A formal dance: Efforts to crack down on informal operations are continuing

One of the more difficult challenges the mining sector faces is the incorporation of informal operations into the formal sector and the elimination of illegal operations. Differentiating between the two can be a challenge in itself. Illegal and informal mining activities are reckoned to account for 9044 mines out of a total of nearly 15,000, according to the Ministry of Energy and Mines (Ministerio de Minas y Energía, MME). Moreover, estimates put the amount of gold production from informal and illegal operations at 40%, and perhaps as high as 60%, of the national total.

The government is keen to crack down on such activities, as the operation of illegal mines and the extortion of both formal and informal miners have become major sources of revenue for organised crime and guerrilla groups. While exact numbers of how many informal and illegal operations finance armed groups do not exist, in 2011 the national police force stated that the problem extended to 151 municipalities in 25 of the country’s 32 departments.

CRACKDOWN: In recent years isolated instances of crackdowns have been reported on several occasions. In the last quarter of 2010, 46 illegal mining operations were shut down and 573 people were arrested, according to local authorities. In the first quarter of 2011 the office of the president reported closing 191 illegal mining operations and arresting around 600 people. In July 2012, the office of the president announced that its Operation Troya had resulted in the closing of 87 mines and the arrest of 447 people. In April 2013 President Juan Manuel Santos ordered another operation that would see illegal operations closed across eight departments, though at time of press the official results of the operation were not available.

New techniques are also being employed to counter illegal and informal operations. One approach could see the government place GPS tracking devices on every piece of mining equipment that enters the country. The MME has also set up a task force, the Office of Mining Formalisation, to handle oversight of the process of formalising informal operations.

A BROADER ISSUE: Illegal activities surrounding the mining sector go much deeper than operating a mine without a permit. As mentioned, extortion of mining operations has become a popular strategy among local armed groups. In March 2013 the second-largest armed guerrilla group, the National Liberation Army (Ejército de Liberación Nacional, ELN), attempted to exchange a kidnapped mining executive from Canada’s Braeval Mining Corporation for the company’s mining titles.

The Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia, FARC), which announced it would abandon its practice of kidnapping for ransom in 2012, has adopted a different tack as mining has also become a major source of revenue for the group. FARC is known for its use of extortion to obtain funds, a tactic it has extended to the mining community by charging miners, formal and informal alike, “taxes” on the importation of machinery. According to a report published in March 2013 by local news outlet Semana, five of the mines surveyed were actively being extorted for between 5% and 20% of gold extracted.

A report published by InSight Crime, a think tank dedicated to researching and reporting on organised crime in Latin America, found that FARC’s 36th Front charged $1600 for each piece of extractive equipment entering their territory, while also charging a $530 monthly “maintenance” fee.

REFORM: Reforms passed by Congress in 2010 aimed to make the process of obtaining a mining licence easier for small-scale informal miners. Informal miners who could prove five-year longevity of operations through a variety of means – including sales receipts, reliable witness testimony or tax documents – could apply for and receive formal mining permits.

However, limited progress has been made towards formalising the sector, particularly in areas where security is still an issue. “While 80% of mining in the Chocó region is informal, Decree 380, which sought the formalisation of these miners, is having little impact, as the state is not entering in different areas where informal mining has expanded, for security reasons,” Fabián Llano, manager at Meprecol, an exporter of precious metals mainly from the Chocó and Antioquia regions, told OBG. The general lack of progress has also led to criticism of governmental policy.

CRIMINAL OFFENCE: Despite previous, and likely future, policy attacks from opposition figures, in November 2012 President Santos introduced a bill to Congress – Decree 2261 – with several measures to fight illegal operations, including one that would make illegal mining a criminal offence. Other measures would see military and police forces granted the authority to destroy confiscated equipment and place more stringent restrictions on imported equipment. At time of press the bill was still under consideration by the national legislature.

ILLEGAL OPERATIONS: Illegal or criminal mining operations, as opposed to the illegal extortion of mining operations discussed above, are generally defined as those that involve severe environmental damage or otherwise support criminal activities.

There are two principal reasons for the rise in criminal mining activities in recent years. The first is pure economics – the soaring price of gold has made it an attractive resource for the multitude of criminal and insurgent groups. High prices of other precious minerals, such as coltan, which is used in the manufacturing of semiconductors, have also led to an increase in illegal operations. Furthermore, ever since the hard-fought war on drugs began to have tangible effects on coca production, many groups that relied on the narcotics trade have shifted to illegal mining operations to fund criminal activities.

INFORMAL, ARTISANAL & SMALL-SCALE: Informal operations, on the other hand, are considered to be those which are simply unlicensed. They are often referred to as traditional miners, some of whom have been mining for decades and generations. The wider informal economy extends throughout nearly every sector and is particularly widespread in rural areas, where agriculture and mining are common.

In July 2013 the National Mining Agency (Agencia Nacional de Minería, ANM) updated its progress report on the 19,629 licensing requests that it continues to sort through, stating it had cleared 88% of the requests, approving just 8% of these. Of the nearly 1400 approvals, only about 130 pertained to the formalisation of informal operations. Given that current estimates of informal operations number in the thousands, there is much work yet to be done.

If formalisation is the first step in further developing the sector, the second is to improve the operations of small-scale and artisanal miners. Most in the informal sector fall into one of these two categories. Artisanal miners are defined as small families and communities that rely on manual labour, while small-scale mining operations are generally more developed in terms of mechanisation. The National Office of Mining and Energy Planning’s (Unidad de Planeacíon Minero Energética, UPME) National Plan for Mining calls for the improvement of small-scale and artisanal operations, which often lack the access to financing, technology and security to successfully run operations.

INDIGENOUS GROUPS: Article 122 of the Mining Code establishes rights and regulates mining activities in areas with indigenous communities. The creation of indigenous mining zones by authorities gives native communities rights to the exploration and exploitation of surface and subsurface minerals. Many such communities are part of the informal sector, and through 2010, 17 indigenous mining zones were created covering a total area of 2100 sq km, according to figures from UPME’s document. In January 2013 the ANM announced it had approved the establishment of the 18th indigenous zone, a 71.8-sq-km plot of land located in Chocó.

The vast extent of the issues surrounding illegal and informal mining operations will be difficult, if not impossible, to tackle during the course of a single administration or, for that matter, consecutive ones. Numerous challenges still lie ahead, such as ensuring the consistent and fair determination of the informality or illegality of rural miners, given that judgement will come down to individual inspecting authorities. With guerrilla and organised criminal groups becoming increasingly dependent on mining revenues, strong government efforts to eradicate illegal operations are expected to continue in the short term, while the formalisation of informal operations will be a longer-term issue. “Institutional changes through creation of the ANM, the Department of Mines and the National Agency of Environmental Permits have strengthened capacity in the sector. The regulations issued by these bodies should help to bring stability to the industry,” Ken Kluksdahl, the president of AngloGold Ashanti Colombia, told OBG.