, the community will be your first Michael Keough work in the mining industry, while there crease in other Latin American countries as companies enter new areas. This has line of defense. There, you just need an are few programs for semi-skilled work- such as Peru, Mexico, Chile and Ecuador. Oliver Wack taken seasoned Colombian investors by advanced community relations program & Felipe Andrade ers. The Ministry of Mines and Ministry Chilean companies are already looking at surprise. Colombia’s infrastructure issues and strong journey management. of Environment currently are in conflict Colombian university graduates from the also affect the security situation. EcoPetrol OW: Kidnappings these days are often with each other; each local minister of class of 2017 to address their challenges, has started purchasing oil at the end of very well planned operations, involving the environment will have his or her own way but in Colombia there is no medium term pipelines rather than the beginning, pass- infiltration of communities. Good local re- of thinking and approaching the mining plan. The challenge is the measurement DL: VP - Global Client Services ing on transport risks to producers. lations can alert an oil and gas company to MK: General Manager industry. does not exist and the institutional cer- OW: Analyst Americas this, especially in very rural areas. DOWNING TEAL MK: Many companies are taking the tainties do not exist yet, so companies in CONTROL RISKS How much do the high security risks FA: General Manager view that we are in the midst of a five Colombia cannot plan for the future. in Colombia’s southern border regions Has complacency led to some compa- ESTRATEGIA HUMANA to ten year birthing period for Colombia coincide with oil and gas activity? nies no longer taking the security steps to define mining outside of the tradi- Colombia has seen wages increase DL: Obviously oil and gas is a very attrac- they would have in the past, including tional areas such as Cerrejon. If mining dramatically across the economy in tive target for some of Colombia’s armed consulting groups like Control Risks? truly is a locomotive of growth then the the last five years. What are the impli- groups, although there has been a slight DL: The improved situation has made government ministries all need to get on cations of this for the mining industry, change in the way they interact with the it harder for risk managers to make the the same page with one another. Colom- especially for experienced workers? sector. In the past, armed groups would case for precautions, and some compa- bia deserves a huge amount of credit; FA: The wages in Colombia are almost wait for companies to start operating nies have stopped taking the security Colombia is a different country from 25, twice that than they are in Mexico. before extorting them, but international measures they would have previously. It or even 10 years ago. The country is try- Colombia is very expensive right now regulations now mean the large majority is easier to spend money on security and ing to close a 30-year development gap in and the labor regulation is very complex of companies do not give in to extortion community affairs once the cash is flow- five years, which is quite a difficult chal- and restrictive. For small companies this demands, so the FARC has begun kidnap- ing; some companies will refuse to take lenge. The economics of minerals alone could create a very large challenge. For ping geologists and vulnerable employees. the same measures for their preliminary will drive Colombia towards mining; it is each peso a company pays in wages, the Many of these groups have also set up le- work. It is a challenge in this era of busi- just a matter of time. real cost is almost 1.50 pesos once pay- gitimate businesses, and their extortion nesses where, across the board, company ments to the government are taken into can now take the form of, for instance, managers are demanding that more be What are some of the issues sur- account. ‘strongly urging’ businesses to use ser- done with less. rounding the existence of the informal Risk is one of the topics at the forefront vices or hotels the group controls. How do the manpower issues in or illegal mines in Colombia and what While mining companies in Colombia of every conversation on Colombia. To Much credit was given to the Uribe Colombia compare with other South will help these groups cooperate with may be taking a five to 10 year view what extent are you focused on oil and What is your advice to companies government for improving Colombia’s American countries? the government? on the Colombian market, what needs gas, and what type of services do you when asked to pay for these overpriced security situation. How have you found MK: The governments in South Amer- FA: Colombia has a problem in that no to occur to kick start Colombia’s next provide the sector? services? the transition to the Santos govern- ica’s main mining markets are all very one owns this land where mining can phase of development and/or ensure DL: In Colombia, a large share of Control OW: One of the strongest pieces of advice ment? cognizant of the manpower challenges take place: the government could lay the market does not stall? Risk’s revenue comes from oil and gas Control Risks repeats to its clients is for DL: The foundations for improving the the mining sector is going to face in the a claim, but it could belong to a former MK: Colombia has to develop. World- and mining; both face similar issues. For their risk management strategies to cas- security situation probably started even coming decades. For example, Chile has paramilitary group, or a local community. class companies have invested hun- the oil and gas sector here, we provide ev- cade down to their subcontractors. Our before Uribe with the previous failed estimated that they will need 45,000 Fifty percent of the gold mining in Colom- dreds of millions if not billions of dollars erything from very basic pre-entry studies recommendation is to vet contractors as peace process. We realized, then was not more mining jobs over the next few years bia is illegal, which creates a huge prob- in Colombia because the potential is so to extremely detailed risk-management carefully as possible and have very trans- the time to talk, although I think now is. for projects on the books today. In Peru, lem for the government because the gov- huge and companies cannot even explore planning and implementation. In the last parent policies. The improvements at one point looked the estimation is that 150,000 people will ernment has to have complete control of some of the most promising areas! licensing round, we did a lot of work help- DL: Oil and gas companies used to keep exponential, but they started to level off be needed over the next five years, 30% these areas to release titles. Permits are FA: If the peace talks with the guerrillas ing companies actually benchmark differ- most services in-house, but now the peo- toward the end of Uribe’s administration. of whom are technical professionals. not going to be issued to a paramilitary work, then mining will be very positively ent prospects by analyzing the security ple in the field who are most exposed to The FARC has adapted and Colombia is Colombia has no such projections, which group! So these groups have even less affected. But for these guerrillas a key risks of the various properties earmarked security incidents or extortion are subcon- a very large country with difficult terrain. is understandable because of the long of a reason to cooperate with the govern- cornerstone of the talks will be stopping by their geologists. Ultimately security risk tractors. Ten or 15 years ago, companies There are issues with army morale – they period of violence this country faced and ment. mining in the land they control. We will can be modeled as a fixed cost for oil and in Colombia might have found ways to ac- feel less empowered than they did under the fact the industry is still being defined not see the violence we once did, but if gas companies, which makes it manage- commodate extorted demands, but now Uribe, and the peace process is sending institutionally. We have seen skill shortages globally the government cannot develop a frame- able. they are very much aware of the long-term them a conflicting message. in recent years. Are the major players work to bring lasting peace and incorpo- legal and reputational risks which this en- OW: The advances under Uribe were not What could accelerate the institutional in Colombia having issues sourcing rate informal mining, then the industry’s The name Colombia has long been tails. Global experience says the minute sustainable in the long term. Santos may direction necessary to have a thriving skilled talent? development will be hindered. • synonymous with risk. Have you seen you give in to an extortion demand, you have lowered army morale, but I think his mining industry in Colombia? MK: At the moment, the only thing big this perception change from the out- will forever be extorted. peace talks have a real chance of con- FA: There is currently no government or mining and big oil need to do in this coun- side world? cluding successfully, which would make private body thinking from a broad per- try is run an ad and a thousand people DL: Although security remains a big chal- Kidnappings have increased slightly in a dramatic change. We do not envisage spective what the needs of the mining will come knocking on the door for jobs. lenge in the country, local risks – commu- recent years, what is the solution for a non-violent paradise; extortion would industry will be in terms of manpower. However, this will change as internally nity relations and environmental licensing companies when faced by one? probably continue, but attacks against in- This impacts all kinds of institutions the locomotive of mining, the locomo- – are probably more relevant. In the past, DL: Prevention is always the best cure, frastructure and kidnappings should dimin- such as universities, government, and tive of infrastructure and the locomotive the security situation meant social activism although there is no completely failsafe ish. • the miners. Only four or five universities of oil all take off. At the same time, you

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 12 - Industry Explorations Industry Explorations - 13 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 Colombia’s Hydrocarbons: Continuing an Impressive Decade

“I admire the people of Colombia in that they have the capacity and are accustomed to solving complicated problems. Colombia is performing well and I am confident that the country will continue to improve going forward. Within six years, Colombia was able to double its oil production and reach one million barrels per day, a feat that no other country in the world has achieved. While issues remain, Colombia is working to solve them in a way that is equitable to the people and to the environment. In 2012 when Andres Energía was looking where to invest next, we could have chosen other countries, like Peru, but we are very happy that we chose to purchase assets here in Colombia.”

- Alejandro Jotayan, CEO, Andes Energía plc

Image: ICG EDITORIAL Global Business Reports Global Business Reports FACTSHEET

COLOMBIA OIL PRODUCTION AND CONSUMPTION Maintaining the Source: World Bank THOUSAND BARRELS PER DAY PRODUCTION CONSUMPTION Million 1,200 1,000

800

600 NET Colombia’s oil and gas industry EXPORTS 400

200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2013 marks the 10 year anniversary is great to be able to enjoy the strength- was successful, the sector today is not MAIN OIL AND GAS FIELDS AND PIPELINES CRUDE OIL PROVEN RESERVES of the establishment of the Agencia ened conditions of today,” says Alberto growing as it was. Interest from junior Source: various Source: CIA World Factbook

Nacional de Hidrocarburos (ANH), the Cisneros Lavaller, CEO and president of players has withered for two reasons. Oil/Gas field COUNTRY BBL organization credited with rejuvenating Venezuelan based firm Global Business The first is the problem with licensing, Pipeline 1 Venezuela 297,600,000,000 the Colombian oil and gas sector. Tak- Consultants. permits and the overall challenges of 2 Saudi Arabia 267,900,000,000 ing advantage of the improved security After the major discoveries of the late doing oil business here. The second is 3 Canada 173,100,000,000 situation achieved through ‘Plan Colom- 80s, such as Caño Limón, the Colom- that the government may be becom- bia’, the US funded offensive against bian government along with the na- ing a bit complacent. The government 4 Iran 154,600,000,000 rebels and drug trafficking, the ANH-led tional oil company, Ecopetrol, sought to feels that it made the country attractive 5 Iraq 141,400,000,000 restructuring of the oil and gas sector strengthen its position in the growing and that this perception will continue 6 Kuwait 104,000,000,000 has brought the attention of the inter- sector. The subsequent restructuring forever,” suggested Álvaro José Ro- Barranquilla 7 United Arab Emirates 97,800,000,000 national investment community back of the sector to unduly favor Ecopetrol, dríguez, partner of natural resources at 8 Russia 80,000,000,000 to Colombia. “International investors coupled with the deteriorating security law firm Posse Herrera Ruiz. 9 Libya 48,010,000,000 started hearing very good things about situation, led to Colombia being widely Meanwhile, E&P firms need to find Colombia from around 2007; people neglected by investors throughout the enough support on the ground along 10 Nigeria 37,200,000,000 have noted the changes in the country, 90s. Still without a new discovery of the whole value chain. Margarita Vil- 11 Kazakhstan 30,000,000,000 with its improved security and stable significance, the birth of the ANH in late, executive director of Campetrol, 12 Qatar 25,380,000,000 contracts,” says Cristian Ducara, gen- 2003 saw the focus shift to the creation a chamber grouping the oilfield ser- 13 United States 20,680,000,000 eral manager of Trayectoria Oil and Gas. of an attractive fiscal regime encourag- vices sector, also gave her opinion on 14 China 17,300,000,000 The ANH marked an impressive ing smaller juniors to enter the market, the areas where the government must 15 Brazil 13,150,000,000 decade, seeing Colombia finally reach- and it was these pioneering explorers improve: "We need clarity in the reg- ing the long awaited one million barrels who established many of the biggest ulatory framework for new activities Medellin 16 Algeria 12,200,000,000 per day (boepd) milestone in December producing assets we see in Colombia such as non-conventionals and offshore 17 Angola 10,470,000,000 2012. Now the focus turns to maintain- today. development. We continue to need se- 18 Mexico 10,260,000,000 ing that level of production in the face The bidding round (ronda) of 2012, curity. Environmental licensing delays Bogota 19 Ecuador 8,240,000,000 of aging oil fields and socio-environ- through heightened qualification crite- are time-consuming and very costly 20 Azerbaijan 7,000,000,000 mental obstacles. ria, marked another shift in the Colom- for our members. We have a hindrance 21 European Union 5,568,000,000 From a geological perspective, Colom- bian oil and gas sector back to a focus in infrastructure development, which Cali bia may not have the huge reserves of on larger E&Ps. “If you consider the causes higher logistical costs, and we 22 Oman 5,500,000,000 neighboring Venezuela, but as more of development of the United States oil need financial support for small and 23 India 5,476,000,000 the nation has been freed of conflict and indsutry, especially shale, you see that medium-sized companies so they can 24 Norway 5,366,000,000 properly explored, numerous smaller the big companies are not responsible acquire technology and develop their 25 Egypt 4,400,000,000 deposits have been found which con- for what it is today, but rather it was R&D departments". 26 Vietnam 4,400,000,000 tribute to significant production. “Dis- the entrepreneurs who went out there The Colombian government may be 27 Indonesia 4,030,000,000 coveries of heavy oil in the Llanos have with money and a new idea. Colombia hoping a shift to the bigger players with completely flipped the country’s future seems to be forgetting this and seems strong corporate social responsibility 28 Malaysia 4,000,000,000 from importer to exporter, and this is to only be encouraging the big players,” records will help to solve growing so- 29 South Sudan 3,750,000,000 a trend which will presumably extend says Stephen Newton, CEO of South- cial and environmental problems across 30 United Kingdom 3,122,000,000 into the medium-term. I think the oil ern Cross Energy. the country. Nevertheless, particularly 31 Yemen 3,000,000,000 boom was related to a certain extent Despite the concern of many in the in terms of production, they need only 32 Argentina 2,805,000,000 to the improved security situation in industry, the bidding round saw look at the main players in the market the country – although the Caño Limón ExxonMobil, Shell, ConocoPhillips and today to see what can happen when 33 Syria 2,500,000,000 boom of the 1980s was able to occur Anadarko move into the Colombian smaller firms are given the right sup- 34 Uganda 2,500,000,000 amidst great instability. Nevertheless, it market. “While Colombia did well and port and backing. • 35 Colombia 2,200,000,000

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 16 - Industry Explorations Industry Explorations - 17 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports EDITORIAL

usually with a 5-year timetable. Their The perception of Colombia is Stephen objective is to take these companies synonymous with issues of commu- Leading the up the value add curve and once they nities and security. Do you believe Newton reach a plateau, sell them, or put them that these issues are still significant Push on the market. What we have been see- today? ing is the classic case of the pendulum Issues of communities and security are swinging too far with companies that still present. Unfortunately the situation were once worth $40 a share now being surrounding security has deteriorated CEO worth $6 a share and these are still very recently with an increase in the num- An overview of the main players raises our level as a service company base. “If we can modestly grow produc- SOUTHERN CROSS ENERGY significant companies. Many compa- ber of pipeline attacks. I have to wonder and allows us to show our commit- tion this year, and have industry average nies were overvalued and now we be- with the current negotiations in Havana ment to becoming an Ecopetrol service or better success rates on our explo- lieve they are significantly undervalued, if FARC is exercisng muscle here to put provider,” explains Eduardo Enrique ration program, Petrominerales can cer- creating a lot of opportunity. more pressure on arriving at a solution Rivodó Z. president of Industrial Consult- tainly grow reserves, grow production, there. I believe that many, though not ing Group (ICG). and provide proof of concept on the two Colombia has traditionally been all, of the community issues are driven Ecopetrol exciting resource opportunities that we a haven for smaller companies. by the FARC. I feel that the communi- Pacific Rubiales Energy have. To put the exploration program Do you see this trend continuing, ties’ discontent is aggravated so as to Colombia’s state owned oil company in perspective, we have 60 million bar- especially as we start to see the create problems for the government in continues to dominate the market pro- TSX listed Pacific Rubiales was born out rels of original oil in place. We typically emergence of unconventional and times of negotitations, pushing the gov- ducing 754,000 boepd which equates of the exodus of oil experts from Chaves’ recover about half of that, so 30 million offshore? ernment to make a deal that is less than to a 70% share of total production. Con- Venezuela. Pacific Rubiales maintains its barrels of un-risked reserve potential. If If you consider the development of the ideal. A number of companies do a good tinued strong production and a healthy position as the largest independent pro- we can be one in three, that is 10 million United States oil indsutry, especially job in socializing the projects that they portfolio of exploration assets positions duction company in Colombia. 2012 saw barrels, and that is before we take into shale, you see that the big companies are working on to the communities. Ecopetrol well for the future. After finds Pacific build their light oil assets base in account any heavy oil or the tight oil re- are not responsible for what it is today, They explain what is going to happen so at the Pastinaca, Cusuco and CPO-11 Colombia by acquiring two mid-size play- source in Brazil,” says Corey Rutten, the but rather it was the entrepreneurs who that there no surprises; however, others blocks earlier this year, Ecopetrol also ers; PertoMagdelena Energy and C&C company’s president and CEO. went out there with money and a new do not. When this happens, dynamite is announced a third discovery at CPO-10, Energy. This is in addition to interna- idea. Colombia seems to be forgetting going off and people are drilling holes, this time at the Guainiz-1 well. tional expansion in Brazil, Peru, Guyana Gran Tierra Energy Colombia (GTEC) this and seems to only be encouraging the communities do not understand Ecopetrol’s share price, however, and Papua New Guinea. Q2 gross pro- the big players. There are indeed issues what is taking place. With regard to has seen better days. The highs of duction was 156,099 boepd (net produc- The Putumayo Basin’s biggest producer with respect to fracking and unconven- royalty distribution, the government did COP$5,700 experienced at the end tion was 127,555 boepd), an increase of and biggest landholder should be espe- tionals, but I think the government is be- not think this through. The idea is that of 2012 and beginning of 2013 saw a approximately 2,100 boepd compared to cially praised for overcoming the difficul- ing far too restrictive, ignoring the fact the money should benefit the country sharp decline, down to COP$3,800 in the first quarter of this year. ties of operating in an area still feeling Please provide a brief overview of these smaller companies were the pio- as a whole and that communities with Q2 this year. The summer, however, “The company will continue with its fo- the social and security effects of guerilla Southern Cross Energy and the ser- neers responsible for Colombia’s recent oil and gas will still get a piece and can saw their share price stabilize at around cus on conventional onshore activities occupancy. The Canadian based firm has vices you provide? oil and gas boom. apply for more if they complete the pa- COP$4,350. with low costs. It will also emphasize continued to exceed expectations de- Southern Cross Energy is in the busi- perwork; however, some are getting far resource activities in areas with light spite pipeline interruption and social re- ness of identifying prospects and sub- What are some of the concerns that less and suffering from lack of infrastu- oil, potentially offshore in countries like sequently looking for investors that you hear from your investors? cure. They will use the slightest excuse Guyana, Brazil, and Peru. It is expected might be interested in these prospects. One of the most important things that to put up obstacles to the oil and gas 61.82 that the company's current production 45.35 We are normally approached by people investors are looking for is people who companies so as to attract the govern- will double in four years; as such we who might have assets that are under- understand the location and can identify ment’s attention to in turn improve their billion kWh are looking to expand our activities in billion kWh funded or distressed, meaning that they problem areas or can highlight the risks condition, in the form of schools, hopsi- ELECTRICITY - PRODUCTION different geological basins that will give ELECTRICITY - COMSUPTION acquired these assests thinking it would so that investors can enter a project tals, drainage and so forth. 2011 us new opportunities in new countries. 2010 be easy to raise money but have found fully aware of the situation. Many times Source: CIA World Factbook We will need reserves and resources to Source: CIA World Factbook that this is not the case at the moment. risk is equated to higher cost. These What is the final message that you drive future growth, so it is important, We also offer a more technical arm companies do not want to put people at would like to communicate about Service companies around Colom- at this time, to access these resources,” sistance to oil and gas activity. “For the where we offer such services as engi- risk and need to carry out operations in Southern Cross Energy to the in- bia have had to step up their health, a spokesperson for Pacific Rubiales told first two quarters of 2013, GTEC has had neering and geology consultancy. a certain way that sometimes increases ternational oil and gas investment safety and environmental practices in us. record production levels despite pipeline cost. Instead of traveling by road, you community? order to meet the new standards set interruptions, through using alternative What kind of demand have you been might have to go by helicopter. If you If there are investors that are consider- by Ecopetrol. Many see this as raising Petrominerales crude oil transportation measures. Our seeing for these underfunded and contract a logistics company to move a ing Colombia, we have a very interest- the standards of the sector as a whole. primary production area is the Putumayo distressed assets? drilling rig, there maybe a risk that the ing portfolio of projects. We believe that “Ecopetrol requires significant certifica- Canadian based E&P company Petro- Basin, where we have stabilized gross With the failure of the stock markets, truck will get damaged because of the the valuations are either fair or less than tion for companies it works with. ICG minerales holds multiple properties production at around 27,000 boepd. We particularly the Canadian exchanges, to location and you will be charged accord- fair and there is still great opportunity to has just completed the one and a half across the Llanos Basin, in addition to are confident that for the remainder of provide the funding, we have been see- ingly. But it is important to realize that move into this country. • year process to achieve that certifica- single blocks in the Putumayo and Up- 2013, we can meet or exceed production ing that private equity wants to come these risks do not apply to the whole tion which will allow us to work with per Magdalena basins. Production from guidelines released at the beginning of in and buy these distressed, underval- country as there is significant regional Ecopetrol. I fully agree with the level of Colombia in 2013 stands at around the year,” explains Duncan Nightingale, ued assets. They have an exit strategy, variation. certification required by Ecopetrol as it 24,000 boepd from a significant reserve Gran Tierra’s President. 21

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 18 - Industry Explorations Industry Explorations - 19 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

19 quired 2 million acres of land at no up- is fortunate in that we are operating The future looks bright for this growing Corey front cost. We had some phenomenal for the most part in the central Llanos power in Colombia’s oil and gas sector. exploration success and the company basin, which is easier to manage from Nightingale points out that the lingering Ruttan security issue is not the biggest obsta- 1.29 has grown considerably since then. In a security perspective than other areas. 8.22 2010, Petrominerales was completely cle to growth. “In addition to our produc- billion kWh billion kWh spun out from Petrobank. Petromin- Petrominerales has worked closely tion, GTEC has an excellent portfolio of erales was initially focussed on Colom- with the governemnts in Peru and exploration lands and is well positioned ELECTRICITY - EXPORTS ELECTRICITY - IMPORTS bia but we added Peru in 2009 and Brazil; how do you guage the politi- for sustainable future growth. However 2011 2010 Source: CIA World Factbook Source: CIA World Factbook President and CEO Brazil at the end of 2012. There is no cal risk in these countries relative to our ability to grow is partly dependent PETROMINERALES LTD way a company would be able to repli- Colombia? upon cooperation with the Colombian the same company it was under BP. In unconventional resources, the offshore cate this suite of assets today. The political will to have independent oil and gas regulatory authorities and in fact, it is even still registered in the UK sector represents a beacon of hope for oil companies operating in Peru and particular the Ministry of Environment’s and therefore a British company. Equión increasing Colombia’s reserves. “Our What are the benefits of operating Brazil is probably the highest it has ever permitting arm ANLA, which is respon- maintains the same high HSE standards offshore blocks RC4 and RC5, won in the companies at three seperate been. There is a bidding round happen- sible for providing the permits that it had under BP and much of the work- the 2008 Ronda, have huge potential, as entities in the current fiscal environ- ing in Brazil right now, which exempli- are necessary to facilitate exploration force remains since the take-over. In the does the Colombian offshore sector in ment? fies the desire to diversify from having drilling and the development permits re- last three years we have tried to make general; for gas in shallow water and po- When you start to combine multiple only Petrobras developing the industry. quired to develop new discoveries,” says the company more flexible, which is tentially liquids in the deep-water blocks. assets into one package you usually Brazil has a complex regulatory enviorn- Nightingale. necessary with our size and the devel- Offshore development will take time, as end up receiving a discount relative to ment but we have got an experienced opments in the market. We strive to take Colombia does not currently have the the true value of the assets. Some in- team that can navigate that. There has Equión Energía the best from all parties involved, from infrastructure or equipment available. It vestors might love heavy oil in Canada been oil and gas activity for the last 80 our history with BP, from Ecopetrol and will come eventually and the ANH are but not follow overseas exploration and years in Brazil and 1.5 billion barrels of A joint venture between Ecopetrol Talisman, and from the culture we have revising exploration timelines on these vice-versa. This allowed shareholders oil have been produced in the basin in (51%) and Talisman Energy (49%), developed ourselves,” explained María blocks to account for this,” continues to do their own portfolio management which we are operating. We are trying Equión Energía was formed in 2010 Victoria Riaño Salgar, Equión’s president. Riaño. and invest directly in the business that to bring Western Canadian know-how, from British Petroluem’s (BP) Colom- Two of the assets inherited from BP, Equión currently produces around appealed most to them. From an opper- practices, and quality of services to the bian assets. “Equión is, in many ways, RC4 and RC5, are offshore. Along with 27,000 boepd. • ational perspective, Petrominerales has country and are looking forward to our always had a seperate operating team; first phase of investment in Brazil start- We recently met with John Wright the only commonalities were at the cor- ing later this year. at Petrobank, can you tell us about porate level, so the transition was quite The regulatory burden in Peru is rea- the relationship between Petrobank, smooth. sonably high. The timelines are long Petrobakken (Lightstream) and and that will create a bit of an imped- Petrominerales? Some interviewees have told us that iment to having rapid growth of the In the late 90’s, John and I worked at the security situation in Colombia is sort we have seen in Colombia. In Peru, Pac’alta Resources Ltd. İn Ecuador. worsening. Does this pose problems the biggest challenge is access. It is a The company grew from no production for you and is there a risk of in- very costly place in which to operate to over 4000 bepd in a very short pe- vestors conflating security risks with because of the logisitcs involved in ac- riod of time. Unfortunetely Pac’alta was political risk? cessing locations by river or helicopter. subject to a hostile takeover. In 2000, Early on we had to tell people over and We are very focussed on bringing the we recapitalized Petrobank, we went over again that there is a big difference cost levels down and efficiently navi- back to the acquirer of Pac’alta and between security risk and political gating the regulatory regime. We have repurchased our old Colombian sub- risk. Colombia is the longest standing made a 53API light oil discovery that sidiary which became Petrobanks Latin democracy in Latin America, sanctity is 8km from a road, and 60 km from a American business unit and ultimately of contracts is absolutely ingrained and barging point, so I think that can be very Pretrominerales. In 2006, we did an they have never retroactively changed economic. IPO of Petrominerales, at that point a contract. However, there are security I was CFO for all three companies. In challenges that need to be managed. Petrominerales is listed in Bogota as 2010, I became 100% dedicated to When Alberta started to mess around well as on the TSX, what are main Petrominerales. with the fiscal regime here, I think benefits to being dual listed? In 2002, Petrominerales had two incre- Canadians began to understand the dif- All of our current production and 80% mental production contracts in partner- ference between poltiical and secuirty of our staff are in Colombia, so we ship with EcoPetrol. We had built up risk. Durring the FARC, or Revolution- wanted to make it easier for Colom- about 1,500 bepd of production and ary Armed Forces of Colombia, peace bian’s to be able to invest in our stock. were fortunate enough to be operating negotiations and leading up to the Today around 20% of our shareholders on the ground when the new fiscal and elections in 2014, there has certaintly are Colombian, and I think that justifies land tenure regime was introduced. been an increase in security incidents. the dual listing. • We saw that as a huge opportunity. We But we feel that this can continue to be focussed on the Llanos basin and ac- managed effectively. Petrominerales

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 20 - Industry Explorations Industry Explorations - 21 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports

regulatory authorities and in particular the Do you at least see signs of improve- bility program, which allows us to have a Duncan Ministry of Environment’s permitting arm ment within the environmental permit- very good relationship with the communi- ANLA, which is responsible for providing ting procedure? ties in our area of operation. This provides Nightingale the permits that are necessary to facili- I can say categorically that I do not see a certain level of operational stability, tate exploration drilling and the develop- any significant signs of improvement in however there are continuing security is- ment permits required to develop new the environmental permitting procedure. sues in the Putumayo Basin. Gran Tierra, discoveries. We often see government publications like many of the producers in Putumayo, stating that refinements are being made enjoys a very good relationship with the President Many in the market complain of slow to the environmental permitting process police and the military. Such a relationship GRAN TIERRA ENERGY and cumbersome environmental but these do not translate into a sig- also helps a great deal in preventing at- COLOMBIA LTD permitting procedures. What has been nificant speeding up of the permitting tacks to our drilling rigs and facilities. From Gran Tierra’s experience of environ- process for companies. We did begin to 2008 to 2011, there were approximately 8 mental permitting and how much see some improvements in the process to 12 significant pipeline attacks on the of a problem is it for the sector as a in 2011 but, at least for Gran Tierra, 2012 OTA pipeline, while in 2012 there were whole? and so far in 2013 has seen the process more than 30. This dramatic increase I believe ANLA is giving its best efforts to get progressively worse. Where the aver- lead to Gran Tierra having to defer some improve the permitting process but it is age time to secure a permit in 2011 was of it’s crude, either by not producing it or far from quick and efficient. Slow permit- previously 10 to 12 months, the average transporting it by truck. The situation has ting processes are slowing many of the now is 18 months. not improved since but equally it has not exploration companies from drilling wells gotten worse. Thankfully throughout this in a timely manner and in many cases this Colombia reached its landmark one period Gran Tierra, through its alternative is causing a delay to companies meeting million boepd mark late last year. How crude oil transportation routes has been their contractual work commitments on can it sustain or increase that level? able to maintain a reliable level of produc- time, thereby necessitating companies to Colombia in 2012 produced approximately tion for the benefit of its investors and apply to the ANH for contract extensions. 345 million barrels of oil equivalent and demonstrate increasing production levels Delays in exploration drilling and devel- the government hoped to achieve the and transportation reliability. opment of new discoveries is impacting one million boepd landmark. In December reserves replacement, and therefore 2012 the Colombia managed to achieve Colombia has long been synonymous Gran Tierra has significant production slowing production growth. Environmen- that goal but I have doubts about how with security issues. How savvy do levels, but what stands out most is the tal permitting has become a bottleneck in sustainable it can be. Colombia has the you find investors on the very regional strong portfolio of projects that Gran the system and is becoming a very seri- expertise and the resources in order to and generally improving situation in Tierra maintains. What can we expect ous problem. The average time needed to sustain or even increase the proposed Colombia? from Gran Tierra in 2013? permit an exploration well at the moment growth targets, but in 2012 exploration Investor perception of Colombia varies, For the first two quarters of 2013 Gran is approximately 18 months, which is to- wells discovered approximately 150 mil- the investors, bankers and analysts tend Tierra Energy Colombia Ltd. (GTEC) has tally unacceptable, and it could be longer lion barrels, that represents a 200 million to take a high level view. There is no way had record production levels despite pipe- if you have certain communities present barrel shortfall to replace reserves that they can know the specific details of ev- line interruptions, through using alterna- within the area of operation. Companies have been produced. At current produc- ery company so the whole of Colombia tive crude oil transportation measures. can mitigate some of the risks of delay tion levels Colombia is burning through and the oil and gas operators are often Our primary production area is the Pu- with good planning, communication and its reserves in the form of production lumped in one pot, which is very unfor- tumayo Basin, where we have stabilized relationships, or by providing studies and faster than it is replacing it. According tunate due to the differences between gross production at around 27,000 boepd. detailed expert environmental impact to the ANH data, in 2012 there were 132 the areas of operation within Colombia. We are confident that for the remainder of studies and impact mitigation studies in a exploration wells drilled in Colombia, Many of the regions that companies op- 2013, we can meet or exceed production timely manner. However, GTEC believes which resulted in the 150 million barrels erate within have many different oper- guidelines released at the beginning of that it goes above and beyond the require- of reserves found. Basic logic suggests ational challenges, which provides chal- the year. Within our considerable acreage ments of ANLA by providing very detailed at current rates of discovery and taking lenges to the analysts when assigning in Putumayo we have two major produc- reports and inviting ANLA for site visits the mean field size being discovered that values to companies and making comparing assets in addition to other smaller pro- and conducting its operations to a very the operators need to drill more wells to isons of the value between companies. ducing assets, all of which are performing high environmentally sensitive standard, replace the reserves being produced and Gran Tierra for example has shown signif- extremely well, especially our Costayaco but despite its best efforts the permit- definitely many more exploration wells icant growth and reliability of production and Moqueta fields. GTEC is currently the ting procedure is still taking an inordinate if the desired growth targets stand a despite the crude oil transportation chal- largest producer, largest landholder and amount of time. As a result of these de- chance of being achieved. lenges; however we are still compared to largest reserve holder in the Putumayo lays we are seeing companies beginning other producers in Colombia who have Basin. In addition to our production GTEC to divert some of their capital investment The Putumayo Basin is still known not shown the same level of significant has an excellent portfolio of exploration dollars to other countries where they for some lingering security concerns. positive growth. • lands and is well positioned for sustain- can drill wells more easily. This year Gran What experiences have Gran Tierra able future growth. However our ability Tierra had a significant discovery in Peru, had in this regard? to grow is partly dependant upon coop- which may compete for capital dollars Gran Tierra has an extremely strong and eration with the Colombian oil and gas currently earmarked for Colombia. effective community and social responsi-

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 22 - Industry Explorations Industry Explorations Global Business Reports Global Business Reports INTERVIEW

Mobil for unconventional resources. certification which will allow us to work The Future Eduardo Do you see a lot of potential for the with Ecopetrol. These certifications also extraction of shale oil and gas here put ICG in a good position to work with Enrique in Colombia? many of the new players moving into the Colombia has huge potential for the Colombian unconventional hydrocarbon Rivodó Z. production of shale oil and gas, in fact market. We intend to attack the market I believe it holds the 5th largest shale aggressively in the next six months in reserves in the world. Companies like order to have a very successful 2014. Unconventional and offshore resources COLOMBIA OIL EXPORTS BY DESTINATION President ExxonMobil would not come to Colom- Source: National Department of Statistics INDUSTRIAL CONSULTING bia for 2,000 or 3,000 boepd. 10 years If we return two years from now, GROUP (ICG) ago we did not have the technology to where will we find ICG? identify and extract shale deposits, but We have set out a five year plan to be now we do and this represents a huge active in five countries; most likely in opportunity for Colombia. ICG provides Guatemala, Belize, Brazil, Papua New Without a major new conventional dis- services in both unconventional and Guinea and Peru in addition to Colom- covery in over 20 years, the oil and gas conventional resources. Colombia also bia. We will be four times bigger than sector in Colombia is depending on the still holds huge potential in conventional we are today, in terms of employees potential that lies with its unconventional resources also, specifically along the and activities. In Colombia we also hope and offshore resources for the longer Orinoco River in the Llanos Basin. to be working in unconventionals with term. 2012 saw the likes of ExxonMobil, VETRA and ExxonMobil, depending on Shell and ConocoPhillips confirm their What is the role of ICG’s Houston the length of the environmental permit- interest in Colombia’s shale evolution. and Toronto offices? ting process. Colombia has yet to prove the full extent Maintaining a small representation of- of unconventional reserves, but invest- fice in Houston allows you to reach Do you have a final message for the ment from such big players has given a the whole world of oil and gas from our readers? United States 44% great deal of confidence to the market. China 7% one city. From Houston we are able to I am originally Venezuelan but I am ex- “Colombia has huge potential for the pro- Spain 8% source a variety of American products. tremely happy to be in Colombia. The duction of shale oil and gas,” says Rivodó Panama 6% By keeping up with the latest technol- country has opened its doors to us and Netherland 5% of ICG. “In fact, I believe it holds the 5th Chile 4% Please provide a brief introduction to ogy in Houston we are able to provide we feel privileged to work here. When largest shale reserves in the world. Com- Aruba 3% Industrial Consulting Group (ICG). solutions to our clients in which small we are in Colombia’s Llanos Basin, we panies like ExxonMobil would not come United Kingdom 2% ICG, founded in 2009, is a consulting changes in technology can significantly feel at home. It is the same Llanos as Peru 2% to Colombia for 2,000 or 3,000 boepd. 10 India 2% company focused on assisting with increase and optimize production. Venezuela, the same environment, the years ago we did not have the technology Dutch Caribbean 2% pre-commissioning, commissioning, ICG’s director of strategic planning is same people. We would like to contrib- to identify and extract shale deposits, but Turkey 1% start-up and optimization of oil and gas based in Toronto and runs our Canadian ute to the development of Colombia. We Venezuela 2% now we do and this represents a huge Others 12% production facilities in Colombia. We office. We also have the intention to list are establishing a maintenance, logis- opportunity for Colombia”. review and conduct testing on control, on the TSX, an exchange which is ideal tics and training facility in Puerto Gaitán, Unexplored geology, however, is not the Offshore production, meanwhile, may data acquisition and other systems in or- for small companies in the resource among the big producers of the Llanos only question mark hanging over the take longer to materialize, but most agree der to ensure a smooth transition from sector. Currently the cost of listing is Basin. Our focus will be to provide train- huge potential that shale is promising. If the potential is huge for the South Amer- engineering, procurement and construc- too high for a company of our size but ing for Colombian technicians working Colombia is to maintain its strict stance ican nation straddling both the Caribbean tion to full production of oil and gas facil- we hope in three or four years to be in with heavy oil in the Llanos Basin, giving on environmental permitting, then it and Pacific. This year, Anadarko, in part- ities. Colombia, until very recently, had a position to capitalize on the funding Colombia the best chance to take this need only look to the political and social nership with Ecopetrol, have contracted very small production levels in compari- opportunities the TSX offers. We are opportunity to improve its human talent resistance to shale extraction methods CGG to acquire and process 5,500km2 son to other countries in the region like currently conducting road shows in the and increase production. • we have seen in the US, Canada and Aus- of 3D seismic, the most extensive in the Venezuela or Mexico; for this reason it US and Canada to raise finance towards tralia, among many other places around country’s history. “I think there is good has not developed the level of exper- this eventual goal, but this is a challeng- the world. The Colombian authorities will offshore potential in Colombia, and the tise and investment required for high ing process, which we expect to see the have to solve these issues in the com- sector will come to comprise a signifi- quality services like those ICG offers. benefits from in early 2014. ing years if significant unconventional cant amount of Jason CGG’s work here,” With recent increases in production, reserves are found; the future growth of says Jorge Aranguren, manager at Ja- we are now seeing the level of quality Ecopetrol is, of course, the largest their oil and gas sector may hang in the son CGG. “Companies such as Equión, in Colombia rise and ICG is playing an producer here in Colombia. Are they balance. “New reservoirs will hopefully Petrobras, Ecopetrol and Anadarko have important role in that process. For our a potential target for ICG? be found, and many of those will contain many offshore blocks. Jason CGG has clients such as Pacific Rubiales, using Ecopetrol is the primary producer in unconventional resources. There is re- been conducting feasibility and inversion ICG increases the speed and quality of Colombia and for that reason ICG fully ally no alternative, because remaining a studies with excellent success – not in transition, allowing them to begin pro- intends to make Ecopetrol its client. net oil exporter is very important for the terms of oil reserves, because many of duction quicker. However Ecopetrol requires significant economy,” suggests Emilio Azout, coun- them are gas, but in helping the compa- certification from companies it works try manager of leading oil and gas soft- nies decide whether to continue develop- ICG is now also working with VETRA, with, ICG has just completed the one ware developer Paradigm. ment”. • who are in partnership with Exxon- and a half year process to achieve that

- 24 - Industry Explorations Industry Explorations - 25 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 A Unique Country: Challenges and Opportunities in Colombia’s Hydrocarbon Industry

“From a business perspective, the main challenges [facing companies in the oil and gas sector] are community relations and environmental permits to carry on exploration activities. Further, companies may face difficulties to transport oil because of significant infrastructure limitations in the country. From the fiscal standpoint, they need advice on applica- ble treatment to their investments in acquisition of rights, and in exploration and exploitation phases, to ensure proper capitalization and amortization policies. They also need advice in duly management of special exchange control rules.”

- Publio Perilla, Executive Director, EY (formerly Ernst & Young)

Image: Gran Tierra EDITORIAL Global Business Reports Global Business Reports

The Bottleneck

Environmental permitting in Colombia

Companies have complained about per- million barrels, that represents a 200 that restructuring came the delays we mitting delays across the board in the million barrel shortfall to replace re- hear so much about today. In reality, areas of seismic exploration, well cre- serves that have been produced. Ac- however, the time taken for environ- ation and field development. Orlando cording to the ANH data, in 2012 there mental permitting in Colombia is much Cabrales, former president of the ANH, were 132 exploration wells drilled in less than that of the US or Canada for told Bloomberg News that with an in- Colombia, which resulted in the 150 example”. crease in the number of companies million barrels of reserves found. Basic If ANLA is to succeed, it needs to iden- seeking permits for exploration and logic suggests, at current rates of dis- tify the main issues affecting the speed production, wait times have doubled covery and taking the mean field size of permitting, which many suggest may in some instances. Even state-owned being discovered, that the operators be due to staffing shortfalls at the reg- Ecopetrol saw delays in environmental need to drill more wells to replace the ulatory authority. “Of course more can permits during 2012. Such delays have reserves being produced and definitely be done to improve the environmental led to the fear that Colombia will con- many more exploration wells if the de- permitting process. The government tinue to fail to breach its current seven sired growth targets stand a chance of should consider appointing more peo- year limit on oil reserves, and stagna- being achieved”. ple to ANLA and the Ministry of En- tion and decline are two words which The Autoridad Nacional de Licencias vironment, which is overworked and observers have become accustomed to Ambientales (ANLA), Colombia’s envi- unable to process all the applications. reading. ronmental regulator, may be just three This is delaying Colombia from reach- Oil is Colombia’s number one export; years old but it is under huge pressure ing the levels of production it expects. however Colombian production is to tackle the delays which are holding I am 99% sure solving these problems currently out-performing the discov- back progression of the whole industry. would result in a dramatic improve- ery of new reserves, lowering the re- Many suggest that the recent restruc- ment,” says Omar Leal Quiroz, presi- serves-to-production ratio (RPR). The Image: Oleoducto de Colombia SA turing of the permitting process is to dent of OMEGA Energy Colombia. fact that 75% of basins in Colombia re- blame for delays. In return the govern- “The exploration timeline at our Bue- main underdeveloped, a large amount ment would suggest that the restruc- navista field,” he continues, “depends of which have not even seen seismic The government has recently been getting much tougher on environmental issues. turing was a necessary reaction to on when we receive our environmental “ When preparing the environment impact assessment they are asking for more acquisition, highlights the regulatory increased demand and the delays are license. We applied for it a year and a inertia. Tyler Rimbey, VP business de- information on hydrogeology, geotechnical issues, and other related fields. When simply a consequence of that. “At the half ago and it is taking longer than ex- velopment of Platino Energy, says: we get these requests sometimes our first reaction is that these are not necessary, beginning of the recent oil boom, it was pected. With the new rules, we had to “Environmental permits for drilling can that this is not a big deal. The government just wants these as a term of reference much easier for the companies present do public consultations. The permitting take from six months to over a year, and you have to put those in reports. It is expensive, but we have to do it. With the in the market,” says Nelson Navarrete, process has been very tough because which is why world scale finds have not delays, we just try prepare our clients with the studies they need and participate in president and CEO of Petroamerica there has been local conflict against been made in Colombia in the last two the ongoing discussions. Currently we have a proposal that we have been waiting Oil, who have moved successfully into the company acquiring the seismic years,” a statement that sums up the for two years for approval. commercial production in 2013. “There for our neighbour, which has caused level of frustration across the industry. were attractive fiscal terms, as we see problems for us too. There is a lot of “Colombia in 2012 produced approxi- today, but in addition there was excess contamination in the region, and with mately 345 million barrels of oil equiv- capacity in the pipeline network. At that little knowledge of our environmentally alent but I have doubts about how - Santiago Correa, stage, the environmental permitting responsible plans, the public fears the sustainable it can be,” says Nightingale former Environmental & process was much like anywhere else same from us. Perhaps to gain votes, of Gran Tierra. “Colombia has the ex- Sustainability Manager, in the world, and there were few com- local politicians create a lot of publicity pertise and the resources in order to Ausenco plaints. However, as the market grew about matters they do not understand. sustain or even increase the proposed and many new companies entered, the OMEGA Energy has plans to drill a large growth targets, but in 2012 exploration authorities had to restructure the envi- number of wells at Buenavista as soon wells discovered approximately 150 ronmental permitting process and with as the license is granted.” •

Industry Explorations” Industry Explorations COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 28 - - 29 - Global Business Reports INTERVIEW

At Buenavista you discovered shallow tain both conventional and unconventional Omar Leal heavy oil. What is the timeline for resources. Our goal is to reach 100,000 further exploration there? boepd in ten years; international efforts Quiroz The exploration timeline at Buenavista will help in this. In Nigeria we hope to depends on when we receive our envi- start production in the next two or three ronmental license. We applied for it a year months, and OMEGA Energy is consider- and a half ago and it is taking longer than ing opportunities in Central America, Suri- expected. With the new rules, we had to name, Barbados and Trinidad. We want to President do public consultations. The permitting partner with Staatsolie, Suriname’s state OMEGA ENERGY COLOMBIA process has been very tough. There is oil company, and are happy to review the a lot of contamination in the region, and opportunity to work in any other partner- with little knowledge of our environmen- ship. tally responsible plans the public fears the same from us. Your group also includes the compa- The government should consider appoint- nies Petroleum Equipment Interna- ing more people to ANLA and the Ministry tional and Pegasus Blending. How do of Environment, which is overworked and these come into the equation? unable to process all the applications. This Our group has service and oil and gas is delaying Colombia from reaching the companies. PEI does not really exist levels of production it expects. I am 99% anymore; Nikoil is the new entity that sure solving these problems would result took it in its entirety. OMEGA Energy is in a dramatic improvement. the headquarters. Pegasus Blending is catered to take gas from various places Did you participate in La Ronda, and and separate the liquids, leaving dry gas what further opportunities would you for power generation. It has two projects like to pursue? already and hopes to keep growing. The OMEGA Energy participated in La Ronda, idea is to expand Pegasus Blending to but was second in most of its bids. How- many countries and we are looking for in- Please introduce Omega Energy? ever, we are in negotiations with two big vestors to join it. The separation process We started as a service company called producing companies for sale in Colombia has environmental advantages, and al- PEI, offering rental equipment and parts. – you may see developments in the next though there may be others doing it, here Then we moved into workovers, drilling two or three months. We are working we are certainly the only ones with car- and well testing services. In 1999, we with the UBS Bank for the finance nec- bon credit approval. started putting in the wells, facilities essary to acquire these companies. We and operations for assets belonging to have been very successful in past finan- If we return in 2015, how will OMEGA small companies coming into Colombia. cial deals, securing a bond with the Bank Energy be different from today, and OMEGA Energy was created in 2000 with of New York last year, paying every month what will be the main talking points? the intention to enter exploration and without delay and complying with all our Unfortunately, last year the ANH desig- production. We had some input into the obligations, thereby inspiring other insti- nated most of the areas that could be changes to E&P contracts in Colombia, tutions’ confidence in us. We have now Type 1 as Type 2. As a result, they did not and studied potential projects around the signed an agreement for a $300 million, receive offers for these areas, and this country before they came in. Investors – which we hope to put in the market in is something they need to think about mostly foreign – carried us to begin with. September. for the next round. However, they did We reduced our participation in projects manage to sign a number of contracts, every time we made a discovery, and OMEGA Energy now has projects in including for unconventional resources – ended up with involvement in more than Paraguay and Nigeria, and plans in which, while in their infancy, have huge 20 blocks. In 2009, OMEGA Energy de- Trinidad. Is your international portfolio potential. I am very worried about explo- cided to concentrate on the Buenavista, likely to grow? ration in Colombia and how the country La Punta, Llanos 21, Midas and Paloma OMEGA Energy has identified some mar- can maintain its production levels – no big assets, meanwhile fully selling off most kets it wants to enter, the main one being discoveries have been made in the last 20 of the rest of the properties. Last year Paraguay, where there is big potential in years or so. The big potential for conven- we bought Lukoil Overseas’ Colombian unconventionals, perhaps five times that tional oil is still in the foothills, which is assets, which have good production po- of Colombia. We have just received ap- why we think Condor is so promising. We tential, and created the new company proval for the first stage of a prospecting are looking at three structures, each of Nikoil Energy. We already have a team contract on our first block there and have which could contain between 50 million in the Condor block starting production agreements for two more. Paraguay is and 500 million barrels. In 2015, I hope and in Marina 1 block, in partnership with virtually unexplored and it offers good in- OMEGA Energy will be producing around

Image: ICG Ecopetrol, which owns 30%. vestment conditions; our assets will con- 20,000 boepd, mostly from Buenavista. •

Industry Explorations - 31 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 EDITORIAL

Freedom to Produce, Freedom to Protest Community relations in Colombia “In the past, the security situation meant social activism and community unrest was very low key, but now they are coming to the forefront as companies enter new areas. This has taken seasoned Community related issues are, perhaps, Colombian investors by surprise,” the only problems concerning Colombia’s says Daniel Linsker, VP at risk man- oil and gas industry greater than those agement firm Control Risks. associated with environmental permit- The last few years provide many ting. “Many communities will completely examples of tension between oil refuse to accept oil and gas activities in companies and locals, although their area,” says William Augusto Franco the trigger for these disputes Castellanos, general manager of Colom- varies widely from case to case. bian firm Meridian Consulting. “Other Labor disputes are a growing prob- communities are the opposite; they de- Image: Talisman lem across the country’s oil pro- mand a lot of the oil and gas companies munities has played a big part in their and, often, paramilitary intervention. ducing regions, but direct civil action from local peoples often before any operations can begin.” success in Colombia, still their biggest Today, most Colombian paramilitaries revolves around environmental concerns and disagreements Environmental and community issues market, where they have served clients have been demobilized, and government over the distribution of royalties earned from oil extraction. are not exclusive of one another; the such as Pacific Rubiales, Talisman, Plus- forces have tightened their control over Previously, proceeds from oil production were distributed permitting procedure incorporates com- petrol, Shell and Lewis Energy. “SAEx- oil-rich basins across the country. The through local municipalities and departments. This system, munity consultation, which puts a lot ploration has extremely good relations Colombian government has also taken however, led to the widespread misappropriation of funds by of power in the hands of the communi- with the local communities in Colombia, measures to reduce violent policing local authorities, prompting the central government to make ties. As the first on the ground seismic which is very significant for our clients as and hold the military accountable for radical changes. companies have become accustomed to it allows us to solve a lot of the problems human-rights abuses. These generally In a move which many describe as swinging the pendulum dealing directly with communities at the for them during the exploration stages,” positive developments may have lead to too far the other way, the distribution of oil royalties has been early exploration stage, the top seismic continues Méndez. a growth of vocal discontent in commu- centralized with an intention to see funds benefit the whole firms making it a key selling point of their Historically, protests were suppressed nities frustrated by resource exploitation country rather than just oil-producing provinces. Communi- service offering. by a mixture of heavy-handed policing in their back yards. ties are now required to submit formal and comprehensive “SAExploration’s strong engagement proposals for development projects that require funding from with local people can aid in the environ- oil revenues. It is fair to say that the majority of these commu- mental permitting process”, explains Ar- nities are ill prepared to organize such proposals in the formal turo Méndez, vice president of SAExplo- manner required. ration in Colombia, “but in many cases In regard to the biggest challenges to E&Ps I would say communities, communities, With access to funds reduced, communities feel they have you simply cannot please everyone. We “communities. However the problem is not the communities, the problem is the lack little choice but to target oil and gas companies active in their may have an area of 400km2 to cover, of a clear legal framework to govern community consultations. It is like knowing region to pressure, albeit indirectly, the central government. for example, but 100km2 is owned by when a game starts but not knowing the rules or when it will end. I should also “Part of the reason we have community issues is because one person who flatly says no to any mention that this issue for the oil and gas sector is less complex than that of the of the unfair distribution of funds by the government, but the oil and gas activity. In those situations it mining sector, and both are less complex than in the infrastructure sector. Many of easiest target for community frustrations remains the oil and becomes very difficult, even when the these issues come down to failures of the national governing bodies, however the gas company in their backyard,” says Nightingale. majority of local people agree to the ex- ANH, in comparison to other authorities, seems to be a first class institution. Companies feel the demands being placed on them are tasks ploration program. In addition, the com- that should be fulfilled by local and central government. This munity element does not only play a part seemingly endless cycle spins atop the backdrop of poverty before exploration activity but also during and extreme economic divide which still grips a South Ameri- and even after”. can nation struggling to emerge from its troubled past. Previously named South American Explo- - Carlos Umaña Trujillo, Managing Partner, While the companies have clear objectives and the govern- ration (SAE), the company has rebranded Brigard & Urrutia Abogados ment clear responsibilities, it is the communities who clearly as SAExploration since their expansion hold the power. For Colombia to reach its ambitious hydro- beyond the continent and listing on the carbon production targets in the coming years, it will have to NASDAQ. Their strong record with com- have the oil region communities on board. •

COLOMBIA EXTRACTIVE INDUSTRIES 2014 Industry Explorations” Industry Explorations - 32 - INTERVIEW Global Business Reports Global Business Reports EDITORIAL

is very significant for our clients as it al- increasingly, in areas like Llanos or Arturo Mendez & lows us to solve a lot of the problems Casanare, we can find a skilled local Monumental for them during the exploration stages. workforce too. In every project we have Raul Roland to invest heavily in training to ensure Backwardness There is a lot of talk in Colombia the standard of our work is where we about unconventional and offshore want it to be. Training however not only Moving Forward oil and gas. Has SAE seen much benefits the quality of our work but also growth in these sectors? provides the local people with skills AM: Vice President, Colombia Operations AM: There is a lot of talk about uncon- they will be able to use for the rest of Infrastructure constraints for Colombia’s RR: Manager, HSE ventional oil and gas, but we are yet to their lives, which is of great value. industry SAEXPLORATION see that materialize into real business. Colombia is a little slow in adopting 2013 saw SAE become a public new technologies. company by listing on the Nasdaq exchange. What were the key factors Environmental permitting in Colom- behind this decision? Reducing environmental and social pensive, making it difficult to conduct bia is creating a bottleneck for cru- AM: When SAE was established, the obstacles to hydrocarbon exploration short term projects. As an example, a cial exploration activity. How is this name stood for South American Ex- and production along with the devel- rig move which would cost $150,000 problem affecting business for SAE? ploration, representing the initial inten- opment of unconventional and off- in North America costs a million dol- AM: Environmental permitting is a re- tions. However, due to requests from shore resources could see Colombia lars for the same distance,” explains ally big problem for SAE and the whole our clients to expand outside the re- experience huge production increases Warren Levy, chairman and CEO of AM market. SAE won programs in February gion, we became a global company. So in the coming years. However, these Estrella International Energy, now the and March 2012 but we are only just the name remained SAE but this now projections are being met with mixed biggest rig holder in Colombia after its finishing them now in August 2013 due stands for Safety, Acquisition, Experi- feelings as the industry comes to the acquisition of San Antonio International to environmental permitting delays. We ence. Two years ago the decision was realisation that Colombia’s already Colombia this year. are told to expect a wait of four to six made to take the firm public and it has struggling infrastructure will be play- Given the difficult topography, lack of months when in reality it is more like taken that period to fulfill all the require- ing catch up to anticipated production infrastructure and still precarious se- 12 to 18 months. We have seen no sig- ments for the listing. When a company levels. curity situation in Colombia, it is little nificant signs that the environmental goes public it must maintain a high level In addition to the transportation of surprise helicopters are of great utility SAE is now active in a number of permitting process is improving. of transparency and ethics, this reas- hydrocarbons, those moving large to Colombia’s extractive sectors. Bogo- markets around the world. How im- RR: With environmental permits, sures our larger partners and clients, so equipment are among the worst af- ta-based Vertical de Aviación has seen portant is Colombia for the company Colombia has a ministry for social we have had a very good reaction from fected. “Over the longer term, the real demand for its services rise over the currently? protection and a ministry for the envi- the market so far. We expect our share- challenge facing the country is that of last few years and sees the trend con- AM: SAE was established in Colom- ronment. There are also autonomous holder base to come primarily from the infrastructure – transportation costs tinuing in the near future. In addition bia in 2008 when we were growing at regions that have the country divided US and Canada. are very high, and moving equipment to its 10 helicopters in Colombia, out about 10-12% per year and currently in various zones, each zone is autono- around the country is ridiculously ex- of a total of 25 worldwide, the com- Colombia is the most important market mous in terms of environmental permit- When we come back in 2015 how Image: B2 Gold in our South American operations due ting, and each has its own way of quali- will SAE be different to what we see to the level of oil and gas activity in the fying and evaluating the documentation today? country. In Colombia, we work with used for an environmental permission, AM: SAE expects to continue growing most of the major players; Pluspetrol, around 6-8 months are need for this at the strong levels you have seen in Talisman, Pacific Rubiales, Shell, Lewis kind of permit. I have not seen any ef- recent years and you may see a wide Estrella International Energy Services Ltd. Energy and we are currently in the bid- fective movement to try to standardize variety of services being offered. In ding process for Ecopetrol. In the last or equalize the processes across these Colombia, we are waiting to see how two years, we have conducted the ma- regions. the market develops. We have always Argentina Bolivia Chile Colombia Ecuador Perú jority of the work available for Pacific seen great potential in Colombia but Rubiales. Where in Peru and Bolivia we How many people would you nor- the social challenges need to be over- Estrella has unrivaled capabilities servicing the • Drilling and Workover Rigs. Oil & Gas, Geothermal and Mining industries. dominate the market, in Colombia we mally employ for a seismic crew, come. Outside of Colombia we would • Directional Drilling & Rental Tools. maintain about a 15% market share. how many would be from the local have moved strongly into the Brazilian Our success is founded on the strength of our • Consulting and Project Management. community and do you have to market but I believe Colombia will re- people who are focused on providing innovative and fit for purpose technology for our customers. If I were to ask the big E&Ps in invest heavily in training? main our strongest market in the region Colombia about SAE, what would AM: SAE would usually employ be- for many years. • Estrella has a fleet of rigs and we are ready to their perception of the company be? tween 1000 and 1300 people for a seis- tailor solutions drawing on our experience and our range of services to meet your work over AM: I believe the key elements of mic crew and on average 60% would and drilling needs. SAE are people and service. SAE has derive from the local community. More the most experienced staff, not just in often than not, there are not enough Visit us: www.estrellasp.com Colombia but across the region. SAE people in the local community. In most has extremely good relations with the regions the local people make up the Cll 100 No. 8A-55 Torre C, Off. 616 l Bogota, Colombia l PBX (571) 5082335 l FAX (571) 5082337 local communities in Colombia, which unskilled section of the workforce but

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 34 - Industry Explorations Industry Explorations - 35 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports

pany has four additional Russian-made cial opposition increase substantially. target for their attacks. According to In the early 2000s, Colombia saw low helicopters on order to meet increas- Both public and private sector need to the Colombian government, there “levels of oil production, down to about ing demand. “Our helicopters have a work and invest together in creating were about 31 attacks against pipe- 300,000 boepd, due to both political great cargo capacity and oil companies appropriate infrastructure,” comments lines in 2010, and 84 attacks in 2011, and logistical challenges. In subsequent need equipment which moves greater Marcela Vaca Torres, general director of and 117 in 2012. This rising trend has years, we saw huge increases in the amounts of weight in the least possible GeoPark. continued into 2013. levels of foreign investment in Colom- time to reduce expenses and the only Undoubtedly the most significant infra- “There have been a lot of discussions bia’s hydrocarbon sector, partly because helicopter that can do that is the Mi-8 structure project for the oil and gas sec- about pipelines and river transport, but of the contrasting developments in MTV-1/ Mi-171 series; our helicopters tor is the 975km Bicentennial Pipeline, not nearly enough about roads,” sug- the political climate of Colombia and have a 4 tons capacity and today, drills the longest and largest in the nation’s gests Warren Levy of Estrella Interna- Venezuela. Now, production has risen are designed to weigh approximately history. Stage one, near completion, tional Energy Services. “The river trans- to approximately 1,000,000 boepd fairly 4 mt,” explains Admiral Mauricio Soto, will cover 230km through Colombia’s port system works very well in Peru, quickly, creating logistical challenges executive vice president of Vertical de most productive oil fields in the Llanos and reasonably well in Brazil and the for transportation of hydrocarbons to Aviacion. Basin from Araguaney to Banadía. system connecting it with Argentina market; this is compounded by Colom- Current Colombian President, Juan From Banadía the 30-42 inch diameter and Paraguay sees very heavy traffic. bia’s difficult terrain. The current system Manuel Santos, has pledged to invest pipeline will hug the Venezuelan bor- There are parts of the world where it of pipelines is limited, leaving costly and $100 billion to improve infrastructure der, winding though the Lower Mag- is much more effective than road trans- inefficient road transport as the only over the coming decade. At least half of dalena Basin, then west to the port of port, but it took Peru 15 years to figure option for many producers. these funds are forecast to come from Coveñas on the Caribbean coast. The out how to effectively move rigs along the private sector. Where and how this project is a significant undertaking and the river and there are still problems money will be spent is still unclear, but certainly a step in the right direction doing it. Most conventional oilfields Image: Gran Tierra the oil and gas and mining sectors will but is still some way short of satisfying really require road access. Colombia However, now is the time to push built on time, to budget and with high be keeping a close eye on the develop- the sector’s demand. badly needs major investments in high- - Luis Eduardo Mendoza, forward with infrastructural improve- quality. The legacy of President Álvaro ments. “As you stretch your operations Pipelines are the most efficient and ways, particularly from the ports to Bo- General Manager, ments, be it road, rail, river or pipeline. Uribe was crushing the FARC guerrillas into the countryside and start using de- cheapest way to transport oil, but rebel gota, and from there to the main fields. Big River Fota Naviera S.A.S., With an economy growing at over 4% and opening up large swathes of land partmental or municipal unpaved roads groups remain a significant force in This is the missing piece in the puzzle Alianza Group SA and foreign capital pouring in, funding for oil exploration. President Santos's or face the need to build new access many areas of the country and pipe- to bring the country up from a million these projects should not be a prob- legacy may be helping move that oil roads, your costs and exposure to so- lines have long represented a prime barrels per day to two million; every- lem. Rather, it is ensuring they are efficiently. • thing else will sort itself out naturally”. Colombia’s rivers represent a realistic Barranquilla. While Alianza Group’s” Big medium for oil and equipment trans- River project will utilise large 25,000 port; one large river barge can move barrel barges from their river port in the same amount of cargo as 75 ar- La Gloria to their Atlantic oil terminals, ticulated trucks. The Magdalena river storage and port facility, also in Barran- stretches from the inland plains near quilla. the capital, through the oil fields of the The Caribbean port city of Barran- Llanos and Lower Magdalena Basins quilla’s position on the Magdalena to the port of Barranquilla on the Car- River should see it grow as an oil ex- ibbean coast. The river is navigable port hub with the increase of river traf- by 25,000 barrel barges for 435km fic, but the harbour’s restricted depth from the coast, upstream 4,000 barrel will limit it reaching its full potential. barges can reach as far inland as Bar- Meanwhile the deep-water harbour rancabermeja in the heart of oil country of Cartagena is accessible from the and home to Ecopetrol’s refining and Magdalena at Calamar via the Canal port facility. The government is said del Dique. However, entrance to Carta- to have been in discussions with Hy- gena bay is only accessible through droChina over channelizing and dredg- the Pasacaballos, just 6 feet in depth, ing from Barrancabermeja to La Do- limiting traffic to small barges. Some rada, just 113km from Bogotá. sympathy can be given to a govern- Developments along the Magdalena ment who has been struggling with could increase river traffic by five times political turmoil and violence, which and a number of logistics companies have become synonymous with the are already moving on the opportunity. nation’s image. “Until now we have Grupo Coremar seeks to establish a not invested in infrastructure because river port on the stretch between Bar- we have had other priorities, such as rancabermeja and La Dorada, trans- waging an internal conflict,” explained porting crude to its new oil and gas Luis Fernando Andrade, director of the business cluster and port facility in national infrastructure agency, ANI.

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 36 - Industry Explorations Industry Explorations - 37 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

an extensive drill program for the coming intention is to continue long-term test- main fields. This is the missing piece in 2015. In South America it generally takes Nelson year and expect to reach 7,000 to 10,000 ing. We also have La Guira, in the same Warren the puzzle to bring the country up from about a year to launch a service in a new boepd production within 18 months. It is trend as Las Maracas, which has a high a million barrels per day to two million; country. Navarrete now vital that we start thinking beyond probability of success. Development at Levy everything else will sort itself out natu- that period, assets in the Llanos basin La Guira should be straight-forward as rally. Estrella’s rigs’ portability does give How much more M&A activity do are prolific but once reaching peak pro- it will share facilities with Las Maracas. it a competitive advantage in Colombia. you expect throughout the rest of the duction their decline is rapid. We are Finally we have a 50% working interest market? looking to diversify our portfolio into in Llanos 10 block, for which we expect How has Estrella had to adapt its I expect much more M&A over the next President and CEO other basins, which were too high risk environmental permits to come through Chairman & CEO international expertise to the Colom- six months to a year; valuations are low PETROAMERICA OIL CORP. for us previously but now present a good in September, we will be looking to spot ESTRELLA INTERNATIONAL bian market, and how will the coun- enough, with a lot of small Canadian opportunity to extend the life of our re- the well by December. ENERGY SERVICES try’s specific characteristics affect its public companies not currently viable serve base. We will most likely be look- future development? on a standalone basis. Normally the first ing for partnerships in Putumayo Basin or The bicentennial pipeline, cur- The biggest difference Unlike Argentina entrants into M&A activity are private even the eastern Llanos Basin for heavy rently under construction, will wind or Peru, where most of the oil has been equity groups, followed by hedge funds oil. between your current blocks in the developed in the same areas for the last and public markets. Private equity is now Llanos Basin. How will this impact 60 years, is that Colombia has had a lot stepping into a lot of different parts of Petroamerica’s current asset base has your operations and profitability? of growth in new areas. The industry the market. a strong pipeline of assets at differ- The construction of the bicentennial has to deal with community and social ent stages of production. Even the pipeline in close proximity to our blocks responsibility issues. Estrella does not If we return in 2015, where will we Los Ocarros block has a number of is very positive for Petroamerica. In address these issues directly but is still find Estrella, and what will be the key other promising fields, what are your March 2013 we began to commercialize indirectly affected by them. topics of conversation? hopes for the future of this block and our production, after initially selling it to For a fairly limited operating footprint Our stated goal is to become the your interests in the area? Parex, and we had gained access to the there can be a wide breadth of technical provider of reference in South Amer- We finalized construction of permanent Ocensa pipeline to transport our oil. The challenges in Colombia, from very deep ica – not necessarily the biggest, but facilities at Los Ocarros in June 2013 development of the bicentennial pipe- tectonically-stressed foothills to shallow certainly the one that others look to as with the operating company Parex Re- line will give us additional options when heavy oil. A rig may be suitable to one a benchmark for success. This brings a sources Inc. The production facility at completed, as some of the participating or two regions, but not the whole coun- drive for high quality equipment, per- Los Ocarros is able to handle 15,000 companies will have excess capacity. try. Some modernization in the market sonnel, service and safety. Estrella is When GBR met with Petroamerica Oil boepd and 25,000 barrels of water per The bicentennial pipeline is not just good Estrella is active in seven countries. is going to be needed, particularly in the proud of its commitment to safety and Corp. in 2011 you outlined your plans day, meaning a total fluid capacity of for Petroamerica but for all producing How important is the Colombian development of the Llanos, where the over the last couple of years has been for 2012 as, focusing on the reserve 40,000 barrels per day. The field is now companies in its vicinity. market to the company? wet low lying lands will necessitate pad able to move into a leadership position. potential at Los Ocarros block, devel- producing 10,500 to 11,000 boepd, and In the short term Estrella sees Colombia drilling. Over time we also expect to continue opment of Balay and the delineating we are in the process of defining the Production costs in Colombia are as a key market, and has invested heav- to modernize our rig fleet. I also expect of your assets. It seems you followed optimum maximum production per day. high. How much difference will addi- ily here, although there are some difficul- Estrella has announced the acqui- continued geographic expansion. Mex- that path exactly, how has the shift At Los Ocarros we intend to drill several tional pipelines make to the total cost ties facing the operators due to environ- sition of San Antonio Internacional ico, Venezuela and Brazil are the only big of focus to production changed development wells in 2013, which could of production for Petroamerica and mental permitting problems. I think it is a Colombia (SAIC). Could you provide oil and gas markets in Latin America we Petroamerica? see production rising in the near future. across the industry in Colombia? question of overcoming this difficult pe- an overview of this company prior to are not currently present in, and I would When we spoke to GBR last, we were a We have already completed a water dis- Petroamerica’s operating netbacks for riod, and that the permits will eventually the acquisition? expect us to be in at least two of them pure exploration company with one key posal well, which is very important given Q1 2013 was $79 per barrel, which is flow and the process will become more SAIC has 26 rigs – the most of any a couple of years from now. Colombia asset, the Las Macaras field in the Los the nature of production in the Llanos huge, one of the biggest in the world systematic. Over the longer term, the company in Colombia – cementing and needs consolidation in both the E&P and Ocarros block. In 2012 we delineated Basin. I believe. We sell our crude based on real challenge facing the country is that coiled tubing services, and involvement service markets – there are too many our assets and began developing Las In addition we have made two additional Brent, our royalties are at 8% and our of infrastructure – transportation costs in some integrated projects. For a long companies and the terms small service Macaras field, producing just 200-300 discoveries, west of Los Ocarros and on operating costs are very low, $3 per bar- are very high, and moving equipment time it was the biggest rig operator in companies can achieve financing on are boepd early in the year but raising that different contracts. The first, La Casona rel. While transportation costs work out around the country is ridiculously expen- the country and a clear leader. Estrella aggressive, with a risk tolerance that to 4,000 boepd by the end of 2012. This in the El Eden block, where we have a to about $18 per barrel because we still sive, making it difficult if not impossible likes SAIC for many reasons, particularly may not fully factor in the cyclical nature development now means we have the 40% working interest and our partner truck the oil some distance. Changing to conduct short term projects. As an its technical capabilities, size and experi- of the market. The lack of capital in the cash flow to be fully financed from pro- is also Parex. La Casona is light oil and that would make a huge difference. Also, example, a rig move which would cost ence. We feel our international capabil- Canadian market today will drive some duction for 2013. Petroamerica’s capital we expect to be online by the end of Q3 light oil will be given priority at the pipe- $150,000 in North America costs a mil- ities and advanced technology can help of this consolidation, as, ultimately, program for 2013 is approximately $70 2013, we will also be building a facility line because it will be used as a diluent lion dollars here for the same distance. it take the next step. SAIC has about a will logistical and practical efficiencies. million, so we have no need to go to the and expect long-term production. The for the heavier crudes in the region. This 10% market share; collectively we will Colombia’s vibrant banking sector has market for additional funds. problem at La Casona is the associated is a great advantage to Petroamerica and Are you seeing any early signs of at- be around 15%. been a wonderful source of growth, Production has taken Petroamerica to gas, we have decided to extract the gas other light oil producers. Due to the to- tempts to improve the infrastructure SAIC and Estrella have complementary but if oil prices fall to lower levels, many the next stage as a company, where we and use it for power generation in El Eden pography, logistics are very expensive in situation? Does the portability of your project management abilities and, al- small companies will likely disappear. In will now have new challenges and op- and Los Ocarros blocks. The second, Cu- Colombia, but in general the small scale rigs give you a competitive advan- though SAIC’s cementing and coiled summary, we expect 2015 to see fewer portunities. We are now categorized as riara is in the El Portón block, where we of oil production in Colombia means that tage under the current conditions? tubing services are new, still fairly small- players in the market, with Estrella hav- a junior production company in Colombia have a 25% working interest alongside the industry does not benefit from the Colombia badly needs major invest- scale and limited to Colombia, there is ing a clear leadership position in a broad and we still have a very strong portfolio our partner CEPSA. Thus far we have economies of scale seen in bigger pro- ments in highways, particularly from the the potential to grow them in a bundled range of services across the majority of of exploration assets. Petroamerica has tested just one of the reservoirs and our ducing regions. • ports to Bogota, and from there to the form throughout the region from 2014 or Latin America. •

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 38 - Industry Explorations Industry Explorations - 39 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

pipeline. Within the petroleum sector competition within the petroleum egy was acquiring a balanced portfolio skills and commitment to our operation Admiral we are qualified to work with almost sector, and how are you differenti- Marcela in Colombia, with production and a lot of in Colombia, have been the key to allow all oil companies; we comply with all ated from your competitors? exploratory upside. Some of this came uninterrupted drilling and production Mauricio the requirements of the international First, petroleum companies look at your Vaca from Hupecol’s La Cuerva, which had activities for the last year, at the same oil and gas organization, thus allowing audits from international organizations; steady production of 2,200 boed of light time as we brought Llanos 34 from no Soto us to compete in this complex market. then they see how is your company in Torres crude; Winchester, meanwhile, gave production to nearly 130,000 boed in These companies look for security and aspects such as security, capacity and access to various different blocks with the face of road, facilities, social, per- we, in the last 3 years, have flown more experience. Then, there is the experi- good exploration potential, the best be- mitting and marketing challenges. Executive Vice President than 75,000 hours without an accident. ence of our pilots flying in mountains General Manager ing Llanos 34, which was basically unex- VERTICAL DE AVIACIÓN We are contractors for the Colombian and in complex security areas. Their GEOPARK plored at the time. Infrastructure is a big barrier to government, the petroleum sector and experience is invaluable when we have Since then, we have faced many inter- economic growth in Colombia. we are international contractors for the to deal with difficult places. Although esting challenges: integrating different How much does it come into your US Department of Defense and State petroleum companies coordinate with teams and cultures, getting to know thinking when you investigate new Department. Vertical de Aviación is the government to have security in the and work with new partners (Parex, P1 basins? one of the ten international companies zones where there will be investment, and Pacific) at the same time that we The lack of appropriate infrastructure audited and authorized to work with personnel and cargo, there is always a conducted operations and attracted sea- (roads, ports and pipelines) as well as these US government organizations in need for experienced contractors in the soned professionals in different areas. delays in environmental permitting in Afghanistan, and the only CARB certi- field, and that`s what we are and pro- We also promote young and enthusias- Colombia, jeopardizes investments fied Company for Mi series helicopters vide. tic employees who are willing to grow and therefore the country´s ability to in the world. into different areas. We are now at ap- accelerate exploration and increase its Two of the government’s key prior- proximately 100 people. reserves. Both public and private sec- Currently, which are your main ities are infrastructure and security. tor need to work and invest together contracts, the government or the oil If the government achieves these How important is Colombia now in creating appropriate infrastructure. companies? priorities, how would this affect the within your pan-Latin American GeoPark maintains nearly 200 kms of We have contracts with the government petroleum companies’ demand for portfolio? unpaved roads and is deeply committed supporting the military sector in erad- your services? Colombia is very important, today ac- in contributing to development of local icating cocaine fields; we also provide The government decided to increase counting for at least 40% of the com- infrastructure. support to the military forces in logistic security and increase foreign invest- pany’s EBITDA and reserves; we have I would like to start the interview transportation. We work with the pe- ment in order to increase production in Please provide a brief introduction to ten blocks, of which we operate four, Security is unfortunately still an with a brief summary of Vertical de troleum sector as well, with short-term the mining and oil sectors; these were GeoPark. all in Casanare. Colombia is produc- issue in Colombia. Do potential risks Aviación for our readers. contracts, carrying drills to the fields the 3 great pillars. The fourth was to GeoPark´s has been a history of rapid ing enough revenue for our continued come into your assessment of new Vertical de Aviación was founded 31 and then back; there are no long-term improve infrastructure, which has not growth. It commenced in 2002 with growth and the company has access to basins? years ago to provide services to the contracts anymore because today there been accomplished. With these priori- the purchase of oil and gas assets in additional funding which will allow us Security risks are relevant when look- government, energy and petroleum is more exploration than exploitation ties in mind, we have adjusted our plan- Argentina and Chile. Those assets in- to grow also in Brazil, where we have ing into certain basins. GeoPark recog- sectors in Colombia with a helicopter in the sector with small companies in ning to participate with the government cluded three operated assets in Ar- recently acquired 10% of the coun- nizes there is government support in and airplanes fleet; today we are the the market which prefer to use our he- supporting the oil sector and mining. gentina and a non-operated working in- try’s major gas field, Manatí, and been the more challenging areas, and there country’s fourth largest air transporta- licopters due to the important savings Additionally, to comply with the sector’s terest in the Fell block in Chile, which at awarded seven blocks in the latest bid- is good cooperation between the com- tion company. Vertical de Aviación was they have in time, security and the guar- demands, we are in a process of renew- the time was operated by ENAP. GeoP- ding round. Our portfolio in Chile con- panies operating there. In these areas, the first company to import heavy antee to have the equipment immedi- ing our fleet so we purchased four heli- ark later obtained operation and 100% tinues to grow too, and is now equally there has been a history of institutional equipment helicopters from Russia ately. This works as well for the energy copters this past year. We have 25 heli- interest in this block. In 2006, the IFC, balanced between gas and crude. abandonment and a long industry pres- and today we exclusively fly the Mil sector, transporting towers where there copters and three airplanes throughout a member of the World Bank Group, ence without a corresponding increase Bureau Mi-8 MTV-1 and Mi-171 series is no other way to install those than us- the world: 10 helicopters Mi-8MTV1/ became one of our shareholders, and These high expectations come from in living standards. The geography and helicopter. This type of equipment has ing a helicopter. Mi-171 series are in Colombia, and the we listed our common shares on the your excellent success rate to date. lack of infrastructure certainly do not proved to be a very good choice in a planes are in Afghanistan. We have AIM of the London Stock Exchange. What is the secret behind this? help. However, I believe that basins country with high mountains, inefficient Why are your helicopters better than just one type of helicopter, the Russian Five additional blocks were awarded in GeoPark has achieved success mainly as Putumayo and Caguán will soon roads and security problems. Invest- others for oil exploration? Mi-8MTV1/ Mi-171 series; this is good Chile in 2008, 2009 and 2011, as we es- through its team and culture. Man- develop further and improve its opera- ment in petroleum takes expensive, Our helicopters have a great cargo ca- because it reduces maintenance, spare- tablished partnerships with Pluspetrol, agement, professionals and field op- tional conditions. difficult to replace equipment, so the oil pacity and oil companies need equip- parts and training costs. • Wintershall, Methanex and IFC. In 2010, erational teams have an unusual mix companies prefer to move their cargo ment which moves greater amounts of we formed a strategic partnership with of experience and a strong perfor- If we return in two years’ time, by air means. weight in the least possible time to re- LGI, a Korean conglomerate, to jointly mance-driven culture. As an operator, where will we find GeoPark? duce expenses and the only helicopter acquire and develop upstream oil and GeoPark has the ability to make deci- We will probably have closed more Do companies move personnel by that can do that is the Mi-8 MTV-1/ Mi- gas projects in South America. sions fast and execute timely and eco- acquisitions in the next two years and helicopter? 171 series. These helicopters have a 4 GeoPark looked persistently into dif- nomically in every area: drilling, produc- increase our current production and re- Executives are moved by plane to the tons capacity and today, drills are de- ferent options in Colombia, finally en- tion, transportation and marketing of oil serves. We may begin to invest in the fields; helicopters move cargo and sup- signed to weigh approximately 4 tons. gaging in negotiations with Winchester and gas. As consolidator, GeoPark has midstream system as a mechanism to port personnel. For example, Vertical de Oil and Gas, La Luna and Hupecol and the experience to assemble the right guarantee evacuation of our crudes. Aviación had an important participation Is there competition in the market acquiring three companies in the first asset mix, with the right partners at the GeoPark prefers to operate, but we are in the construction of the Colombian oil with other companies? How is the quarter of 2012. Geopark´s growth strat- right price. People, culture, exploration also good non-operating partners. •

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 40 - Industry Explorations Industry Explorations - 41 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 ANALYSIS Global Business Reports Global Business Reports EDITORIAL

tremely happy to be in Colombia, the BOLSA DE VALORES DAILY AVERAGE VOLUME AND A Place Like Home: country has opened its doors to us and DAILY AVERAGE NUMBER OF TRANSACTIONS Paying for Source: BVC we feel privileged to work here. When we Expelled PDVSA staff become a integral NUMBER OF TRANSACTIONS AMOUNT (IN MILLIONS OF PESOS) are in Colombia’s Llanos Basin, we feel at Progress 5000 280,000 part of Colombia’s hydrocarbon growth home, it is the same Llanos as Venezuela, the same environment the same people. 4500 We would like to contribute to the devel- 240,000 4000 opment of Colombia, we are establishing a

200,000 Simultaneous political shifts in neighboring Venezuela and Colombia have lead to vastly maintenance, logistics and training facility 3500 Financing Colombia’s oil and gas projects differing fortunes for the two South American nations’ oil and gas industries. in Puerto Gaitán, among the big producers of the Llanos Basin. Our focus will be to 3000 160,000 provide training for Colombian technicians 2500 BOGOTÁ, COLOMBIA – “I don’t have “Colombia has absolutely benefited from working with heavy oil in the Llanos Basin, 120,000 any problems firing everyone I need to Venezuelan human capital on every level. giving Colombia the best chance to take 2000 fire,” declared Venezuelan President Hugo In 2003, the expulsion of all executives this opportunity to improve its human tal- 1500 Chavez in 2002, during his sanctimonious from the Venezuelan state oil company def- ent and increase production,” declared Ing. 80,000 mission to rid the oil-rich nation of corrup- initely resulted in the export of expertise Eduardo Enrique Rivodó, the Venezuelan 1000 Financing varies with the type of tion. Within months almost 20,000 petro- to Colombia. Pacific Rubiales was the icon founder and CEO of Industrial Consult- 40,000 “company. A large, national company leum engineers, geologists and managers of Venezuelan human capital, becoming ing Group, experts in commissioning and 500 like Ecopetrol is able to get financing had been forcibly removed from Petróleos the largest private producer in Colombia start-up of hydrocarbon wells and facilities. from local investors but international de Venezuela, S.A. (PDVSA) the state oil and capitalizing on Venezuela’s experience It should be noted that the spirit and busi- 2006 2007 2008 2009 2010 2011 2012 2013 2014 companies, which are not permitted to company. Within a few years Venezuela in heavy oil. Pacific Rubiales has enjoyed ness acumen of the Colombian people has finance directly in the country, channel had tumbled from its position as the a rate of success more than double the been the single most important factor in their money from the home office to world’s fifth largest oil producer to a rela- country’s average of around 30%: it is a the growth of their hydrocarbon industry ISSUERS WITH LARGEST STOCK EXCHANGE CAPITALIZATIONS Source: BVC local branches, which are regulated tively unassuming 11th place. great success story,” explains Dr. Alberto and their economy as a whole. It is also separately. A lot of investment is made Meanwhile, in neighboring Colombia, Cisneros Lavaller, CEO and president of that business acumen and welcoming na- available to the oil and gas sector from 2002 saw the appointment of President Venezuelan-based Global Business Con- ture that has allowed for Colombia to cre- ECOPETROL S.A. the international community. For exam- Álvaro Uribe. Under Uribe’s political slo- sultants. ate an environment in which their expelled GRUPO AVAL ACCIONES Y VALORES S.A. ple, there are many Canadian compa- gan “firm hand, big heart” he ordained As Cisneros states, Colombia’s largest cousins can find opportunities while simul- BANCO DE BOGOTA S.A. nies here in Colombia that receive their the US-backed military offensive against private producer Pacific Rubiales Energy taneously aiding economic growth. financing from their parent companies. rebel groups which had kept the coun- Corp., second in production only to state 10 years on, given the demise of BANCOLOMBIA S.A. try in the grips of civil war since 1964. oil company Ecopetrol, is the prime ex- Venezuela’s hydrocarbon industry and the GRUPO INVERSIONES SURAMERICANA ample of this transfer of expertise. “The passing of the iconic leader Hugo Chavez, In what was widely considered to be a GRUPO ARGOS S.A. great victory for the nation, Uribe’s tactics top management of PDVSA is now the a new question stands. What would hap- brought huge areas of the country back top management of Pacific Rubiales,” said pen to foreign investment in Colombian oil EMPRESA DE ENERGIA DE BOGOTA S.A. E.S.P. - Hector Palomino, Associate, under the control of the government, si- Ronald Pantin, the chief executive and and gas if the situation in, vastly more oil ALMACENES EXITO S.A. Deloitte multaneously opening them up for oil and founder of the company and a former high rich, Venezuela were to reverse? COP$ 10 20 30 40 50 60 70 80 90 100110 120 130 3.0 140 150 gas exploration. executive at PDVSA. “All the people we “I can only speculate, but Venezuela has millions These two independent political shifts brought from Venezuela have more than certain problems and is therefore quite in neighboring northern South American 25 years of experience, so people with a likely to open up more strongly. It would nations were to have unforeseen con- huge knowledge of all this geology.” be very difficult to completely reverse the MOST TRADED STOCKS OF THE YEAR (IN COP MILLIONS) ” sequences, largely for Colombia and its While Venezuelans may be exercising process that has taken Venezuelan experts Source: BVC small oil and gas industry. Venezuela’s huge control within the Colombian oil and to work all around the world. It is likely, exodus of highly skilled petroleum ex- gas sector, their benefit to the nation as a however, that improved investment con- ECOPETROL ploration and production expertise saw whole is undeniable, Pacific Rubiales, for ditions in Venezuela would attract foreign Oil and gas companies active in Colom- PREC workers spread around the world, from example, employs more than 12,000 work- capital, know-how and specialized human bia have traditionally looked to raise the US to Saudi Arabia to Nigeria, but ers, directly and indirectly. resources. It is likely that companies, PFCEMARGOS capital abroad. Colombian investors are for many, the opportunities lie just next Venezuelan influence is across the board rather than particular individuals, would ISAGEN not used to the volatility and risk asso- door. Colombian hydrocarbon production for oil and gas. Not only have explo- then flow back to Caracas to invest, be it ciated with the oil and gas sector and CEMARGOS in 2005 sat at approximately 500,000 bar- ration and production companies grown from Colombia, Argentina or Saudi Arabia,” the banking sector is still to develop rels per day (boepd): in December 2012 and benefited from the imported exper- suggests Dr. Lavaller of Global Business EXITO the expertise and the advanced financ- Colombia reached a landmark 1 million tise but Venezuelan entrepreneurs have Consultants. PFAVH ing mechanics we see present in more boepd, a staggering increase by anyone’s helped build Colombia’s hydrocarbon Even if such a reverse were to happen GRUPOSURA mature resource based economies. It standards. Coupled with the Colombian service sector. Colombia has welcomed Colombia’s hydrocarbon industry would is difficult to remedy this quickly, how- government’s success against rebel Venezuelan expertise with open arms and without doubt be in a better position than PFBCOLOM ever the Colombian government has groups, the transfer of human capital those Venezuelans are committed to their they were 10 years ago having grown pro- CLH implemented some innovative strate- from Venezuela has undoubtedly been a adopted country’s growth. duction, established local expertise and gies to make financing easier for for- COP$ 50 100150 200 250 300 350 400 450 500550 600 650 700 750 800 key factor in the industry’s success. “I am originally Venezuelan but I am ex- educational programs. • millions eign companies.

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 42 - Industry Explorations Industry Explorations - 43 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 Global Business Reports Global Business Reports INTERVIEW

“In the early 1990s, when the government was tablished their own tax practices just government has created a window for putting a renewed focus on the oil and gas sector, Carlos as we offer in-house legal services. The tax purposes. If a client has a branch they realized that this was going to be a multi-million market is very intense and the people in Colombia, the parent company in dollar industry,” explained Carlos Miguel Chaparro, Miguel that work in these fields are very knowl- Calgary, for example, would borrow in partner and oil and gas tax leader at PwC. “With edgeable. Having said that, PWC has a the home country to fund the branch’s Colombia’s small currency market, they understood Chaparro very strong presence in the oil and gas operations. The parent company would that the foreign exchange market would be in a state sector; our market share represents then send the money to the Colombian of chaos if companies were regularly bringing in cash 30-40%. On the audit side, we have a branch as equity because you cannot to the country to fund their operations. To protect Mining & Tax Leader, Colombia strong client base and on the advisory push down debt. At the same time, this the foreign exchange market, the government re- PWC side we are very successful in project parent company is continuing to pay in- stricted the E&P companies from borrowing outside management and business restructur- terest to the bank in Canada where the of the country and making cross border loans. Conse- ing with the big players. In the tax and loan was taken out. What the Colom- quently, most of the project finance that I have seen legal area we also have a strong pres- bian government has done is allowed in Colombia is done locally, as borrowing within the ence, with over 60 clients across the in- interest to be pushed down for tax country is not an issue. But 95% of the companies dustry, from E&P’s to service providers. purposes only. This is an interesting de- fund their operations in a different way as the gov- velopment for project finance because ernment has created a window for tax purposes. If a What are the biggest challenges that companies are able to push down this client has a branch in Colombia, the parent company new entrants to the market face? expense; however, the restriction on in Calgary, for example, would borrow in the home What companies do care about is rule cross-border loans from a central bank- country to fund the branch’s operations. The parent changing because, with any long-term ing perspective will probably remain. company would then send the money to the Colom- investment, it is difficult to establish a Another benefit that companies have bian branch as equity because you cannot push down business model that will change in two here in Colombia is that they can repa- debt. At the same time, this parent company is con- years when a new tax law is passed. triate money at any point as long as it tinuing to pay interest to the bank in Canada where I believe that one of the key rules that meets reporting requirements. This is the loan was taken out. What the Colombian gov- Colombia lacks, which other countries significant because while in many coun- ernment has done is allowed interest to be pushed offer, are grandfather rules; meaning tries injecting equity is never an issue, down for tax purposes only. This is an interesting that you will retain the tax benefit that taking it out can be. And so, we see development for project finance because companies you enjoyed when you first came to that while borrowing debt can present are able to push down this expense; however, the re- Please provide us with an introduc- the country, irrespective of the tax law a challenge, companies can benefit on striction on cross-border loans from a central banking tion to PWC and the services that changing, thereby offering a form of the equity side of things. perspective will probably remain”. you provide in Colombia? protection to investors. Meanwhile, as the traditional capital markets, such as PWC has been in Colombia for 60 years If we come back in 2015, where will the TSX, continue to struggle through this period of and the main areas of practice we offer How do companies typically fund we find PWC? slow financing, there lies an opportunity for Colom- include audit, advisory, outsourcing, tax their oil and gas operations in We see that we need to keep building bia’s own stock exchange, the Bolsa de Valores (BVC), and legal, and human talent. We also of- Colombia? Is local project finance on our momentum and what we are to supplement such funding. “We still believe that fer what we call a value chain proposi- becoming more popular? mindful of is that the government is there is opportunity for capital raisings in the Colom- tion in which we provide investors with While project finance has traditionally making changes on three fronts that bian market for this industry, especially for compa- the right solutions from the beginning not had a strong presence, we see that would affect our clients; the tax free nies that are further established with predictable as they are looking into establishing this is changing. In the early 1990s, network, free trade agreements and cash flows as opposed to venture companies,” says operations in Colombia, to running the when the government was putting a investment protection agreements. We Juan Pablo Córdoba Garcés, president of the BVC. business and then exiting. Within the renewed focus on the oil and gas sec- expect that these changes will encour- “We have made a lot of headway with the four oil and energy practice, we have an energy tor, they realized that this was going to age more companies to do business gas companies that are currently listed. These listings country leader, a mining leader, and an be a multi-million dollar industry. With here in Colombia and we plan to be have given investors, analysts and brokers the oppor- oil and gas and mining tax leader. I per- Colombia’s small currency market, they prepared for when they arrive. • tunity to get involved in an industry that was relatively form the latter two functions and have understood that the foreign exchange small five years ago. A lot of progress has been made been doing so for the last eight years. market would be in a state of chaos if in terms of financial knowledge within the oil and gas The oil and gas industry is very signifi- companies were regularly bringing in sector; we better understand the drivers of this field cant to PWC’s operations in Colombia cash to the country to fund their oper- and how to analyze these companies. There is more and we have invested a great deal to ations. To protect the foreign exchange to be done, but we have made significant progress”. make sure we have aligned our practice market, the government restricted Pacific Rubiales Energy, Petrominerales and Canacol and services to the current economic the E&P companies from borrowing Energy have taken the step to dual-list; they join na- situation in Colombia. outside the country and making cross tional oil company Ecopetrol to make up about 40% border loans. Consequently, most of of the index in Colombia. If these pioneering com- How would you describe the market the project finance that I have seen panies continue to find success on the Colombian for the services that you offer? in Colombia is done locally as borrow- exchange, we are sure to see more firms list on the The market is very competitive not only ing within the country is not an issue. BVC and Colombian investors gaining confidence in across the big four, but also across law But 95% of the companies fund their the oil and gas sector. • firms as well. Many law firms have es- operations in a different way as the

Industry Explorations Industry Explorations - 45 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 Revving Up or Out of Steam: Colombia’s Mining Locomotive Chugs Uphill

“Colombia is very undeveloped; there is a great deal of exploration potential in this country that gives companies the opportunity to have an impact in the development of the sector. Colombia has a lot of things to offer, with port access on both the Atlantic and Pacific coasts being a major bonus. There are internal infrastructure challenges, but the geographic location of Colombia is a huge advantage that no other country has. These points of transportation make Colombia a very strategic hub for any company that may want to start a base of operations not only domestically, but also regionally.”

- Olga Fernandez de Soto, Executive Director, Canada-Colombia Chamber of Commerce

Image: Continental Gold EDITORIAL Global Business Reports Global Business Reports FACTSHEET

95% of these applications were sub- Despite President Santos’s directive development paths at the national GLOBAL NICKEL PRODUCTION AND RESERVES (in mt) Unclogging the sequently rejected, this did not deter for mining to be a part of the country’s and departmental level, the cliché that Source: USGS companies from expressing interests national development, mining compa- all politics is local certainly holds true Backlog in the country. When the window for nies are receiving mixed signals from in Colombia. Anglogold Ashanti’s La COUNTRY 2011 PRODUCTION 2012 PRODUCTION RESERVES new applications reopened in June government agencies as they seek Colosa project has met a myriad of on- Australia 215,000 230,000 20,000,000 Botswana 26,000 26,000 490,000 2013, after a two-year hiatus to sort to go from titleholders to developers. the-ground opposition, which has ef- Brazil 109,000 140,000 7,500,000 through the backlog, the ANM received Chief among these mixed messages fectively stalled the project. Meanwhile Canada 220,000 220,000 3,300,000 some 2,200 applications for new min- is the Ministry of Environment’s de- other projects that have not met such China 89,800 91,000 3,000,000 Colombia’s mining industry ing licenses on the first day. “Getting cision to exclude 21 million hectares, widespread opposition, such as Con- Colombia 76,000 80,000 1,100,000 the ANM up and running has been a approximately 25% of Colombia’s ter- tinental’s Búritca project or Minatura’s Cuba 71,000 72,000 5,500,000 challenge not only from an infrastruc- ritory, from extractive industry activity. alluvial production, have received the Dominican Republic 21,700 24,000 970,000 ture point of view, but also in dealing On a similar note, the Ministry of Envi- required permits. “When a mining Indonesia 290,000 320,000 3,900,000 with the backlog of applications. We ronment has also forbid mining in the company is coming to Colombia they Madagascar 5,900 22,000 1,600,000 are working to establish a baseline for páramo ecosystems of Colombia, yet should understand that they are guests New Caledonia 131,000 140,000 12,000,000 Philippines 270,000 330,000 1,100,000 the industry that is more on par with the exact parameters of what consti- in this country. Extraction activity di- Russia 267,000 270,000 6,100,000 other more established mining jurisdic- tutes a páramo, generally defined as a rectly affects local communities, and South Africa 44,000 42,000 3,700,000 tions. This requires stronger processes. high altitude tropical ecosystem above therefore foreign companies must have Other countries 103,000 120,000 4,600,000 We are working on enforcing these and the timberline, are not clearly delin- a clear understanding of the rules and TOTAL 1,940,000 2,100,000 75,000,000 improving inter-institutional coordina- eated. For many mines in the promis- regulations. The mayor is normally the tion, but this takes time,” said Carolina ing Santander department, this has led chief of the community and holds keys Delays in permitting and confused Rojas Hayes, promotions manager of to an indefinite delay in the environ- to facilitating all the processes for the ing regulation had taken a backseat to coordinate all these ministries who see regulations are a miner’s greatest the ANM. mental approval process. mining companies,” said David Arce, more pressing matters. Now, Colom- each other as colleagues and cannot bane in Colombia. In 2012, the govern- While unclogging the bureaucratic bot- In addition to the lack of clarity from president of Arce Rojas Consultants, a bia is experiencing the growing pains direct one another around. There has ment established the National Mining tleneck at the ANM has made signifi- national agencies, the presence of re- legal-based consulting firm. of regulating a complex industry. “We been progress in the last three years, Agency (ANM) under the authority of cant progress, the principle criticism gional and local governments with dif- For a country that has come back from are at the stage where the different but there needs to be a bit more con- the Ministry of Mines and Energy to amongst industry leaders is a lack of fering agendas only further complicates the brink of failed state status and ministries are still figuring out how the sistency from the government,” said sift through a backlog of some 19,000 coordination between the different the country’s regulatory dynamics. As become a thriving economy in a gen- gears fit together. What we are cur- Mark Moseley-Williams, president and mining applications. Although about government stakeholders in mining. companies try to navigate the opaque eration, it is understandable how min- rently missing is someone to lead and COO of Continental Gold. •

Colombia is very undeveloped; there is Colombia has major potential for its “The major mining companies generally a“ great deal of exploration potential in “mining future. The government is talking “have health, safety and environment this country that gives companies the about $22 billion in investment over the standards, but there is a lack of essen- opportunity to have an impact in the de- coming years, but there are some obsta- tial dialogue between mines and com- velopment of the sector. Colombia has cles to overcome before we can realize munities… Mining is both capital and a lot of things to offer, with port access this. The government needs to make labor intensive, whereas oil is primarily on both the Atlantic and Pacific coasts the licensing process more straightfor- capital intensive and jobs tend to be being a major bonus. There are internal ward. We cannot convince companies very technical. Therefore mining has a infrastructure challenges, but the geo- to invest in new projects and products if greater impact on communities because graphic location of Colombia is a huge they do not have the freedom or release it creates more local employment. One advantage that no other country has. from the government for exploration and of the key principles that Equitable These points of transportation make exploitation. There are many restric- Origin has is an analysis of the complete Colombia a very strategic hub for any tions on investment in Colombia in this lifecycle of a project. Companies need company that may want to start a base regard, but we are hopeful for this to to recognize there can be substantial of operations not only domestically, but change as the government responds to benefits to the community if you ana- also regionally. them. lyze the impact of the entire lifecycle of the project. This can allow there to be a sustainable plan in place after the mine site has finished production.

- Jerry Jones, President and CEO, - Ricardo Gil, Gerente Division, - Stephen Newton, CEO, Duralite Diamond Drills Rexroth Equitable Origin

COLOMBIA EXTRACTIVE INDUSTRIES 2014 ” - 48 - ” Industry Explorations” Industry Explorations - 49 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

window for applications last July 2nd develop their properties in tandem with When president Santos announced that extraction indus- Carolina Rojas with a new system for registering title these companies. David Arce Rojas tries were locomotives of development in the country, requests that offers more transparency We must also make a distinction be- some people in the industry said that mining became a par- Hayes Soto to the process. tween illegal and informal mining. Infor- ticular target for NGOs in Colombia. In your view, what is Another big project has been to audit all mal miners have existed for a very long the influence of NGOs in community relations in Colombia? of the currently existing mining titles, time. If they can prove that they have In Colombia there are many NGOs dealing with different issues approximately 9,700 of them. For the had running operations in a designated such as human rights, environment and wildlife protection. Like first time in many years, the national area, we will work on helping them. in any country, there are good NGOs and there are bad NGOs. Director of Investment Promotion government was able to revise every Illegal miners are also present and of- President These organizations have interest in the country’s problem and AGENCIA NACIONAL DE title and understand how and where ten operate in conjunction with rebel ARCE ROJAS can provide support. Social responsibility is a serious problem in MINERIA (National Mining concessionaries were complying—or groups, putting them under the purview CONSULTORES Colombia because many problems need to be addressed, while Agency) not complying—with the requirements. of the police and Ministry of Defense. the government does not have the financial means to help with This is part of our goal of achieving best that. practice standards across the industry. How do you plan to avoid another One of the main concerns in the mining industry in Colombia bottleneck in applications as you What differentiates Arce Rojas from other consul- is the discrepancy between the national government and local Stakeholders in the mining industry reopen the register to new ones? tancies or law firms in the mining and oil and gas authorities, especially in the environmental domain. How much have spoken about the opportunity We have established a 180-day time- industries? discrepancy do you see between the laws made in Bogota and the ANM provides to get Colombia’s line to resolve applications and are try- Arce Rojas was born as a law firm 16 years ago, but to- their enforcement? mining legislation correct; what influ- ing to stick to this. We were prepared day we are more than this. We provide legal advice to There is not that much discrepancy, because the government is ence do these stakeholders have in for a much larger bottleneck than the mining, oil and gas, transportation and infrastructure able to explain properly to the companies all the requirements. developing the policies that govern 2,000 applications we received the first industries. Within our team, we have many engineers However, in relation to environmental licenses there are two the sector? day. The declining price in minerals and who help companies understand how to adjust a persistent problems. There is a real problem with regards to how The agency has a very good relationship strengthening of our institutional proce- project to Colombian standards. Arce Rojas can man- long this process takes, due to the fact that many applications both with mining associations that rep- dures and legal requirements has led to age very well companies’ interactions with local com- are submitted at the same time the government does not have resent most mining titles and with the a more careful consideration of appli- munities and authorities. We provide our clients with enough staff and expertise to deal with all of them at once. • private sector. Our goal is to keep the cations before submission. We would solutions and help them to establish their business best interests of the country in mind rather have fewer applications that fol- in Colombia, incorporating international branches, and by responsibly increasing production of low our code than many which are not managing corporate issues with Colombian govern- Please provide us with a brief minerals. We must ensure that royalty up to par. ment agencies etc. The unique feature of Arce Rojas overview of the progress ANM has structures are competitive but also en- in contrasts with other law firms is that we provide so- made in the past 18 months as it has forced to ensure that communities see Is the Santos administration deliv- lutions to our clients in the field, including ports, build- sought to replace Ingeominas as the and enjoy the benefits of the industry. ering on its promise to develop the ing infrastructure and exploration. We are the only law mining title authority of Colombia? industry? Why should companies put company in Colombia to receive ISO 900 accreditation Since 2012, when the ANM was offi- There is a large informal mining sec- increasingly limited resources into in the process of acquiring and managing the superfi- cially launched, there has been a great tor that has developed in Colombia, Colombia? ciary rights and the components of as the legal back- deal of progress in strengthening the especially with the rise in gold prices People tend to underestimate the work ground and the cadastral information of the premises. mining institution with both changes in over the past several years. Is there a that has gone into reforming the indus- the structure and innovation in mining plan to bring these miners within the try from a government perspective. Get- Do you agree with the following assessment procedures. This is why the Agency was formalized processes the govern- ting the ANM up and running has been ‘the most important person in the mayor’ when structured with three vice presidencies, ment is setting out? a challenge not only from an infrastruc- a company is trying to develop an extraction each one in charge of the main tasks of Informal mining is one of the biggest ture point of view, but also in dealing project’? the renewed authority, including one challenges we have to deal with moving with the backlog of applications. We are When a mining company is coming to Colombia they in charge of granting contracts, one in forward. There is a department at the working to establish a baseline for the should understand that they are guests in this coun- charge of auditing mining title’s obliga- Ministry in charge of the formalization industry that is more on par with other try. Extraction activity directly affects local commu- tions and one in charge of promoting process and we are in the process of more established mining jurisdictions. nities, and therefore foreign companies must have a and developing the industry. We estab- institutionalizing standards for contracts This requires stronger processes. We clear understanding of the rules and regulations. The lish contact with investors and deal with between big title owners and informal are working on enforcing these and im- mayor is normally the chief of the community and issues regarding sustainable develop- miners that own small titles so that they proving inter-institutional coordination, holds keys to facilitating all the processes for the min- ment of the mining sector, as well as can share the responsibilities and prof- but this takes time. ing companies. Therefore, I absolutely agree with this helping small and medium scale miners. its of mining in Colombia. It is difficult Colombia as a whole has a great deal statement. Over the past 18 months, one of our to ignore the fact that families often de- of potential. Most of our land remains People in the mining and oil and gas industries can be biggest challenges was to solve an in- pend upon mining incomes, even when unexplored, and falling along the same very pretentious and arrogant and have little respect herited backlog of 19,000 mining title re- informally established, so the goal is to geological lines as Chile and Peru means for local community or nature. But it is the locals who quests, some of which dated back to the educate them about the correct proce- that we can expect similar statistics to know the land and the nature. Mining companies 1960s. Between February 2011, when dures and work with them to achieve full those places. There is also a govern- need to respect the people and the local environment. title registration was closed, and July of compliance. We want small title owners ment that is open and willing to do For example, this year there were over 300 strikes in this year, we were able to resolve 90% to benefit from the knowledge bigger things properly to make projects come Colombia because there is very poor management of of these applications. We reopened the companies have through contracts to to fruition. • those relations.

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 50 - Industry Explorations Industry Explorations - 51 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

more on providing technological and for this year, but we must remember economic study done on Buriticá and will from a problem of not having high Hans B support services to potential clients. that Colombia faced severe delays in Mark be the catalyst for a construction decision enough grades to attract the interests The government monopoly, legal and its development because of security and financing so we are hoping for very of investors or is it more a matter of Kulp financial restrictions put in place limit concerns, which lasted a good 20 to 30 Moseley- robust results: i.e. very strong cash flow country risk? our client base to the larger, more es- years. It is only in the past decade that with a good rate of return. For a good PFS If you look at the profile of the projects in tablished coalmines. Considering the things have been looking up. We are Williams we need a solid measured and indicated Colombia to date, many of them are lower presence of smaller mining houses and running behind, but we have a proactive resource, so we are in the process of con- grade deposits. There are some good ex- their inability to comply with such strin- government now. Chile did not suffer the verting inferred resources to measured amples of producers turning a profit with General Manager gent regulations, Colombia is a promis- same setbacks we did, and their industry President and COO and indicated resources. Along with this, lower grade deposits, however, it is dif- EXSA COLOMBIA ing but difficult environment in which to is thriving; we hope we can follow suit. CONTINENTAL GOLD we are advancing the engineering and de- ficult for a junior to attract interest and operate. Therefore the real challenge is Dredging the Rio Magdalena will improve sign work for the mine and are working on develop mines with lower grades in this to improve the efficiency in this specific things here. The real vehicle for growth submitting our final environmental license market. industry and facilitate the process of le- will not just be mining, but all of the in- by the end of 2013. We expect this will Although Colombia has had mining for galizing the operations. frastructure projects being undertaken take about a year or so for the local en- many years and has an established base to improve accessibility and functionality vironmental authorities to review. Ideally, metal industry, it can still be considered What sort of contribution can EXSA around the country. by early 2015, we want to have our PFS new to precious metal mining. The gov- make to the Colombian economy and completed and an approved environmen- ernment sees the potential of the mining mining sector in the coming years? Looking at the sector in particular and tal license amendment in hand. industry. That is why President Santos For the next three years, we are focused your business, you mentioned the gave the clear directive for mining to be on creating a major agreement with the early plants were set for coal compa- How has Continental maintained a a locomotive for development. However government for a production site that will nies. Is coal still the future or is there strong financial position and managed taking a locomotive that has been sitting likely be located along the northern part demand elsewhere? to keep raising capital despite the idle for fifty years and getting it greased of Colombia’s coast. We plan to invest In general, coal is here to stay. The prices difficulties most companies on the TSX up and running again at full steam takes around $7 to $10 million dollars in ensur- are low compared to a few years ago, are currently facing? a long time. Mining, unlike some other ing that our facility and its capacity are but at the end of the day, the whole in- Continental raised $86 million at 9.55 per industries, requires the coordination of up to par with the demand that a number frastructure and long term contracts will common share in December 2012. We many government ministries, beyond just of projects coming online in that region allow coal companies to keep produc- have since been affected by the down- the Ministry of Mines and Energy and the will require. This should both allow us to ing. The mining locomotive is now just a turn, but we have always been of the Ministry of the Environment. We are at EXSA has a strong presence in Peru; compete very reasonably in the market smaller train. It is working but it is not What do you see as the major mile- idea that a junior mining company needs the stage where the different ministries what lay behind the decision to enter and open it up significantly to improved pushing ahead as it was projected yet. stones for Continental Gold since our to have a strong cash position because are figuring out how the gears fit together. the Colombian market? planned delivery systems, state-of-the- It is not going to stop; it’s just floating report on Colombia in 2011? downturns do happen. As of August 2013, We have seen real progress in the last EXSA does have a very strong presence art equipment and higher safety stan- and the initial growth from 70-80 million Continental Gold has continued to aggres- we had a cash position of about $130 mil- three years as we have worked with the in Peru; 2014 will mark 60 years of op- dards. mt to 140 million mt in three four years sively drill at our Buriticá resource and we lion, expect to finish the year with $120 various ministries in moving Buriticá for- erations there. Over the past two years, that was predicted is not going to hap- have significantly grown this resource million and our preliminary 2014 budget ward which included successfully amend- we made a strategic decision to diversify As you plan to invest in Colombia, pen. With some good management and over the last three and half years. We ex- plan will leave us with a worst-case sce- ing our environmental license. from just Peru and acquired companies how much of this will be focused on some reasonable prices, Colombia will pect a resource update by early 2014. The nario of $60 million in cash at the end of in Brazil and Panama. Last year, we de- production and how much will be have about 100-110 million mt of coal external markets are a lot more challeng- 2014. In your view is the Colombian mining cided to invest in Colombia as well; it focused on expanding your service in the best case, but no huge increase ing now than they were three years ago. industry stalled as others in the indus- looks to have a strong future with the offering? in production. That locomotive for coal Colombia is largely a greenfield explo- As Continental feels some of the try have said various investments in mining and en- The better part of our investment will go is very slow. The same for bigger gold ration market and the exploration budgets effects of the downturn, how can you In my view, we are moving full steam ergy infrastructure that are underway at to equipment and technology to improve mines like AngloGold Ashanti, etc. We are usually the first thing to be cut when balance the need to create short-term ahead. Our experience with the Colom- the moment. The initial investment was our service offering. There are still some see a reduction of the gold price now markets slow down. Although the market value with Continental’s long-term bian mining industry has been positive. motivated by our regional expansion restrictions in Colombia for dynamite use and for 2014 and 2015 they are reducing is tough, there are still several projects interests to shareholders? We successfully amended our environ- plans and to build up our market share and production, which comes from a his- their budget by 50 million per year. Those that are being advanced, albeit at different The market determines so much of short- mental license in 2012 in a five month pe- for explosives in Latin America, and tory of security concerns. We have de- are one of the show off projects with rates, and as our CEO Ari Sussman said in term value; I believe the way we can con- riod and continue to enjoy a positive work- Colombia proved a very interesting mar- veloped new forms of dynamite that are the potential to see open pit gold mine Global Business Report’s 2011 story, Con- tinue to deliver value is to keep advancing ing relationship with various Colombian ket for this purpose. very much like an emulsion and are not with nice reserves in Tolima, and this is tinental Gold is still on track to building the the Buriticá project. ministries as we move towards building as dangerous as they used to be, making probably going to start in 2017 or 2018. first modern gold producer in Colombia. In World class, high-grade assets like Bu- the first modern gold mine in the country. As compared to your other regional them safer and more efficient to under- This will delay our business plan a little March 2013, we also integrated thirteen ritica will generate value over time. It is The reality is that mining takes a long time operations, what comments can you ground operations. bit. Looking at coal in the long term in separate exploration licenses into a sin- a bit of a cliché but grade is king. Espe- and this is a normal progression. Some make on the Colombian market as a Colombia, it is important to note coal is gle, 30-year exploitation license. cially when there is a downturn in a mar- companies that are idling right now are business jurisdiction? The past year has not been the best supposed to overtake oil by 2020 as the ket, high-grade mines can afford taking facing the market realities, while others Colombia has a very specific situation. for the mining industry across the most used field source in the world. • Your prefeasibility study (PFS) for a hit versus low-grade mines. No matter have stepped out because their projects The government here controls the vast globe; why should companies put Buriticá is due out in 2015. What are what happens to gold price, a high-grade are simply not feasible. That is part of the majority of the explosion production and increasingly limited resources into a some of your expectations for the project can deliver value. risk of the junior mining industry. There sales market; there is space for other country like Colombia? PFS and how will it move Continental are companies that are struggling and players, but the competition is scarce. The potential for growth here is per- forward? Are the gold juniors in Colombia who have stalled, but the groundwork is being This means that the focus here remains haps not what the government forecast Our prefeasibility study will be the first are currently struggling suffering put in place and this takes time. •

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 52 - Industry Explorations Industry Explorations - 53 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

for Colombia is to keep good conditions role in determining whether or not the latory difficulties coupled with social and our country; our potential will undoubt- Claudia for attracting mining investments. New government’s directives are enforced. Jose Vicente environmental issues n these sectors. edly be developed sooner or later. The institutions are being built in order to Mining has a significantly high potential issue is how does government create a Jiménez assist foreign investment and in the fu- One of our interviewees commented Zapata in Colombia and if it were not for the definition of what it is effectively support- ture they will play a key role in support- that the ‘mayor is the most impor- lack of clear regulations and undefined ing. When government keeps silent as to Jaramillo ing the growth of the mining sector. tant person in advancing a mining environmental and social components whether it supports mining and oil and project’. Do you agree with this mining would be significantly developed gas, it slows investment. Countries are In terms of Colombia’s institutional statement? in Colombia. competing for investment and this lack Director development, many cite the ANH as Even if mayors do not have the func- Partner of definition of mining’s role in the coun- SECTOR DE LA MINERIA DE a model for the evolving ANM. Do tion of approving or prohibiting a partic- SUAREZ ZAPATA PARTNERS How would you rate the progress of try’s future is hurting our competiveness GRAN ESCALA (Association of think it is possible to compare ANH ular economic activity, it is impossible ABOGADOS the ANM in its first year? How apt vis-à-vis other countries. Large-Scale Mines) with the creation of ANM? to have a successful mining project if is the common comparison made ANH and ANM are entirely different or- there is no harmony between the min- between the ANM and the ANH? In your view, what main challenges ganizations. ANH has been around for ing company and the mayor. Political The oil and gas framework has been does the mining industry need to 10 years and governs the oil sector in and environment harmony is crucial. helped by the creation of the ANH. The overcome in the next two years to a way similar to that of organizations in If the local authorities do not support ANH was formed when oil and gas was reach its potential? France and the UK. ANH has a lot of the project, it will not progress. Min- being redefined in Colombia, while the The first thing is what I call a lack of har- good experience, while ANM was born ing companies have to do a good job National Mining Agency (ANM) is sim- mony between four different factors: the only a year ago and it took more than in explaining in detail the nature of ply a change in name of the previous timeline of titles vis-à-vis the timeline eight months to kick-start this organi- the project, as it is often the case that agency, Ingeominas. Therefore, the of environmental permits vis-à-vis the zation. Colombians simply do not understand ANM is still plagued by the same tra- timelines in environmental permits vis-à- Colombia has been experiencing an oil the mining industry. The initial reaction ditional problems that it [Ingeominas] vis the timelines in regulations vis-à-vis boom since 2008, but the same cannot of the public is very negative towards suffered before. There is this Latin tra- the defacto timeline of the operations. be said about mining. What we have mining activity, but this is because they dition to regulations in Colombia: it is In essence this means matters are not in mining is great expectations: firstly do not know about the benefits such the belief that paper solves problems. fitting together correctly. For example, because Colombia is a more stable as improving infrastructure, access to It is not an ANM or ANH problem, but companies are expected to drill in a country, secondly, because our econ- electricity, creation of jobs, technology rather a problem of the definition of the timeline that does not allow for consul- omy has been managed better. Thirdly, improvements and construction of ad- administration of the entities. As entities tation with ethnic communities, which What are the objectives of Sector de we have a huge known potential. In ditional structures. This is the fault of Please begin with a brief overview of get stronger and more robust they will then puts them in a position of breach- la Mineria de Grana Escala? 2010, we only knew about 48% of the the mining industry, because they do the services Suárez Zapata & Partners ultimately strengthen the institutions. ing their contracts, or an environmental In 2010 a group of mining companies geological composition of the country’s not do a good job communicating this provides to the mining industry? When you have better institutions, the license may take more time to acquire decided to create their own association, territory, today we know 53%. to the public. Suárez Zapata & Partners is a boutique system works. The ANM is trying to copy than thought. So companies are always Sector de la Mineria de Gran Escala to law firm dedicated to oil and gas, min- the success of the ANH, but unlike the asking for more time because the syn- focus on the needs of the industry and Colombia’s mining sector received Do you think mining became a ing and environmental matters. In these ANH it did not start from scratch. Thus chronization is lacking from government yield on the very optimistic and high close to $ 2.5 billion in Foreign target for NGOs and the guerilla industries we cover all services a client many aspects that were lagging from its agencies. The second thing is the ef- expectations of growth that prevailed Direct Investment (FDI) in 2012; how groups that oppose mining fol- could need, with the exception of crim- previous organization are still present. fectiveness of the rule of law; everyone in Colombia at the time. Sector de la much of that came from or to the lowing President Santos’ speech inal law, whether it be mergers and ac- Even if there are good administrators, must respect the rule of law. The chal- Mineria de Gran Escala is comprised members of Mineria Gran Escala? identifying mining as a locomotive quisitions, farm-in and farm-outs or envi- they still are affected by the problems lenge is to make sure that rules are fully of the 13 largest mining companies, How do you see the FDI change in of development? ronmental issues. In this sense, we have of the past. The ANM is suffering from effective so we can state that not only which represent 95% of total Colom- the near future? Criticism of the mining industry is an represented many major companies the copy paste model of the ANH. At the Colombia respects the rights of both na- bian coal exports and most part of the During the last four years, mining was international trend. Colombia is no operating in Colombia, as 90% of our end of the day, the historical problems in tional and foreign investors, but also that legally produced gold. The main idea pushing the Colombian economy. But exception to the rule. The low profile clients are multinational corporations. the mining industry are beyond copying. the content and conduct of rules is fully behind creating this association was to unfortunately, in 2013 there has been a policy is not a good idea, because it is There are certain good aspects that can maintained. • combat some of the operational chal- negative growth in exports, lower con- important to discuss mining together Suarez Zapata & Partners is active in be taken from the ANH, but simply copy- lenges and improve Colombian mining tribution of mining to GDP, lower em- with the public. If you make yourself deal making for its clients in Colom- ing it will never work. industry, as well as give these compa- ployment and a decrease in investment more visible you will receive more crit- bia. How would you characterize the nies a public voice. and royalties. The reason is that interna- icism. It is on the contrary important to current climate for deal making in the President Santos famously called tional prices have decreased and there tell the public what the mining industry country? mining a locomotive of development Have the large mining companies are challenges in Colombia. Mostly is about and how minerals can improve The number of deal making activities in in 2011, yet there seem to be mixed been affected as harshly as smaller because Colombia has not clarified the daily lives of the people and demon- oil and gas is greater than mining in the messages coming from the govern- companies by the downturn in the role of mining in the country, there is strate positive examples of sustainable last two to four years due to a clearer ment as the Ministry of Environment global mining market? much discord in the country. For exam- mining. Colombia is an emerging coun- regulatory environment in this sector and the Ministry of Mines and Energy The slowdown of the industry was ple, the president says mining is a “lo- try, there is a 40% poverty rate and it compared to mining. The change in the have some conflicting interpretations. felt by the majority of the companies comotive of development,” but there is is very diverse, so it is impossible not last few years is that it has become Does this hurt Colombia’s reputation around the world, but the big difference obviously tension that exists between to use mining as a tool to improve lives more expensive to conduct transfers in the eyes of multinational investors? to the industry comes from countries the Ministry of Environment and the of people. • in the Colombian oil and gas sector. In The problem is not that there are mixed themselves and how they handle the Ministry of Mines and Energy. On top mining, conducting these activities are messages, it is that there are no mes- situation. The most important challenge of this, local politics are playing a huge less expensive, however there are regu- sages. Colombians are great sellers of

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 54 - Industry Explorations Industry Explorations - 55 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 EDITORIAL Global Business Reports Global Business Reports EDITORIAL

to compete with other coal exporters COLOMBIA COAL PRODUCTION & CONSUMPTION On the South Africa and Russia in Europe, its Source: EIA MILLION SHORT TONS PRODUCTION CONSUMPTION largest coal export market. 120 Hot Seat With the Caribbean coast dominated “Currently, the main mineral resource in production in Colombia is coal. However, by the well-established major produc- shale gas from the USA and other factors, have been changing the dynamics of ers, Colombia’s interior, especially in the 100 world energy markets. This has been particularly hard for Colombian coal producers Boyacá region is seen as the frontier of because of the reduction in thermal coal prices. Industry forecasts do not see coal Colombian coal with many local and inter- recovering in the near future. Of course we expect some business from the coal national companies developing projects 80 Coal Mining in Colombia NET industry, but we do not expect there to be too much expansion. and using foreign capital to jump start EXPORTS production in a region with high-quality 60 thermal coal and excellent metallurgical coal potential. “It remains hard for a ju-

nior or a small company to have the re- 40 - Carlos Contreras, sources to acquire or develop an open pit District Sales Manager, Andean Region, mine in the north of the country. We are FLSmidth seeing a few opportunities for local com- 20 panies to develop open pit mines in the interior, but we see a prime opportunity in underground coking coal. There are still 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 many places to explore, develop and find The bulwark of Colombia’s mineral pro- pany as it dealt with the fallout from a and gold junior AUX, were offered up” for new potential areas that can increase the an interview before the Lara-Nebo deal for Colombia as the United States is now duction comes from a handful of coal barge that sank at its port in early 2013, sale in an attempt to rescue the discred- output of Colombia as a producer and was announced. producing good quality coal and transport- mines near the Caribbean coast and spilling coal into the harbor. The govern- ited baron’s crumbling empire. Although in exporter of metallurgical coal,” explained While the government has prioritized ing it for export via efficient infrastructure. BHP Billiton’s Cerro Matoso ferronickel ment fined the company $3.5 million for 2011 Batista speculated that CCX’s assets Carlos Felipe Barrera, managing director transportation in the area, a plan by Vo- On the other hand, in Colombia we have asset in Cordoba. After years of impres- environmental damages and is charging could be worth as much as $6 billion, Turk- of South America for consultancy John T. torantim-owned Minas Paz del Rio to difficulties transporting coal from the inte- sive production growth, Colombia, the six Drummond employees for their role in ish producer Yildrim has agreed to pay a Boyd Company. construct a railway from the region to rior of the country to the ports, hurting our world’s fourth largest exporter of coal, the disaster. More devastatingly, exports paltry $125 million for the company. AUX Australia-based New Age Exploration and the coast was reportedly cancelled in De- competitiveness. If the shale gas in the has faced some substantial impediments were ordered to halt in January 2014 af- has had rumored buyers for over a year, its partner, UK-based Aurora Energy, have cember 2013 throwing the future of this US keeps on going the way it is expected, in 2013 that have impacted both immedi- ter Drummond was found in violation of but as of writing no sale is confirmable. identified their Terranova project in Cund- promising region in doubt. “Alternative Colombia is going to have to start look- ate production and long-term investment regulations requiring the use of conveyor Batista’s exit from Colombia will hopefully inamarca, 40 km outside of Bogota, as a markets need to be identified to replace ing towards other markets for our coal,” prospects belts rather than cranes and barges for allow these companies to continue their prime development for coking coal, while those industries that could be migrating commented Carlos Felipe Barrera of John In October 2013, the FARC claimed re- ship loading procedures. Drummond ex- development in a feasible manner that for the time being, it is placing less em- from coal to gas. The government has T. Boyd Company. • sponsibility for two attacks on a railway pects to have conveyor belts in place by can reinstate confidence in investor’s ex- phasis on its infrastructure-starved ther- announced the implementation of trans- owned by Cerrejon, the country’s largest March 2014. pectations in these assets and in the sec- mal projects near the coast, according portation by train to satisfy the needs in coal miner. This mammoth joint venture While originally Drummond agreed with tor as a whole. to Hans Friedrich, an associate at Aurora the area. Once this happens, the coal between Glencore Xstrata, AngloAmeri- regulatory authorities to pay a fine for its Despite these setbacks, there are encour- Energy. industry in the Andean region will spring can, and BHP Billiton produced 33 million incompliant port facilities to keep operat- aging developments that will help the In Boyacá, Carbhid SAS, a relatively new up. The quality in that jurisdiction exceeds “Comparing gold and coal is interest- mt of thermal coal in 2013 and accounted ing, authorities backtracked on this agree- country’s coal majors get back on track entrant established in 2010, began ini- that of the mines located in the Caribbean ing. Coal production numbers in the for over 40% of the country’s coal ex- ment and the Ministry of Environment in 2014. While low prices and weakened tial production of thermal coal in 2013. area which, on the other hand have good millions of tonnes per year, but is less ports. halted exports causing another thorn in demand in the United States remain as The project attracted investment from transportation infrastructure and exhibit valuable per ounce than gold is. The While these attacks highlight the lingering relations between the ministry and the major question marks, long-awaited ex- Canadian firm Lara Exploration, which in massive production,” said Perez of Carb- size of the gold market is much smaller, legacy of the country’s difficult past, labor mine and signaling yet another case of pansion projects, upgrades and new in- turn sold its 19.91% ownership stake in hid. perhaps 10% of the market for coal. unrest, especially at the country’s large indecision within the government itself. vestments are expected to run full steam Carbhid to newly incorporated, Vancou- With a rapidly changing energy paradigm Bigger mining companies will probably coal mines, poses a substantially greater “If they [Drummond] do not do things ahead in 2014. ver-based Nebo in December 2013. “Our in the United States demanding fewer continue developing at a slower pace risk to productivity and the country’s properly, we would prefer not to have this Cerrejon is expected to complete an es- partnership with international companies coal imports, Colombia now must redou- until commodity prices come back to a economy. Both Cerrejon and Drummond, money. They have to learn that Colombia timated $1.3 billion expansion project in is a way of financing the expansion of ble its efforts to remain competitive or reasonable level. As such, gold will prob- the second largest producer in Colombia, must be respected,” proclaimed Environ- April 2014. This P40 project is expected to Carbhid and allowing it to reach its target. its key commodity will continue to take ably show greater growth overall. One experienced work stoppages in 2013. ment Minister Luz Sarmiento to reporters increase production capacity by 28% to We are working on getting new markets, a substantial hit. According to the ANM, must keep in mind, however, that high At Cerrejon, the 32 day work stoppage upon the decision in January 2014 to halt 41 million mt/y. Glencore Xstrata-owned and capital injections will help us to meet 94.3% of Colombia’s coal is exported with growth rates are much easier to achieve helped account for the mine’s 4.6% de- the mine’s exports, which is costing the Prodeco is also expected to complete a the new commitments. Lara’s target is virtually all of the coal from these major percentage wise when the relevant mar- cline in production in 2013. government an estimated $6 million in $550 million expansion to raise its pro- to be established in Colombia with large mines on the Caribbean coast bound for ket is much smaller to begin with. The shut down at Drummond halted pro- royalties per day. duction capacity to over 20 million mt/y, projects in areas in which they can be international markets. “Companies in duction for nearly two months, costing The collapse of Brazilian tycoon Eike more than doubling its total annual output competitive. They will help us in the com- Colombia and the United States are going the company an estimated $250 million Batista’s reputation over the course of since 2009. These upgrades are not only mercialization of our coal and will also be to start fighting for the same clients over- in revenue and the government tens of 2013 had ramifications for Brazil’s west- increasing production capacity, they are a strategic partner for new acquisitions in seas whether they are in Europe, Asia, or - Carlos Ingacio Ojeda, Sales and millions of dollars in royalties. Things went ern neighbor as Batista’s two Colombian also lowering operational costs for these our area of operation,” explained Gildardo Brazil. The reality is the energy situation Marketing Manager, Astecnia from bad to worse for the American com- mining companies, coal developer CCX mines; a critical factor as Colombia seeks Perez, general manager, Carbhid SAS in in the United States triggers difficulties

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 56 - Industry Explorations Industry Explorations - 57 - COLOMBIA EXTRACTIVE INDUSTRIES” 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

clients with a host of services from the the challenges that exist in the market We could say that there are no more than 10 big companies in William conceptual phase through prefeasibil- especially surrounding land and water Gildardo that area; however, big is a relative term because production of ity and full feasibility stage. usage. In many cases we have been these companies cannot be compared to that of companies lo- Feragotto able to optimize past designs from Perez cated in the northern part of the country producing from open pit. One of the major issues in Colom- other consultants in order to bring Two factors are impacting the development of the coal industry bia is the clarity of environmental world-class quality coupled with local in this area; the type of mining (underground) and transportation. regulations. From your perspective, expertise. Growth of companies in Boyaca is in most of the cases associated does adhering to internationally with the production of metallurgic coal which is to a great degree Country Manager defined standards make a difference Colombia’s mining industry is General Manager sold abroad at prices that can absorb the negative impact of trans- GOLDER ASSOCIATES to the environmental authorities? generally characterized by the CARBHID SAS portation costs. The biggest limitation we are facing in well-established coal mines in the Colombia is the issues surrounding en- north and the exploratory firms in What does the partnership with Lara Exploration and other vironmental licensing. The mining min- the interior of the country. In which international firms allow you to do with the company finan- istry and the environmental ministry area do you see the most potential cially? are working to clarify the rules of the demand for Golder’s services in Can we start with a brief review of the company and Our partnership with international companies is a way of financing game for the environmental licensing, Colombia? the different business arms both in the coal and petro- the expansion of Carbhid and allowing it to reach its target. We are which will help Colombia’s interna- The major coal players in the north such leum and gas sectors? working on getting new markets, and capital injections will help us tional image. I am not sure what the as Cerrejon have in-house engineering Carbhid SAS is working in the coal industry; for the oil to meet the new commitments. Lara’s target is to be established timetable for this is, but in our meet- departments and will use companies sector we will establish a new organization in the future. in Colombia with large projects in areas in which they can be com- ings with the authorities we can tell like Golder for very specialized ser- Carbhid SAS is a young company that was incorporated in petitive. They will help us in the commercialization of our coal and progress is being made. vices. Golder Colombia also is focused 2010 and initiated production in April 2012. Our activity is will also be a strategic partner for new acquisitions in our area Adhering to international standards on the gold companies in the planning underground mining; our target for 2013 was ending the of operation. The above is true not only for Lara, but also for any makes a huge difference. We support phase of their projects in regions such year with production of 500 mt per month; we were very other company that could be willing to work jointly with Carbhid. • our clients in preparing the environ- as Antioquia. These companies are close to this goal. In 2014, we expect that production will mental impact assessments in a way more dependent on consultancies to be around 1500 mt per month. that Colombian authorities can easily assist with design, waste manage- review them. We also prepare com- ment, underground engineering etc. Have you had the licenses since 2010 or have you plimentary documents to support the As everyone is aware, the price of gold been able to acquire licenses? Golder Associates’ Colombia office environmental impact assessment. In has dropped, which has particularly We operate with a license that is owned by a third party, opened in 2011. Could you provide Colombia, Golder has an engineering hurt the small gold juniors. For Golder, under an operation contract. We applied for a new conces- an overview of the growth of this department and a social and environ- our key to success is diversification, sion this year and expect it to be resolved by mid-2014. office? mental department that work together which is a model that we have used Our plans include going after new licenses and negotiating Golder opened our Colombia opera- to prepare an environmental document worldwide. Our interdisciplinary teams existing licenses also in the area where we are operating. tions in October 2011 with four people that will be accepted by the environ- provide a wide variety of services to and today we have quickly expanded to mental authorities. For example, we our clients in the mining, oil and gas, Does Carbhid produce thermal coal or metallurgic an office of over 20 people. The situa- are delivering international standards infrastructure, and manufacturing sec- coal? How do the markets differ for the two at the tion in Colombia is not easy for mining, for the treatment of wastewater. Since tors. moment? but for a highly specialized company many of Golder’s standards are stricter Currently Carbhid is producing thermal coal. From a mar- like Golder, there is opportunity in the than local regulations, this ensures What are the key priorities for keting point of view, metallurgic coal is better because market. Since clients are looking to op- that the mine will go through an easier Golder Colombia over the next two most of the clients are abroad and prices are more favor- timize their costs for their projects and process of receiving its permit. years? able. For thermal coal, the situation is difficult because are looking for consultants that can pro- As an industry in general, we need to we are located right in the middle of the country with no vide solutions to complex problems. Given the current state of the focus on connecting our engineering efficient transportation infrastructure. We sell our product market, what are some of the ways design capabilities with environmental locally to power generation plants and other industries. Al- There are a number of players that Golder can optimize efficiency at issues. Engineering capability needs to ternative markets need to be identified to replace those are preparing to move from the mines? become more integrated with stake- industries that could be migrating from coal to gas. How- prefeasibility stage to development. Since prices for some commodities holder engagement in order to pro- ever, the government has announced the implementation How important is it that these mines are not favorable right now, clients vide success and sustainability to the of transportation by train to satisfy the needs in the area. adhere to industry best practice are looking for increased efficiency projects. Environmental issues usually Once it happens the coal industry in the Andean region will standards? first and foremost. At Golder our local can be solved applying engineering spring up because its quality exceeds that of the mines It is very important that our clients ad- engineering staff is supported by the design and technology; social issues, located in the Caribbean area which, on the other hand, here to the highest quality standards. best of our senior staff worldwide. instead, require good engagements have good transportation infrastructure and exhibit mas- Applying best practice standards give This is important for Colombia because with communities and transparence sive production. them a better opportunity to obtain the these senior engineers are able to during the development of the project. environmental license and to develop transfer their knowledge from around This is exactly how we can add value In Boyaca there are several companies like you op- a good relationship with the commu- the world to this country. One of the and help our clients to succeed in their erating in the region. Is this lack of access something nities. Bringing our international ex- main aspects of local participation in projects. • that hampers the development of the coal industry in pertise to the country we can provide the market is that we are aware of the center of the country?

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 58 - Industry Explorations Industry Explorations - 59 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

You mention the opening of a Our last report in 2011 on Colom- deposit with potential for growth, and funding is scarce. At the same time, Carlos permanent office here in Colombia. bia’s mining sector named infra- Fernando Elías located in a good jurisdiction for this big mining companies have reduced What are some of the objectives for structure the “Achilles Heel” of the type of operation. their exploration budget, which de- Felipe this new Colombia office? coal industry. Has the situation Ganoza creases the chances of a joint venture Thankfully John T Boyd has a good changed since then? Now that you have completed the for junior explorers. Barrera amount of ongoing work that allows In 2011, I am sure industry leaders acquisition, what are the next steps In this context we were fortunate to us to maintain a presence in Colom- complained about the lack of port infra- for El Roble? transition the last quarter of 2013 from bia. We have experts flying from our structure and the complexities of deal- El Roble is undergoing a complex re- having an exploration project to a pro- Managing Director-South America Pittsburgh and Denver offices at least ing with this. Three years later, compa- CEO structuring process that will have some ducing company generating cash flow JOHN T. BOYD COMPANY two to three times per month. The nies can transport their coal through ATICO MINING CORP. effects on the current working culture. while maintaining a strong exploration objectives of the Colombia office are any port in Colombia because now I believe our team on the ground is do- upside. I believe the market has per- to establish an outpost with technical there is excess capacity. Gradually, the ing an excellent job in managing the ceived this transition in a very positive capabilities, make us more competitive infrastructure is getting better; we are transition from very manual mining way as evidenced by the fact that In and employ and develop Colombian seeing barging through the Rio Mag- methods to a semi-mechanized mod- the middle of the crisis and in a time of employees. Unfortunately the market dalena, ports are being built, the central ern operation. We have invested about the year where it is usually challenging situation is not great right now; in nor- railroad project has been renewed, and $20 million in El Roble so far ($14 mil- to raise funds (summer in the northern mal times we would have already had other improvements are being made. lion of which is the acquisition itself), hemisphere), Atico raised money to the office here. In the meantime, we Constructing modern rail infrastructure and we are going to spend a further execute the purchase option. We were are supporting our existing clients and to service the interior met coal regions $8 million for the mine expansion and actually oversubscribed. The few in- positioning ourselves for better times of Colombia will be a challenge due to modernization. To supplement the eq- vestors that have stayed in this market ahead. the fragmented nature of the industry. uity funding we have an offtake agree- are choosing very carefully where to A joint effort by the coal industry par- ment with Trafigura for a debt line of $8 invest and Atico is an attractive option. Some industry experts are of the ticipants and the government will be million in exchange for approximately Our advantage is that Atico reduces opinion the demand for coal in needed to support this investment. 200,000 mt of concentrate. many of the risks that exploration North America is bound to decline Today, El Roble mine produces 1,200 to companies have. El Roble generates in the medium term as the US What do you see as the key objec- 1,500 mt of fine copper per annum. Af- cashflow, has growth potential and a experiences the effects of the shale tives the Colombian coal industry ter the optimization we expect to pro- group with a successful track record gas boom. What do you see as must accomplish in the coming duce 6,000 to 7,000 tonnes per annum, of developing mines behind it; this is As an American firm specializing the demand for Colombian coal in three years in order to enhance its Could you provide an overview of as well as 10,000 to 12,000 oz of gold. important in the face of the overblown primarily as a coal-mining consul- North America? position as the important player it the history of Atico Mining? The increase will be achieved through investment budgets that have been tancy, please begin with a brief Companies in Colombia and the United is today? Atico Mining started with the idea of several means. Presently, the mill oper- highly disappointing for investors in the overview of John T Boyd Company’s States are going to compete for the Colombia has a great opportunity. The replicating the growth model of For- ates 240 days per year and we believe last years. Finally, the deposit is very operations in South America, specif- same clients overseas whether they country is being mapped and surveyed tuna Silver Mines, but in the copper it should operate for no less than 330 high-grade, which tends to mitigate ically here in Colombia? are in Europe, Asia, or Brazil. The real- more extensively than it ever has be- and gold space. In this respect, Atico's days per year. Second, we are expand- the risks of volatility in the commodity John T Boyd Company has been present ity is the energy situation in the United fore by the geological survey. Those re- mission is quite simple: to look for ing the plant capacity from 400 to 650 prices. in the mining sector for over 70 years. States triggers difficulties for Colombia sults will be handed over to the ANM, high-grade, mid-sized, advanced cop- tonnes per day (tpd), this will allow the John T Boyd has work in Chile, Mexico, as the United States is now producing which will receive tenders from both per and gold assets in Latin America. used capacity to double because cur- El Roble is located in Chocó, a prob- Peru and Colombia. While we perform good quality coal and transporting it national and international companies. The company stayed private in 2009, rently the mine is only processing at lematic department of Colombia. consultancy services for coal, industrial for export via efficient infrastructure. This mapping will hopefully be done looking for the right opportunity. In 300 tpd. Finally, by reducing dilution we What is the security situation? minerals, metalliferious ores, precious Whereas in Colombia we have difficul- well and will attract international in- 2010 we found El Roble and after a are going to increase the head grades Geographically and politically, El Roble metals, and oil/gas, our work to date in ties transporting coal from the interior vestors. Despite the difficulties in the long negotiation, in 2011 we signed an of the ore sent to the mill. Currently the is located in Chocó, but in many re- South America has been primarily coal of the country to the ports, hurting our market, now may be the right time to agreement to explore in the area, with life of the mine is projected for 8 or 9 spects the operation is closer to An- related. Colombia has the most coal competitiveness. If US shale gas keeps buy. The market will recover eventually, an option to purchase 90% of the mine years, but we believe that we can find tioquia because it is at the border be- potential in South America, and John on going the way it is expected, more and if a company can explore during a and surrounding claims. additional resources of significant size. tween the two departments. Chocó is T. Boyd Company has been present US coal will be diverted into the export down time and be positioned to reach The owners at the time and the min- Around the mine we have concessions historically a problematic department, in Colombia for the last 30 years. We market and Colombia is going to have production during peak prices, they will ing community in Colombia believed for 6,679 hectares that have the poten- with primary jungle from the moun- have worked in the main coalfields in to start looking towards other markets maximize their financial returns. • that the El Roble mine was being ex- tial to host additional VMS deposits and tains to the Pacific Ocean and very lit- the Cerrejon Guajira region since their for coal sales. hausted, whereas we saw potential if discovered, could become satellite tle infrastructure; that favors the devel- inception. Over the last five to seven Prior to the recent worldwide reces- for more resources. Over the following operations to the existing El Roble mill. opment of illicit activities such as drug years, we have focused on the under- sion in coal demand, companies from two years we explored the property trafficking, illegal gold mining and guer- ground, metallurgical coal, dedicated Japan, China, and India were inves- and were successful in proving high How is Atico Mining perceived in rilla operations. However, this happens to supporting the coking coal industry tigating the Colombian coal industry. grade mineralization extended below the market? in the 'Bajos' of the department, while in Cundinamarca, Boyacá, Santander There is potential for Colombian coal in the current mine. With the support of I believe there are currently very few we are up in the mountains, in an area and in Antioquia. John T Boyd has se- these markets. Once Colombia has a positive exploration results we decided companies that are valued according to controlled by the government and the lected Colombia as the entry point for couple met coal mechanized mines run- to execute our option to acquire the their fundamentals. People are not in- military. The last time that El Roble had South America and we plan on having ning that can guarantee a single-seam mine and surrounding claims. The mine terested in investing in the sector right to shut down due to a security situa- a permanent office established here to product rather than a blended one, we presented all the characteristics we now and in particular in high-risk vehi- tion was back in 1991 to 1992. We have better serve our clients. could see a strong shift towards Asia. were looking for: high-grade, mid-sized cles, such as exploration companies so never had any problems ourselves. •

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 60 - Industry Explorations Industry Explorations - 61 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 Difficult Times: The Challenges Facing Colombia's Mining Industry

“The situation has improved drastically in Colombia over the past few years. One year ago, illegal, artisanal and informal mining were all the same thing. We had very poor institutions that were not prepared to develop the sector. One year ago, nobody in the country wanted to talk about mining or how it could benefit the country; being anti-mining was popular. Today, we have more information; sustainability is being built into the sector and the various forms of smaller-scale mining are being classified and dealt with appropriately. In every part of the world, there are those that oppose mining. In Colombia, this was the case because strong institutions did not lead the sector. It was impossible to sum up issues with the industry in a ‘Twitter headline’ of less than a few words, so it was easy for people to be against it.”

- Mario Escobar, President and CEO, Ashmont Resources

Image: Talisman EDITORIAL Global Business Reports Global Business Reports EDITORIAL

good news; this mine coming to fruition money, but it also gives a vote of con- duction,” said Mario Escobar, president Re-strategizing provides this,” said Jensen. fidence in the project and the work we and CEO of Ashmont Resources. A company that is creating a buzz on the [Solvista] have done. There were obvi- TSX-listed Antioquia Gold has acceler- Investments market is newly formed Cordoba Miner- ously not many deals done [in Colombia] ated the production timetable at their Cis- als. The company was formed through last year, and this probably is among the neros project in order to generate cash the merger of several companies to larger ones,” said Solvista’s president and flow in the near term, while shelving acquire all of the land surrounding the CEO Miller O’Prey. some costly exploration activities for the copper gold porphyry district at Mon- Prior to the announcement, Solvista had time being. Antioquia Gold is in the final Colombia’s industry adapts to the market tiel. In November 2013, Cordoba an- halted its drilling program to conserve stages of securing financial backing and nounced drilling results of 1.0% copper cash, a move common amongst the ju- completing feasibility studies; once these and 0.65 g/mt of gold at 101.1m depth. nior sector in Colombia as financing runs steps are completed, the company esti- “This discovery puts the focus on this tight. With IAMGold coming onboard, mates Cisneros can begin producing in newly discovered porphyry district which O’Prey expects exploratory drilling to 18 months with initial production targets we control 100%. It is very rare to have recommence on Caramanta by the mid- at 35,000 oz/y. However, Antiquia Gold’s 2012 and 2013 were not easy years for 100m holes with these types of grades dle of 2014. president and CEO, Fernando Jaramillo, the cash-strapped junior sector and within a district that is controlled by one Atico Mining, formed in 2009, attained contended that this figure could eventu- Colombia’s decline in mining investment company. What the drill holes and our a purchase option agreement on Colom- ally triple once full exploration at Cisneros reflects this harsh reality. Many juniors exploration work to date have shown is bia’s only producing copper mine, El is completed. “The exploration is focused exited the market giving the remaining that this project has the potential to be Roble. In exercising its option after on an area below a mountain; therefore players a prime opportunity to fill the a high-grade porphyry cluster, hosting promising exploration results, Atico paid exploration is not cheap because the void. In such a difficult market environ- significant grades of both copper and $14 million to obtain a 90% interest in holes to test the veins which are close to ment, defying norms could favor the bold gold. The area is unique when compared the mine. Through mechanization and vertical run deep,” he said. as traditional strategies have led to fail- with the rest of the middle Cauca belt, further exploration on the 6,679 hectare “The potential for growth here is per- ure for many. With fewer players in the where open-pit porphyry discoveries are property, Atico is not only planning to haps not what the government forecast market, companies are finding financial economically challenged due to the high significantly extend the mine’s life, but for this year (2013), but we must remem- success because they are able to blend elevation in a mountainous region with is also targeting production to increase ber that Colombia faced severe delays strong projects, experienced manage- lower grades,” said Mario Stifano, CEO of from its current figure of 1,200 to 1,500 in its development because of security ment teams and attractive prices all into Cordoba Minerals. mt/y of copper to 6,000 to 7,000 mt/y. concerns, which lasted a good 20 to 30 one enticing package for investors. With a number of Colombia’s most prom- Additionally, Atico is planning to produce years. It is only in the past decade that According to the Colombian Chamber of inent mining figures as stakeholders, in- 10,000 to 12,000 oz/y of gold. things have been looking up. We are run- Mines, 90% of the country’s territory re- cluding incoming chairman Ari Sussman, Despite the challenging market environ- ning behind, but we have a proactive gov- mains underexplored, making Colombia current CEO of Continental Gold, Paul ment, Atico was oversubscribed when ernment now,” said Hans B. Kulp, gen- a project developer’s dream. Exploration Dias, CEO of Minatura International, and it raised capital to exercise the purchase eral manager of the recently established activity has come to a halt for many ju- previous Cordoba CEO Simon Ridgway option in summer 2013. “The few in- Colombian branch for Peruvian explosives niors in the market and recent merger as director, the project certainly has an vestors that have stayed in this market firm Exsa. and acquisition activity in Colombia has experienced team and the market took are choosing very carefully where to in- Despite the short-term market uncertain- been slow. “The current struggles of the notice. “Taking our discovery and com- vest and Atico is an attractive option… ties and the continuing growing pains of junior market are not so much based pany on the road to potential investors Atico reduces many of the risks that the country’s regulatory regime, the ge- on their exploration results but on the around the world, we raised $15 million in exploration companies have. El Roble ological potential of Colombia is too ap- current poor market conditions that are January 2014 and the financing was sig- generates cash flow, has growth poten- pealing of a prize for the mining industry determining the progress or lack of it on nificantly over subscribed. The investors tial and we are a group with a successful to ignore. As an Andean country with the a project. There are certainly acquisition saw the potential of this district just as track record of developing mines behind same geological DNA as mining power- opportunities to be made at the right we did,” said Stifano. us; this is important in the face of the houses to the south, Colombia’s mining price,” said Stephen Jensen, B2 Gold’s While others have shied away from the overblown investment budgets that have fortunes will certainly turn as the global vice-president for Colombia. Colombian market in recent years, Cor- been highly disappointing for investors market recovers. “The reality is that min- B2 Gold is currently in the midst of a doba is proceeding with unabashed con- in the last years,” said Fernando Elías ing takes a long time and this is a normal prefeasibility study on the Gramalote fidence. “Cordoba is a young company, Ganoza, CEO of Atico Mining. progression. Some companies that are project with operating partner AngloGold though we are a major in the making,” For some of Colombia’s non-producers, idling right now are facing the market Ashanti. According to Jensen, Gramalote said Stifano. drilling programs to prove additional re- realities, while others have stepped out has recoverable gold reserves of 3.9 Another encouraging development for serves have taken a backseat to initiat- because their projects are simply not fea- million oz with potential production of the Colombian market in the latter half ing production as soon as possible. “The sible. That is part of the risk of the junior 300,000 oz/y. While AngloGold Ashanti’s of 2013 was the announcement that problem is one of perception; from our mining industry. There are companies other Colombian asset, La Colosa, faces IAMGold had agreed to an option agree- point of view, we have hard assets with that are struggling and have stalled, but significant opposition, Gramalote is ment to earn up to a 70% interest in good metallurgy where a valuable project the groundwork is being put in place and moving forward. “Gramalote is probably Solvista Gold’s Caramanta project. “We can be developed. Everything is under- this takes time. You cannot build a mine, Colombia’s first opportunity for modern, are very happy to have IAM Gold come valued and that is why we are going to or a mining industry, overnight,” said large-scale, open pit gold mining to come into the project not just because they the production side of the business and Mark Moseley-Williams of Continental into production. Colombian mining needs will be investing a significant amount of acquiring new assets that are near pro- Gold. •

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 64 - Industry Explorations Industry Explorations - 65 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

into production. We can always do more lot of frogs and hope that one is a prince? tinental Gold discovered the property, Si- tor’s Carbon del Caribe coal mine is also Fernando exploration as we are producing. The We currently do not have the resources Mario mon Ridgway went to Colombia in 2011 to 10kms away and there are a number of problem is that the market does not un- to work on them as we would like, so have a look at a property and he realized ongoing power projects to service both of Jaramillo derstand this; it wants as many oz as pos- we are looking for partners to sign joint Stifano that there was a porphyry district owned these mines in addition to the grid power sible in the resource, but drilling some ventures for those properties. Right now by a private US company. Simon nego- already available. Also, given the history holes costs as much as the amount of there are a lot of titles available, because tiated an earn-in agreement to lock-up of these mines there are a number of gold they can add to the resource. There- many companies have left the country. In the ground. In August of 2013, Cordoba towns in the surrounding area which can fore, what matters to us is the grade and Cisneros alone we are working on 250 Minerals acquired and consolidated all provide an experienced labor force. The President & CEO the cash cost of production, which in our hectares but we actually have over 5,000 CEO the ground such that the property por- project is also serviced by a landing strip, ANTIOQUIA GOLD INC. case would be around $500 per oz dis- ha where we have identified an additional CORDOBA MINERALS CORP. phyry district is now all 100% owned. I Puerto Libertador, close to the Carbon counting development work. seven very interesting prospects, so we will be the new incoming CEO with an del Caribe mine and a full-service airport have enough there to keep us busy for exceptional board led by Ari Sussman as roughly 50km away. What is the estimated initial cost to the next years. chairman and including Simon Ridgway put Cisneros into production and how and David Reading. Moving forward, what does 2014 hold are you going about securing the The industry complains there is not for the Cordoba Minerals? necessary financing? enough support to the sector. What On November 20th, Cordoba an- Once the merger is complete, Cordoba We estimate that $20 to $25 million will can mining and Antioquia Gold in nounced the discovery of a new will undergo an aggressive drilling explo- be enough to put the project into produc- particular bring to Colombia? high-grade copper and gold porphyry ration campaign to demonstrate that we tion. Consorcio Minero Horizonte is com- In Antioquia Gold, if we are successful in system having drilled 101.1m at 1.0% have not only a great discovery at Montiel mitted to the project and currently hold creating a modern, green gold producer Cu and 0.65g/mt Au. Please talk about but an exciting porphyry district. Due to about 45%. We are currently exploring we could become operators with other these results from the Montiel project the topography of the area, Cordoba will deals with second-tier financial institu- companies. So far, the gold industry has and where it positions your newly incorporate drilling techniques from Aus- tions that are willing to be paid in gold. little to be proud of in this country. There- amalgamated company? tralia and Western Africa. Rotary air blast This is a good option because it is not fore a key motivation for me is to actually What the drill holes and our exploration drilling (RAB) will allow the company to dilutive; besides, it aligns you very well prove that gold can be produced respon- work to date have shown is that this drill 30m to 60m holes at a cost of around to what you want to do because it com- sibly, just as the coal and nickel industry project has the potential to be a high- $30/m. While this manner of drilling can- mits you to production. The mine, to start has shown with world-class operations. grade porphyry cluster, hosting significant not be utilized for resource estimates, it with, will produce around 35,000 oz/y, In Colombia we are stuck with the idea grades of both copper and gold. The area allows Cordoba Minerals to significantly Could you provide an overview of and eventually, with further exploration that because natural resources are Cordoba Minerals Corp. is a Canadian is unique when compared with the rest reduce the timeline for identifying the po- Antioquia Gold? success, we would like to triple that. As non-renewable, we should keep them company with a focus on Colombia. of the middle Cauca belt, where open-pit tential of the project and the district. The Antioquia Gold started in 2007 with a soon as we have full financing and com- to ourselves or in the ground rather than Could you provide an introduction to porphyry discoveries are economically company will diamond drill the two out- group of 10 individuals all involved in plete some studies, construction should exploiting these with the support of for- your company? challenged due to the high elevation in a crops from the previously mentioned 1km some way with mining and with our take around 18 months. eign investment. This attitude is crazy. I Cordoba Minerals has consolidated what mountainous region with lower grades. strike, RAB drill in between, and follow up own capital. In summer 2008, we went have seen Norway, the Netherlands, the we believe is a large unexplored porphyry What is significant about Montiel is the with diamond drilling before moving onto to the market with a reverse takeover. How are you working with the arti- UK, Australia do wonderful things with district in an area with infrastructure, op- topography of the area. These rolling hills our other targets. We raised some capital but the market sanal miners in the area? their natural resources. I have also seen erating open pit mines and ideal topogra- are believed to have high temperature crashed soon after that. The real turning The community is mainly dedicated to what Nigeria has done with its oil, which phy. The company is well financed as we copper-gold porphyries and it is quite Given the financial markets, how will point was when the Peruvian investors agriculture and mining, so mining is not you can check out. It is not a good story. announced a $15 million equity raise in possible that Cordoba is in the goldilocks Cordoba look to raise the money re- of Consorcio Minero Horizonte bought a new for them. With the artisanal miners So, because someone else has done January 2014 to allow us to aggressively of the copper-gold district of Colombia. quired for this drilling program? significant share of the company. We in- we have a three-pronged strategy. We will things poorly, it does not mean that we drill our newly discovered porphyry dis- Our work so far has given the company New discoveries that have real potential vested that money in drilling and ended offer them a job if they want to work with are going to follow the same path. Gold trict. It has taken almost three years to a kilometer of strike, with two outcrops will always attract funding. Taking our dis- up with a good project; Cisneros. us. The second option is to organize them in Colombia will be three times as big get this property consolidated and we are on either end, both of which have been covery and company on the road to poten- We have a high-grade deposit and the in a cooperative to work in one of our ti- as coffee in income for the country, and now positioned to explore. Chris Grainger trenched, with one outcrop having been tial investors around the world we raised project is favorable from an environmen- tles. In this case we will supply technical no-one will dare to criticize the coffee in- the incoming vice president of exploration drilled. If we can demonstrate that these $15 million in January 2014 and the financ- tal point of view, as it would cause a very support, financing and then we can buy dustry, even if it has a significantly larger for Cordoba Minerals and previous vice two structures are related we will be able ing was significantly over subscribed. The small footprint. We believe we can put the ore from them. The third approach is and more invasive footprint than modern president, exploration for Continental to build our resource very quickly, while investors saw the potential of this district Cisneros into production very quickly. The to help them get a mining title. Of course, underground gold extraction. • Gold was going through 2 million hectares also exploring and drilling the 13km dis- just as we did. exploration is focused on an area below we need to distinguish the true artisanal of ground owned by Grupo de Bullet. In trict, which includes Costa Azul. a mountain; therefore exploration is not miners from the opportunistic people that search of another Buriticá project, Mr. When Global Business Reports returns cheap because the holes to test the veins just come to the area trying to get money Grainger came across an area that held In addition to being located in a in two to three years where will we which are close to vertical run deep. from us. the possibility of being a high-grade favorable topographical setting, the find Cordoba Minerals? porphyry deposit, which was located in Montiel project is also very close to Cordoba is a young company, though we What is your current resource, and Besides Cisneros, is there any other rolling lands, near infrastructure. Conti- infrastructure. are a major in the making. There are expe- how much more exploration do you project in your portfolio that shows nental ended up exercising its right of first The Montiel project is 20kms away from rienced companies and investors behind need in order to take a production good potential? refusal with Grupo de Bullet and created a BHP Billiton’s Cerro Matoso, the world’s Cordoba Minerals to help guide us and decision? We have two other projects that are quite company, which is being acquired by Cor- third largest nickel mine, which has been in three years’ time we will have clearly Right now we have around 300,000 oz of exciting, but the dilemma is: do you con- doba Minerals. in operation for 30 years, with reserves demonstrated that we own the entirety of gold, which is enough to put the project centrate on one project, or do you kiss a At more or less the same time that Con- estimated at an additional 40 years. Sta- a prolific copper gold porphyry belt. •

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 66 - Industry Explorations Industry Explorations - 67 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports EDITORIAL

needs good news - this mine coming to As you look for new partners at Stephen fruition provides this. Mocoa, are you looking to retain the The Challenge Our other notable asset is the Mocoa operator role? Jensen project in southern Colombia, which is B2Gold would be open to either retain- of the Unofficial a copper-molybdenum porphyry deposit ing or relinquishing the operator role. We in the Putumayo department, close to want to bring onboard a company with the border with Ecuador. The United Na- base metal experience, but we also rec- tions and the local government originally ognize that Colombia is not an easy place Vice President-Colombia drilled in this area in the late 1970s and to operate and that our experience here Tackling illegal mining B2GOLD early 1980s with a non 43-101 compliant is a great asset. inferred resource of over 300 million mt. We have done some additional drilling on Most of the exploration focus and the property to advance the project, but buzz in Colombia has been towards at this stage we are probably looking for gold exploration. How underexplored a partner that has experience in copper is Colombia’s copper potential given In October 2013, Cerrejon, the coun- used by illegal miners is to be confis- grated members of society. In Segovia to come onboard to help advance the the amount of copper in its fellow try’s largest coal miner, was the victim cated and destroyed. While a neces- the informal miners used to process next stage of Mocoa. Our eventual plan Andean countries Chile and Peru? of a railway bombing by the Revolution- sary step in the right direction, the di- the ore with mercury, making the area would be to form a spin-off company Copper has been less of a focus for the ary Armed Forces of Colombia (FARC). rective has caused some confusion for the most polluted in Colombia. Formal- called B2 Metals, which could become juniors thus far compared to gold, so In August, Canadian geologist Gernot the country’s equipment dealers and ization provided a solution for this envi- focused on developing copper plays. The the discovered reserves are not as well Wober of Braeval Mining Corporation leasers. “Unfortunately, the regulations ronmental challenge because as the ti- timing of this will depend on when mar- known. A great deal of the potential cop- was released after being held hostage have not been clearly defined, creat- tleholder we were liable for the adverse ket conditions are favorable to do such per plays in Colombia lie in the Chocó by the National Liberation Army (ELN) ing misinformation and delays on the a spin-off. region, which continues to be a hotbed for seven months. Despite ongoing machines deliveries to our legitimate for guerrilla groups as well as many other peace negotiations with the FARC in customers, affecting them profoundly. Many mines in Colombia have faced traditional challenges such as poor infra- Havana and the dramatically weakened Once the rules are clearly defined and opposition from local communities structure and sensitive communities. For position of both guerrilla groups, these communicated, we believe that these It is very difficult to differentiate illegal “miners from legal ones; as an equip- which has delayed the progress of juniors that are often more focused on instances show that the hydrocarbon conditions will be beneficial for the projects. Is Gramalote facing these the immediate market conditions, Chocó and mining industries remain a target legitimate miners,” said Fredy Daza, ment provider, I cannot tell when the B2Gold’s portfolio has quickly grown same issues? is a difficult place to operate, whereas a for insurgent attacks and kidnappings. mining sales and marketing manager paperwork is legitimate or not. We over the last half decade to include Gramalote is not facing the same polit- major that takes a longer term view may Primarily due to a legacy of five decades for Gecolsa, the country’s Caterpillar strive to operate legally and are always projects in Central America and ical or social issues as projects in other see greater potential in the region. of violence, Colombia is home to only a distributor. able to provide the paperwork the gov- Africa; could you provide a brief regions of the country and the local handful of legal, producing gold mines, As foreign companies have entered ernment asks for. However, when we overviewof B2Gold’s projects here in community is strongly in favor of a mine B2Gold has grown into a mid-tier which are operated by companies such the country, many have had to contend send machines to mine sites, it is not Colombia? at Gramalote. The local environmental gold producer over the last five years as Mineros SA, Gran Colombia Gold, with preexisting informal miners work- possible for us to continue doing follow B2Gold has been present in Colom- authorities have a great deal of control through your acquisitions in other and Minatura. Although it is the third ing on their titles. The issue is thorny up, so we cannot guarantee the illegal bia since 2006. In 2007, the company in Colombia and play a large role in de- parts of the world. Given the diffi- largest gold producer in South America, as the government estimates that over or legal operation of our machines. The went public and was able to raise $100 termining whether a project will pro- cult market conditions, how much the majority of Colombia’s production half of the country’s 102,000 miners are government needs to take more initia- million on the TSX largely based on the ceed. Cornare, the local environmental of an advantage is it for B2Gold to comes from informal sources. This gold involved in unpermitted mining activity. tive to monitor the mining environment potential of our Colombian exploration authority in Gramalote, is very strict, but have cash flow versus other juniors is difficult to track, giving terrorist orga- In many cases, these informal mines by more strictly enforcing the various projects. Since that time, we have de- they want their name on the permit of in Colombia? Does this allow you nizations a funding vehicle to comple- are the main source of livelihood for regulatory regimes that govern it. veloped a couple of projects, the most the first modern open-pit gold mine in to look at potential acquisitions in a ment their infamous source of revenue, entire communities, while at the same noteworthy being Gramalote located the country and we are working closely downturn? narcotics production and trafficking. time they follow no environmental stan- in Antioquia, a joint venture with Angl- with them for permits including the EIA. Many of Colombia’s junior companies “It is necessary to separate informal dards and their production may be used oGold Ashanti who became operator The local governor is behind the project cannot raise enough or any money to mining or traditional mining, which has as a financing vehicle for the country’s of the project in 2010. We are finishing as he learns more about mining. For the explore and advance their projects and a long history in Colombia, from the guerilla groups. a prefeasibility study by the end of Q4 mining industry, the most important gov- they are just trying to keep the office nexus of criminality. For informal or One company that encountered infor- - Juan Carlos Londoño, 2013, where we are working out the size ernment official in Colombia is often the open. During the last downturn in 2009, traditional miners, the government is mal miners on its title was Gran Colom- General Manager, of the operational mine and our timeline local mayor: the area around Gramalote B2Gold acquired two assets in Nicaragua working towards a process of formal- bia Gold when it acquired the Segovia Rodriguez y Londoño has potential production commencing in has a history of mining, so the commu- that are now producing mines instead of ization for its legalization. However, for mine in 2010. Since then, the company 2018 depending on market conditions nity understands the industry and our ob- investing in a full drilling program at Gra- those miners that have entered into has implemented its Artisanal Mining and when we decide to undertake a full jectives and is on side with the project. malote. In October 2013, we acquired the nexus of criminality, there is no Program. Profits are shared between feasibility study. Presently, we have a 43- We are working with the small-scale min- Volta Resources in West Africa for a good tolerance for this activity,” said Amilkar the mining company and artisanal min- environmental impact they created.” 101 compliant resource of 3.9 million oz ers to figure out how they can exist with price. The current struggles of the junior Acosta Medina, Minister of Mines and ers, while standards for these once This program was a risk, as we have to gold with a potential production scenario the mine and we have demonstrated market are not so much based on their Energy. informal miners are implemented and share profits with these artisanal min- of 300,000 oz/y. Gramalote is probably that once we integrate these small-scale exploration results but on the current While engaged in peace talks, the gov- upheld. “It [the Artisanal Mining Pro- ers on our title. We figured if everyone Colombia’s first opportunity for mod- miners into the project, mining will have poor market conditions. • ernment is also taking steps to curtail gram] has transformed the community walks in the same direction we would ern, large-scale, open pit gold mining to a smaller environmental footprint than if illegal mining. In 2013, the government as the informal miners have gone from be more productive as a whole,” said come into production. Colombian mining these miners were left unregulated. issued a directive that any equipment being in the shadows to becoming inte- María Araújo of Gran Colombia Gold. •

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 68 - Industry Explorations Industry Explorations - 69 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

How has the market changed since its previously mined illegally through creating and expansions, we are looking at responsible for the consequences of Paul peak in 2010/2011 and what will it take a structure and protocol to ensure that Maria lowering our production cost of $1,000 their actions. With these differences for companyies to have success in this these miners respect the environment. /oz. Our third milestone is our work, between the formal and informal min- Dias more difficult market environment? One of the key aspects of formalization is Araujo through cooperation with the governing sectors, there have to be realistic Most of the investment capital for explo- that these miners stop using mercury. The ment and other stakeholders, formaliz- opportunities for them to become for- ration in Colombia has come from the most important thing we provide is assis- ing 2,500 illegal miners in Segovia. This malized and Gran Colombia’s artisanal Canadian markets. Minatura benefitted tance. These miners use alluvial methods, is the first example of a mine opening mining program serves as model for from that with its deals with Cordoba Min- where we have a particular expertise. We the door to these miners and providing this. CEO erals Corp. and Tolima Gold. Our deal with are an open door to discussions, whether Former President them legal, formalized contracts. These MINATURA Cordoba Minerals Corp. is really an anom- or not the miners have a presence near GRAN COLOMBIA GOLD miners have the right to mining on our As Gran Colombia seeks to mecha- aly due to our extraordinary discoveries our title we can help them. title with the duty to uphold increased nize its processes and reduce costs, and strong shareholder base. In my view HSEQ standards and pay royalties. how can you strike a balance be- successful mining companies in the next Minatura’s current production is tween accommodating the artisanal decade will need active boards that get largely based on 43-101 compliant allu- Informal mining is cited as one of miners and your goals? out from behind their desks and gather vial mining. How does the investment the greatest challenges Colombia The layout of Segovia allows there to intelligence on the ground. For example, community view alluvial mining? faces. How does the artisanal mining be room for both. Our long-term strat- community relations are different than Alluvial mining is currently viewed by program serve as a model for other egy is to keep our currently operating before; companies cannot simply hire a many as mining without proven and prob- mines and communities in Colombia plant for the artisanal miners and then PHD to manage their social relations and able resources. While this is widespread that have this issue? use our new Pampa Verde plant for our hope that the situation will be resolved. practice, we don’t operate that way. It is When we arrived in Segovia in 2010, mechanized production. Gran Colombia Community support is essential for per- easier and less expensive to prove an al- people who had been there for gener- has put this social relationship at the mitting. Keeping communities informed, luvial resource than a hard rock resource. ations were mining the title. We saw top of our priorities. Thus the mining creating opportunities for them, and chal- We produce from proven resources this not as a problem, but an oppor- strikes in other parts of the country do lenging them to become partners is at the and continue to develop more proven tunity. We built a new model where not affect us because the community center of what companies should do. It resources. An alluvial mine producing the informal miners are integrated knows that as we grow it enables needs to go beyond paper, beyond build- 1,000 oz to 1,500 oz a month from proven with us and we share 50% of profits them to grow. ing a school. That is what differentiates resources can be developed and put into of the ore they mine with them based Minatura from the other companies out operation within 12 months or so from the on the spot price of gold. Today, it has As someone who spent most of your Could you provide a brief overview of there. We have developed an instinctual first sample pit or test hole for between Could you provide a brief update on transformed the community as the career in government, how would Minatura’s key changes since we met understanding of the community ecosys- $5 million and $7 million of capital expen- the key milestones for Gran Colom- informal miners have gone from being you rate the progress of the govern- with you for our 2011 report? tems where we exist. ditures. This model can survive any down bia Gold over the last year? in the shadows to becoming integrated ment in developing mining regula- We have focused on new projects out- market. In terms of market perception, 2013 members of society. In Segovia the tion and institutions in the country? side of Colombia, primarily West Africa as One of the government’s stated goals We have replicated our 43-101 compliant has been a difficult year. Therefore, informal miners used to process the The government’s progress has taken we wade through the Colombian govern- in its reorganization of the sector’s reg- alluvial methodology developed in Colom- Gran Colombia Gold has been working ore with mercury, making the area the longer than expected. Things cannot ment’s change in direction with regards ulatory regime has been that they seek bia worldwide. We think the methodology hard on accomplishing three objec- most polluted in Colombia. Formal- be done with only the framework, to how it manages mining and environ- a more active investor. Do you believe will be project financeable shortly. We are tives. First, we are seeking to reduce ization provided a solution for this daily activity has to be managed. The mental laws affecting long-term mining a disconnect exists between mining launching an advisory subsidiary in Q1 costs. We cannot control the price of environmental challenge because as industry is clamoring for an instrument investment strategies. Colombia has companies and the government with 2014 to help other companies that want gold, so we have to control how much the titleholder we were liable for the of mining policy in the country. If min- been a challenging environment for last regards to how active they are in the to become involved in these types of it is costing us to produce an ounce adverse environmental impact they ing truly is a catalyst for the economic few years and we hope it improves. Most communities? projects and processes. This company will of gold. We have reduced G&A costs, created. This program was a risk, as development of the country, then it is exploration companies in the Colombian Social programs need to be the first prior- focus on alluvial mining expertise, building cash costs, etc. From top to bottom, we have to share profits with these crucial for the rest of the institutions in gold mining sector rely solely on invest- ity of any company, especially in Colombia relationships with communities and infra- everyone in the company has taken a artisanal miners on our title. We figured the government to understand that. ment capital from foreign capital mar- where everything is regional. The mind- structure. 10% salary reduction in the wake of if everyone walks in the same direc- kets like Canada where new capital has sets and needs of people vary incredibly the current price volatility. Our second tion we would be more productive Do you think Colombia is a mining become incredibly scarce. Minatura is from region to region. Companies need Can mines produce in a cost effective objective is to be the first low-cost, as a whole. In fact, today 70% of the country? a gold producer which has allowed us to to see firsthand how they will be received manner given the current prices in the mechanized gold mine in Colombia. ounces Gran Colombia produces come Colombia certainly has the mineral pay our bills and continue our exploration before making an investment. They could market? Currently we are the largest under- from these artisanal miners. resources to become a mining country. activities. Additionally, we are involved in be entering into the middle of a family When I began in this industry, gold was ground gold miner in Colombia. Our At the beginning there were doubts If companies are creative in developing base metals in Colombia, which diversifies feud and one match can light an entire for- around $300 /oz. In my view the gold price operating mines in Segovia and Mar- especially from investors as to whether relations with communities then min- our focus. Minatura has been able to stay est on fire. Big investment decisions often is high! $1200 /oz is four times the spot mato are becoming more efficient and this program could succeed, especially ing in this country will be successful. ahead of the curve because of our focus have to be based on small things. price from when I started. Many people more productive. In 2012 we expanded with regard to liability issues. We This is why Gran Colombia’s artisanal on production. A couple of years ago I in the industry at present do not have the the capacity of our processing plant worked with the Colombian Chamber mining model, which started as a emphasized that we needed to move into One of the key challenges in Colom- experience of producing when gold was at from 540 mt/d to 1,500 mt/d. We are of Mines and Sector Minería de Gran modest program, has opened the door production as soon as possible in order to bia is the prevalence of the informal $500 to $600 /oz; they do not know how currently operating at 1,000 mt/d. We Escala to pass a law that prohibited the for community relations in the mining position ourselves for a downturn. Sure mining sector. How does Minatura to tighten the belt when costs drop. Obvi- had a financing of $100 million to fund use of mercury and share the liability industry. As an industry and a country, enough the market has dried up here and work to incorporate these miners into ously profit margins are not as high now, our Pampa Verde plant at our Segovia of safety and environmental damage we need to take the necessary steps many companies have had to exit the mar- a process of formalization? but miners can still make a living if they project, which will have an initial capac- between the titleholder and small-scale forward in order to develop the mining ket. Minatura works to legalize areas that were are able to adapt. • ity of 2,500 mt/d. With these upgrades miners. Now the artisanal miners are sector further. •

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 70 - Industry Explorations Industry Explorations - 71 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

for their existing fleet. We align with ent distributors, especially those global experience to our clients in the In this moment, Colombia is still in Iván Osario & the maintenance strategy from our from Asia trying to make inroads. Andrew Kremer Colombian market. a development stage of its mining customer to better serve their needs. What differentiates Gecolsa and industry with the government trying Freddy Daza Some customers prefer a “Do it my- its Caterpillar products from these Are there projects close to meeting to define regulations and control. self” approach, and we strive to deliver providers? your services? Which is the oppor- How important is that there is in- parts and components for them to ex- IO: A number of Chinese or Asian tunity for Jacobs and who are your dustry’s best practice and standard ecute the maintenance. Other cus- companies are coming to the coun- main international competitors? in the construction of new mines in tomers have a “Do it for me” approach, try with low cost product lines. That's Jacobs’ approach to addressing the mar- Colombia? IV: Regional Manager for Antioquia where they want to focus on produc- something you cannot hide. We strive Executive Vice President ket is one of diversification. By diversi- Foreign direct investment in mining & FD: Mining Sales Manager tion and leave us the maintenance; in to remain excellent in support and sup- JACOBS (FORMERLY SKM) fying our capabilities into several coun- minerals is capital intensive and has GECOLSA this case, we offer maintenance con- ply experience, presence in more than ter-cyclical markets, we have managed a long-term view. Therefore, to attract tracts like MARC (Maintenance and 20 branches throughout the couontry, to grow consistently for the last 15 years. foreign direct investment it is important Repair Contracts) where we take care which ensure not only that they will Market diversification combined with that Colombia continue to develop clear of all the maintenance and guarantee have a good support, but they will also our relationship-based business model and specific regulations and frameworks a machine’s availability. Also we have a keep their machines running. and client loyalty ensures that we have that will survive any administration, as Component Repair Center (CRC) to re- the continuous work load necessary to well as a transparent tendering process. pair components with state of the art What are the main objectives of maintain our employees and to provide Colombia has made great progress in technology and the highest standard to Gecolsa for the next 3 years? them with an opportunity to grow, even becoming a safe, stable and democratic secure the customer will have the best IO: The development of the mining when some markets are down. We place of business, and we have high ex- reliability for their Caterpillar machine. sector in Antioquia is a process of na- significantly increased our presence in pectations for the future. Gold mines in Antioquia mainly require tional development that will take some Colombia in 2013 through acquisition, support in project definition, cost anal- time to mature. We are very optimistic and today we are actively looking for Do you have a final message or ysis, and in some cases, construction about what is taking place at the politi- continued growth opportunities here. something you would like to discuss? machines to work in the infrastructure cal and government level trying to pave Our clients drive our growth, and as our Our company’s relationship-based busi- required to operate the mine in the fu- the way for foreign investment. We see clients determine their investment plans ness model is focused on developing ture. We have a well-prepared group an opportunity to grow as a company, and their own growth strategies, we po- ongoing and long-term relationships of professionals that support the cus- to grow as a region but especially as a sition ourselves to provide the services with our clients so that we can fully tomers with their knowledge and expe- country. and expertise they need locally to realize understand their goals and needs and As the exclusive Caterpillar distribu- rience. FD: In the short term with the current Could we begin with a brief sum- their growth objectives. Internationally, can provide them with superior value tor in Colombia, could you provide a We have a broad value chain offer to our commodity market, most of our cus- mary of Jacobs’ operations in our typical competitors are the Tier 1 and quality. In this way we share in brief overview of Gecolsa in Colom- customers, including power systems, tomers are conscious with their bud- Colombia regarding the mining global players. our clients’ priorities and growth and bia? technology, construction equipment, gets. They are postponing their invest- industry? make them our own. We are commit- IO: Gecolsa is a company that has been railway solutions, and financial support. ments and lowering their production Jacobs currently employs approximately From your perspective, why is there ted to continued growth in Colombia present in Colombia for over 80 years. We are certain that we can tailor so- targets, so we have to align ourselves 150 professionals in Colombia. We are the culture of doing it in-house? and view our presence here from the It was founded in 1927 as a subsidiary lutions appropriate for our customer’s with our customer’s actions. Gecolsa committed from the highest levels of our Jacobs’ execution model fosters the perspective of how we can help grow of General Electric in Colombia and mining cycle. is currently focusing on supporting ini- executive management to continuing to maximization of local resources and our clients’ businesses in Colombia later became Gecolsa, the exclusive tiatives with our customers that help grow in Colombia and to continuing to experts. We believe in and are com- over the long-term. We are constantly representative of Caterpillar in Colom- In 2013, the government passed them lower the operating cost per ton, hire and train local engineers and techni- mitted to promoting local talent and to looking for ways to drive down costs bia. Additionally we have in our portfolio legislation ordering the destruction so they can get the best value out of cal professionals. Our service offerings allowing these professionals to grow by and add measurable value to our clients’ other manufacturers' brands that com- of confiscated equipment used by their Cat equipment. We have programs include: pre-feasibility studies, feasibility exposing them to the pool of global ex- businesses. We bring our core values, plement the products that we offer to illegal miners. What has been the like CPS (Caterpillar Production System) studies, conceptual engineering, de- perts that we have. Local project teams tools, innovative solutions and techno- our customers. Our portfolio allows us affect of this on Gecolsa’s business? that focuses on identifying inefficien- tailed engineering, global procurement, may be enhanced by our global experts logical processes to all aspects of our to address all sectors of the construc- FD: We believe that the government is cies and developing processes to better construction management, pre-commis- who provide specific expertise, if that project work here in Colombia and, in tion, infrastructure and mining indus- going in the right direction controlling use valuable resources. Also we work sioning and start-up. Most of the work knowledge and skill-set is not available doing so, offer opportunities to increase tries nationwide. the illegal mining in Colombia and we hand in hand with Caterpillar on prod- we presently do is in the mining & min- in-country. We can also leverage addi- productivity and achieve lower capital support those initiatives. Unfortunately uct excellence programs where we join erals sector, and we are currently deliv- tional resources from our high value en- costs over the life cycle of a project. How do the needs of your cus- the regulations have not been clearly efforts with customers to optimize the ering an EPCM project for a large coal gineering centers, which may be used These characteristics set us apart from tomers at the large, operating coal defined, creating misinformation and use of their Cat machine. All these ini- mine expansion in the north of the coun- to absorb major staffing peaks and to our competitors. Other key differentia- mines in the north of Colombia delays on the machines deliveries to tiatives will prepare us to weather this try. We also have in-country capabilities accommodate aggressive schedule de- tors include our staunch commitment differ from the needs of the devel- our legitimate customers, affecting current market and be strong with our in oil & gas and infrastructure. As a large mands. We offer global exposure and to safety and ethical business practices, oping gold mines in regions such them profoundly. Once the rules are customers for the time the commodity global organization with technical exper- many opportunities around the world our ability to leverage our global net- as Antioquia? Where do you see clearly defined and communicated we market cycle rise again, which we are tise in just about every discipline imagin- to our employees in Colombia. We ul- work of 75,000+ resources across 200+ growth potential in Gecolsa’s mining believe that these conditions will be sure will happen. • able, we are able to transfer knowledge timately want to attract and retain the offices worldwide ability, and our ability market? beneficial for the legitimate mining in- and technology from our global subject best professionals here, and then we to offer the full cycle of project services: FD: Large operating mines have differ- dustry in Colombia. matter experts to our local offices and want to train and develop them so that ranging from conceptual studies, engi- ent demands compared to the emerg- project teams. We operate seamlessly they grow with us, and so that additional neering and global procurement all the ing gold miners. Large mining rely on The market has seen the arrival of and without boundaries across all disci- expertise and capabilities are developed way through to start-up and commis- us to offer them support and services lower cost equipment with differ- plines and geographies and bring this in-country. sioning. •

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 72 - Industry Explorations Industry Explorations - 73 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 Magical Realism: Business Travel in Colombia

"Colombia is a country full of opportunities, which for years was repressed by internal conflict. These conflicts have diminished considerably in the last 10 years, to the point in which, today, we are working towards a definitive peace process. This has allowed the most remote regions of the country - where most of the investment-worthy natural resources are located - to remain intact, now allowing for substantial investment projects in mining, oil and gas, infrastructure, tourism and general development"

- Andrés Alarcón, General Manager, 101 Park House Hotel

Image: Jess Kraft TRAVEL Global Business Reports Global Business Reports TRAVEL

Colombia AIRPORTS IN COLOMBIA Travel at a Barranquilla Glance Rafael Nunez International Airport Barranquilla Rafael Nunez International Airport

Cucuta Camilo Daza International Airport

Antioquia Cucuta Antonio RoldánCamilo Daza International Airport Betancourt Airport Antioquia Antonio Roldán Betancourt Airport As security concerns wane, Colombia is lunch try Gordo, a Brooklyn-inspired tory of the country while the Museo de Medellin INTERNATIONAL DESTINATIONS TO/FROM Jose Maria Cordova International Airport EL DORADO INTERNATIONAL AIRPORT remains an undiscovered gem for busi- bar and restaurant that offers first-class Antioquia offers the finest collection of Enrique Olaya Herrera Airport Medellin ness and leisure travelers alike with a va- American comfort food and drink such the famed local painter Fernando Bortero Jose Maria Cordova International Airport Enrique Olaya Herrera Airport riety of options at a lower than expected as old fashions, fried chicken and even in the world. Today, Medellin is the ad- Pereira Bogota price. Bogotá’s El Dorado International S’mores, complete with your own camp- ministrative hub for most of Colombia’s Matecaña International Airport El Dorado International Airport airport is the third busiest airport in Latin fire, for dessert. For a night on the town junior mining companies as it is within Pereira Bogota Matecaña International Airport America in terms of passenger traffic or to impress clients NN offers a refined close proximity to many developing El Dorado International Airport Cali Neiva making it a convenient gateway to the atmosphere complemented by a live pi- projects and the Poblado neighborhood Alfonso Bonilla Aragon Benito Salas Airport International Airport rest of the country and continent. anist, while Peruvian fine-dining staples offers foreign executives and offices a Cali Neiva Alfonso Bonilla Aragon Benito Salas Airport such as Astrid y Gaston and Rafael make fashionable address to impress locals International Airport Bogotá: The Capital District outposts in the Capital District with the and foreigners alike. Bogotá is the political and commercial same superb seafood that can be found hub of Colombia with over 6.5 million in Lima. Lastly, no trip to Bogotá is com- inhabitants and a thriving tourism sec- plete without a pilgrimage to the one- tor. Globally recognizable brands such of-a-kind dining/entertainment/nightlife Colombia is divided into a number of as Hilton, JW Marriott, Sofitel, Shera- experience that is Andres D.C in Chia “regions, each with its own culture and ton and Holiday Inn and local staples its more central sister location Andres ethnic identity, unique gastronomy, such as the timeless Casa Medina and Carne de Res in the upscale Zona Rosa special folklore and varied costumes. the Hotel la Fontana can accommo- neighborhood. In general terms, Colombia is a very date any range of budget. The newly diverse country, to work in as well as opened Grace Hotel offers an intimate Medellin: The Junior Mining Hub live in. boutique experience on a quite street Once the home to the world’s most no- within walking distance of the city’s best torious narco-trafficker Pablo Escobar, restaurants in Zona G. Bogotá offers a Medellin is a vibrant, modern city that - Andrés Alarcón, General Manager, surprisingly cosmopolitan array of dining wears its infamous past on its sleeve 101 Park House Hotel CLIMATE EXCHANGE RATES options allowing any traveler to discover while simultaneously challenging visitors Currency: Colombian Peso (COP) local options or find tastes from home. to abandon any preconceived notions of C° (TEMPERATURE MM (PRECIPITATION) 50 320 For a casual meal or an easy business the city. Numerous city tours offer a his- In the capital city of the Department” 1,000 COP = 0.49 USD Antioquia, the internationally recogniz- 1,000 COP = 0.54 CAD 280 able brand names do not have the same 1,000 COP = 0.36 EUR presence as they do in Bogota. Never- 40 1,000 COP = 0.29 GBP 240 theless, there is no shortage of options 1,000 COP = 0.54 AUD for business travelers as local boutiques 200 such as the ultra-chic Charlee Hotel em- 30 body the “see and be seen” attitude held DIALING CODES AND USEFUL NUMBERS amongst Paisas. The rooftop bar and pool 160 Colombia Country Code: +57 offers one of the most stunning views of 20 120 Bogota Area Code: 1 this dramatic city and of Paisas partying in the numerous bars of Parque Llares Police: 112 below. Another nearby trendy destina- 80 Medical Emergencies: 125 tion that is a bit lighter on the wallet is 10 Fire Department: 119 the popular Art Hotel. Its oversized lobby 40 Information: 114 and airy restaurant make it the perfect lo- Traffic Accident: 127

cation for a casual afternoon meeting. • JAN FEB MAR APR MAYJUN JUL AUG SEP OCT NOV DEC Tourism Police: 337-4413/243-1175

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 76 - Industry Explorations Industry Explorations - 77 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 TRAVEL Global Business Reports Global Business Reports TRAVEL

Events & Media There are a number of media sources MINING AND MINERALS OIL AND GAS 12th Latin America Leadership Forum industry trends in the Andean region SPE Heavy and Extra Heavy Oil devoted to the extractive industries of June 4th to June 6th, 2014 and Central America, with attention paid Conference Colombia, and many international publi- 21st Annual Coal Conference of the 4th Annual Colombia Oil and Gas Cartagena, Colombia to offshore exploration in Colombia, September 24th to cations that provide excellent coverage Americas Conference and Exhibition www.cg-la.com Ecuador’s new oil drive and the Central September 26th, 2014 of the country. Engineering and Min- March 12th to March 13th, 2014 April 2nd to April 4th 2014 American Regional Electricity Market. Medellin, Colombia ing Journal (www.e-mj.com) remains Cartagena, Colombia Cartagena, Colombia Though not specifically focused on Final speakers are yet to be confirmed, www.spe.org the benchmark for mining information www.ihs.com www.cwccolombia.com the oil and gas industry, this forum ad- however the 2013 event hosted an im- around the globe and Oil and Gas In- dresses a crucial component to the in- pressive list of industry leaders. Hosted by the Society of Petroleum vestor (www.oilandgasinvestor.com) Hosted by IHS McCloskey, the Coal Con- Over its three-year history, the Colombia dustry: infrastructure. It will identify the Engineers, this conference focuses on and Hart’s E&P (www.epmag.com), both ference of the Americas aims this year to Oil and Gas Conference and Exhibition top infrastructure projects in the Latin sharing expertise and experience gained part of the Hart Energy publishing group, explore the issues facing the Colombian has brought together 2,025 industry American region over the next year, in- from the application of innovative tech- are two of the world’s leading sources coal industry, such as labor and infra- leaders from 39 companies and 1,084 cluding some in the oil and gas sector, 20th Latin Oil Week nologies to heavy and extra heavy oil of information on oil and gas exploration, structure trends, and looks at the coun- companies, focused on Colombia’s oil and explore the business opportunities September 1st to September 3rd, 2014 fields with a view to improving recov- production and financing. Worth a spe- try’s role in the global coal market. Con- and gas industry. Speakers this year that these projects will present compa- Rio de Janeiro, Brazil ery and increasing economic viability. cial mention is Colombia Energía, a lo- firmed speakers include a wide range of include Colombia’s Minister of Energy nies. www.petro21.com Its regional scope is not just Colombia, cal publication dedicated to the energy the industry’s leading experts. and Mines, the Minister of Defense, the but the whole of Latin America and the industry – in all its manifestations – in President of the ANH, and multiple in- Though not held in Colombia, the 20th Caribbean. Colombia. dustry representatives. 8th Andean Energy Summit Latin Oil Week by Pacific Global Partners In addition, there are numerous events July 9th to July 10th, 2014 is one of the key events for the conti- each year focused on Colombian explo- Bogota, Colombia nent’s oil and gas industries, boasting a ration and extraction, both for the mining www.bnamericasevents.com full speakers list list of industry leaders and oil and gas industries. A selection of and government figures and providing a upcoming events in 2014 are listed be- This BNamericas-hosted event concen- comprehensive overview of the entire low: trates on hydrocarbon and electricity region’s upstream policies.

www.globalpacificpartners.com

Latin O th i 0 l 2 W

G • e l k

U b

a s

l t r

P a

a m

c • i f i c & rs Partne

Exploration, Development, Production: Oil/Gas-LNG, New Ventures, Bid Rounds, Investment, Service/Supply

th st 10 Latin Petroleum: Strategy Briefing - 1 September st rd 15th PetroLatino Club Networking Reception - 2nd September 1 - 3 September 2014 20th Latin Upstream Conference - 2nd - 3rd September Copacabana Palace, Rio de Janeiro, Brazil

Sponsors: Supported By:

Senior Partners Sponsor / Exhibition / ShowCase Enquiries Registration Marketing Contact Dr Duncan Clarke: [email protected] Sonika Greyvenstein: [email protected] Judith Moore: [email protected] Jerry van Gessel: [email protected] Babette van Gessel: [email protected] Brigitt Relli: [email protected] Jodee Lourensz: [email protected] Contacte a nuestro mejor equipo editorial con cualquier noticia que tenga sobre su compañía o si desea más información sobre cómo puede colaborar con la publicación. [email protected] | Tel: +57 1 235 05 23 | Cel: +57 311 562 80 15

Contacte a nuestro mejor equipo de suscripciones para recibir su copia gratuita cada tres meses: [email protected] @ColombiaEnergia

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 78 - Industry Explorations Industry Explorations - 79 - COLOMBIA EXTRACTIVE INDUSTRIES 2014 TRAVEL Global Business Reports Global Business Reports INDEX

GOVERNMENT, ASSOCIATIONS AND ORGANISATIONS Agencia Nacional de Mineria 48, 50, 54, 55, 57, 60, 82 Cámara Colombiana de Minería (CCM) 82 Hotel Directory Ministry of Mines and Energy 10, 11, 48, 53, 54, 55, 59, 82 Sector de la Minería a Gran Escala 54, 71, 82

MINERAL EXPLORERS AND PRODUCERS 101 Park House Hotel Bogota Marriott Hotel Bogotá's RoyalPark Metrotel Hotel Antioquía Gold Inc. 65, 66 Carrera 21, No, 101-10, Bogotá Av. El Dorado No. 69b-53, Bogotá Calle 74, No. 13-27, Bogotá Ashmont Resources Corp. 65 Atico Mining Corp. 61, 64 Tel: +57 1 6000101 Tel: +57 1 4851111 Tel: +57 1 6578787 B2Gold Corp. 68 Carbhid SAS 57, 59 Carboandes www.101parkhouse.com www.marriott.com www.metrotelroyalpark.com Colombian Mineral Resources plc Continental Gold Ltd 15, 48, 53, 64, 65, 67 Cordoba Minerals Corp. 64, 67, 70 Gran Colombia Gold Corp. 69, 71 Grupo de Bullet SAS 67 Radisson Royal Hotel Bogotá Sofitel Bogota Victoria Regia Hacienda Royal Hotel Metalurgex Minas Paz del Rio Calle 113, No. 7-65, Bogota Calle 82, Bogotá Calle 94, Bogotá Minatura 48, 65, 69, 70 Tel: +57 1 6295559 Tel: +57 1 6212666 Tel: +57 1 6578787 Mineros SA 69 Miranda Gold Corp. New Age Exploration Ltd 57 www.radisson.com www.sofitelvictoriaregia.com.co www.haciendaroyal.com Solvista Gold Corp. 64 Waymar Resources Inc.

OIL AND GAS EXPLORERS AND PRODUCERS Andes Energia plc 15 GHL Hotel Capital Bogota Plaza Summit Hotel Hotel Rosales Plaza Azabache Energy Inc. Canacol Energy Ltd 43 Calle 25B, No. 69 A-50, Bogota Calle 100, No.18A - 30, Bogota Calle 72, No. 5-47, Bogotá Equión Energía Ltd. 21, 24 Tel: +57 1 4233000 Tel: +57 1 6322200 Tel: +57 1 3171100 GeoPark 36, 41 Gold Oil plc Gran Tierra Energy Inc. 19, 22, 23, 27, 28 www.ghlhoteles.com www.bogotaplazahotel.com www.hotelrosalesplaza.com Hupecol Operating Co. 41 Omega Energy International 28, 31 Perisson Petroleum Corp. Petroamerica Oil Corp. 28, 38 Petrominerales 19, 20, 43 JW Marriott Bogotá Hotel Estrelar La Fontana Arlington Place PetroNova Platino Energy Corp. 28 Calle 73, No. 8-60, Bogotá Carrera 15, No. 127, Bogotá Calle 109, Bogotá Trayectoria Oil & Gas 16 Tel: +57 1 4816000 Tel: +57 1 6154400 Tel: +57 1 2153507 ENGINEERING, CONSULTING AND ENVIRONMENTAL SERVICES Arce Rojas Consultores 48, 51 www.marriott.com www.hotelesestelar.com www.arlington-place.com Control RIsks 12, 32 DTK Group Dyprotec Equitable Origin Estrella International Energy Services Ltd 35, 36, 39 Hilton Bogata Bogota Royal Hotel Best Western Plus 93 Park Hotel EXSA 52, 65 FLSmidth Carrera 7, No. 72 - 41, Bogota Cra. 8A, No. 99-55, Bogota Calle 93, #13-71, Bogotá G2 Seismic Tel: +57 1 6006100 Tel: +57 1 6362938 Tel: +57 1 6051444 G4 Drilling Galway Group Geoatlas Geominas www.hilton.com www.bogotaroyal.com www.hotelbestwestern93.com Golder Associates 58 HL Ingenieros Industrial Consulting Group (ICG) 19, 25, 42 Integral de Servicios Técnicos Hotel bh La Quinta Bohème Royal Hotel Sheraton Bogata Hotel JAHV McGregor Jacobs 73 Cra. 5, No. 74-52, Bogota Calle 82, Bogotá Calle 25B, No. 69C-80, Bogotá Jason CGG 24 Tel: +57 1 7424908 Tel: +57 1 6578787 Tel: +57 1 2105000 Mecánicos Asociados Meridian Consulting Ltda. 32 SAExploration 32, 34 Southern Cross Energy 16, 18 www.bhhoteles.com www.bohemeroyal.com www.starwoodhotels.com Synergy

SOFTWARE, TESTING, EQUIPMENT AND OTHER Alianza Group 37 The Grace Hotel Andino Royal Hotel Compas Coremar Group 37 Calle 66, No. 5-18, Bogotá Calle 85, No. 12-28, Bogotá Gecolsa 59, 72 Tramec Tel: +57 1 3462429 Tel: +57 1 6513131 Vertical de Aviación 35, 40 Wärtsilä Weir www.bogotadesignapartments.com www.andinoroyal.com FINANCIAL, LEGAL AND HUMAN RESOURCES Amrop Seeliger y Conde Bolsa de Valores de Colombia 43 Correcol Holiday Inn Bogata Pavillon Royal Hotel Deloitte Calle 26, Bogotá Calle 94, No. 11-45, Bogota EY 27 Martínez, Córdoba & Abogados Asociados Tel: +57 1 9520052 Tel: +57 4 6502550 Norton Rose Fulbright Posse, Herrera & Ruiz 16 PwC 43, 46 www.ihg.com www.pavillonroyal.com.co Suárez Zapata & Partners 55 Universidad Sergio Arboleda

This list represents a selection of the companies operating in the Colombian oil and gas and mineral industry and should not be considered a comprehensive guide. GBR holds an exclusive and extensive COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 80 - Industry Explorations mineral company database for Colombia and the wider region. For further information on database access packages, please contact [email protected] or call +44 20 7612 4511. CREDITS Global Business Reports

EDITORIAL TEAM

Oil and gas research conducted by: Senior Project Director: Caroline Stern ([email protected]) Project Coordinator: Chloe Dusser Project Coordinator: Alice Pascoletti Journalists: Ramzy Bamieh, Joseph Hincks and Josie Perez

Mining and minerals research conducted by: Journalist and Project Director: Andrew Mason ([email protected]) Project Coordinator: Alice Pascoletti

Additional research provided by GBR’s Vancouver office: Senior Project Director: Katie Bromley ([email protected]) Journalists: Alexander Corbeil and Harry Thompson

Managing Editor: Mungo Smith ([email protected]) Executive Editor: Barnaby Fletcher ([email protected]) Graphic Designer: Gonzalo Da Cunha ([email protected]) Regional Director: Alfonso Tejerina ([email protected]) General Manager: Agostina Da Cunha ([email protected])

For more information about GBR, please email [email protected]. For updated industry news from our on-the-ground teams around the world, please follow us on Twitter @GBReports or subscribe to our newsletter at gbroundup.com.

Additional copies of this book can be ordered through Elif Ozturk ([email protected])

THANK YOU

GBR would like to extend our thanks to the following organisations for the assistance provided during the research of this publication:

Agencia Nacional de Minería (ANM) www.anm.gov.co

Cámara Colombiana de Minería (CCM) www.ccmineria.org

Ministerio de Minas y Energía www.minminas.gov.co

Sector de la Minería a Gran Escala (SMGE) www.mineriaagranescala.org

We would also like to express our sincere gratitude to all the companies, associations and individuals who took the time to provide their insights into the market.

COLOMBIA EXTRACTIVE INDUSTRIES 2014 - 82 - Industry Explorations