Colombia will start awarding mining concessions in 2013 under a new competitive tender process and in the first year hand out a maximum of 20 percent of an area set aside by the government for mineral development, a minister said on Monday.

The government will award the titles using various criteria, including proposed exploration spending and how much a company offers in terms of revenue sharing with the government, Mines and Energy Minister Mauricio Cardenas told Reuters.

“Rather than changing royalties, we ask the market to tell us what is the maximum royalty we can get from that area,” said Cardenas, who was in Toronto for PDAC, the mining industry’s largest annual conference. “It’s an innovation.”

In recent years Columbia has emerged as a hot destination for exploration spending. Foreign direct investment, or FDI, in the country more than doubled in 2011 to $14.4 billion, up from $6.8 billion in 2010, as a military campaign against narcotics-funded insurgents and criminal gangs made it safer to conduct business there.

In percentage terms, Colombia’s growth in FDI outstripped that of all other countries in South America in 2011, according to the latest data from the United Nations Conference on Trade and Development. Investments in Chile grew to $17.6 billion from $15.1 billion, while those in Peru rose to $7.9 billion from $7.3 billion.

The new concessions are expected to accelerate the influx of foreign capital into the South American country. Last month, Colombia said it would set aside nearly 3 million hectares (7.4 million acres) for mining development. That represents some 60 percent of its known mineral resources.

The Andean nation will hand out the first of the concessions, which contain gold, silver, coal and other strategic resources, under the new tender process in 2013.

“We have to do this gradually because it is a lot of land, and we need to make sure that we do several rounds in the future,” said Cardenas. “We don’t know the final figure, but think about 10 or 20 percent of that, maximum, which is already a lot of land.”

REVISED MINING CODE

The country will continue to award mining concessions outside the reserved strategic hectares on a “first come, first served” basis, said Cardenas.

At the same time, the government plans to revise the mining code to give it the power to revoke titles for assets it sees as improperly explored or developed, and put them back into the strategic pile to be auctioned or tendered.

“The one thing we want to avoid is titles that go to individuals or companies that only want to speculate with them,” said Cardenas. “We’ve had a lot of trouble with that.”

The revised mining code will give the authorities more power to shut down illegal miners and destroy their equipment. That bill is slated to come before Congress in July.

Cardenas, visiting Toronto during a rare cold snap in an otherwise balmy winter, said Colombia owes a great deal to Canada’s junior miners, who have so far spent hundreds of million on exploration in the country. But he warned that those looking to get rich quick at the nation’s expense are not welcome.

“Investors should not think about this as a short-term, highly profitable ventures,” he said. “We’d like them to see this as long-term, sustainable projects with adequate rates of return.”

(Editing by Frank McGurty)

© Thomson Reuters 2012 All rights reserved