South African mining company AngloGold Ashanti (ANGJ.J: Quote) is going ahead with exploration of what could be a major gold deposit in Colombia despite virulent opposition from local environmentalists.
The project would provide 4,000 jobs in Cajamarca, a farming town of about 20,000 residents during the 20-year life of the operation, if its 12.3 million ounces in unproven reserves are confirmed and the project goes forward.
Between 38% and 42% of net sales would go to the Colombian government in taxes and royalties. The company has invested $35 million in the project so far.
But people here are concerned about the environmental damage that could be caused by the operation, called La Colosa, or “The Colossus”. Resistance to the project from community groups and some local lawmakers remains strong.
“Mining towns do not end up rich. The companies extract the gold and leave. The money will not stay, but the damage will,” said Luciana Pena, head of environmental affairs for the Community Federation of Tolima province, a lush and mountainous area in central Colombia.
It is too early to say what methods will be used to extract the gold, but the company promises zero environmental damage.
“The discussion has generated concerns from the community that we will not be able to specifically address for another year and half, when we know the amount of proven reserves,” said Carolina Rueda, local AngloGold spokeswoman.
“Only then will we know what type of mining methods will be used and what type of environmental plan will be called for,” she said. “Anglo Gold must guarantee that the project will be developed responsibly, and we are sure that we can do that.”
The Johannesburg-based company is the world’s third biggest gold mining firm, with output of 4.9 million ounces last year. It operates 21 mines in 10 countries.
AngloGold plans to invest $250 million in Colombia during the 2009-2011 period, $200 million of which will go into La Colosa, where the deposits were discovered in 2006.
In May 2008 the company announced it had found unproven reserves of 12.3 million ounces. If proven, it would be the biggest gold strike in the world during the last 10 years.
The company would build a $2.7 billion mine where, according to Colombian law, foreigners can only make up 2% of the work force.
Colombia, home to the El Dorado myth of a gold-filled lake, is no stranger to gold fever. The promise of riches lured thousands of Spaniards here during the Colonial period.
In December 2007 Colombian President Alvaro Uribe announced that AngloGold had discovered a huge deposit in Cajamarca.
Within two weeks 900 self-styled miners and other fortune seekers showed up in town. So many arrived at once that most could not find a place to sleep.
“We had to explain to them that we were in the exploration phase, not the exploitation phase,” said Rafael Mateus, a local AngloGold public relations consultant.
The company started operating in Colombia in 2003, a year after Uribe was first elected on promises of crushing the country’s decades-old Marxist insurgency, which is funded through drug smuggling, kidnapping and extortion.
Uribe’s U.S.-backed security policies soon pushed the rebels out of towns such as Cajamarca, opening them to foreign investment. His supporters are trying to change to constitution to let him run for a third term next year in a bid to ensure continuance of his investor-friendly policies.
The president is popular for making the highways and urban areas safer, but guerrillas still control wide areas in the southern jungles. Colombia remains the world’s biggest producer of cocaine, most of it smuggled to the United States. (Reporting by Hugh Bronstein; Editing by Lisa Shumaker)
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