Colombia mining minister sees coal exports hitting 100 mil mt by 2.015

Colombian annual coal exports should reach 100 million mt by 2.015, up 33% from current levels, as a flood of foreign investment boosts coal production, the new mining and energy minister, Mauricio Cardenas, said last week.

Colombia's coal projects were attracting investors because of ample reserves, the coal's relatively high calorific value, and the country's proximity to Atlantic ports, Cardenas said. 

Also, Colombia's largest mines are open pit operations from which coal extraction is relatively straightforward, he said. 

"We aren't in the big leagues of production, but we are in exports partly because Colombia uses very little coal, generating most of our electricity with hydropower," said Cardenas who took the cabinet job after three years at the Brookings Institution research organization in Washington DC. 

"So we have a lot to export. 

And with coal prices where they are, royalties are becoming a very important source of revenue for the government," he said. 

The country will export 75 million mt of coal this year. 

Colombian thermal coal was trading at about $100/mt on an FOB basis in the week ended October 28, according to Platts assessments. 

This is five times the average price of $20/mt 10 years ago, said Alfonso Saade of Fenalcarbon, the Colombian coal producers' association. 

Colombia currently ranks fifth in terms of coal exports, behind Australia, Indonesia, South Africa and Russia. 

The richness of Colombia's coal reserves is what led US oil major ExxonMobil to invest billions in the country's coal industry in the 1970s as the original developer of Cerrejon, the largest coal mine that is an open-pit operation in Guajira province. 

It subsequently sold its interest in the mine to a consortium comprising Glencore, BHP Billiton and Anglo American as equal partners.

Guerrilla violence and drug wars kept many investors away from Colombia's coal reserves until recently. 

Now with security improving thanks partly to $7.6 billion in US military aid given under Plan Colombia. 

At the same time, global mining companies are trying to position themselves for an explosion in exports over the next decade as Chinese and Indian coal-dependent economies continue to grow.

"Colombia is like the last frontier for many of these investors," Cardenas said. 

This year, Colombia expects to receive $4.5 billion in royalties from natural resource sales, about double what it got in 2.006, he said. 

Coal, along with petroleum and tourism, are top generators of foreign currency for the country.

The commerce ministry announced on Monday that foreign direct investment in mining and petroleum projects reached $9.6 billion year to date through October 14, a 52% increase over the same period in 2.010. 

Investment in energy and mining projects accounted for the lion's share of 83.4% of overall year to date foreign direct investment in Colombia, said Sergio Diaz-Granados, the minister of Commerce, Industry and Tourism. 

Three Brazilian mining giants Vale, Votorantim and Eike Battista's EBX Group are among the foreign companies that have established presences in Colombia recently. 

In June, Drummond sold a 20% stake in its open pit mine in northern Cesar state to Japan based trading group Itochu for $1.5 billion. 

Cardenas said construction of a new rail line to connect coal mines in Cesar state to Colombia's Atlantic coast was almost 80% complete. 

The line runs parallel to an already existing coal transport line owned by Drummond and Glencore, which are financing the new line as well. 

Both companies are planning to expand their Colombian mines in coming years. 

Another 520 km of railroad is planned to connect coal mines in Colombia's interior to its Atlantic ports, said Fenalcarbon's Saade.