Colombia Energy Sees Revitalized Colombian Transportation System Reducing Future Coal Shipping Costs

Colombia Energy Resources, Inc. Cerx +12.63%  , a metallurgical coal exploration and production company operating in the republic of Colombia, anticipates transportation cost savings from the planned multi billion dollar infrastructure renovation by the Colombian government and private industry. 

As a direct benefit of the infrastructure investments being made, Cerx expects to use both the railroad and river barge system to bring its metallurgical hard coking coals to international markets.

Recently, the Colombian government released details of its plan to invest more than US$7.5 billion to restore and expand the country's rail system and improve the Magdalena River. 

Its objective is to strengthen these two main transportation routes to reduce long distances between the production and consumption centers and the sea ports, thereby increasing exports.

According to the Colombian Chamber of Infrastructure, the current lack of multimodal transportation adds an estimated 80% to the cost of transporting coal.

The project calls for the restoration of 1,672 km of existing rail lines, of which only 55% is currently in use, and for the construction of new systems and branches.

For the Magdalena River, Colombia and local municipalities plan to invest more than US$135 million over four years in order to restore navigability to 1,500 km of the river. 

This is expected to increase transportation capacity from 35 million tons annually to 90 million by 2.018.

The improvements to the rail system are expected to allow half of the total coal production in the country to be moved by train, with the rest transported by the river. 

The Colombian Mines and Energy Minister reportedly projects coal production to reach 124 million tons in 2.014, climbing to 152 million by 2.020.

The government program is supported by capital contributions from seven private companies : two Brazilian, one Swiss, one Israelian, and three Colombian.

"We want to have as much foreign participation as possible," said Luis Fernando Andrade Moreno, president of Colombia's Infrastructure National Agency (Ani). "

This is the most ambitious program that we've ever undertaken in Colombia for infrastructure. 

And I think it's a great opportunity for U.S. companies."

Colombia created Ani to oversee development and ensure maintenance of this new infrastructure. 

Ani estimates that its overall infrastructure investment more than doubled by the end of 2011 to nearly US$4 billion, and it could pass US$7 billion by 2.014.

Colombian Energy Resources' Ceo Ronald G. Stovash, commented : "the revitalized rail and river transportation system will be a tremendous boost to our outlook for long term growth and increasing profitability. 

Currently we can only make use of truck transport. 

While still economical for us, it is far less efficient and cost effective versus rail or water modes of transport. 

As Cerx moves to more cost effective transportation, the savings will drop right to our bottom line. 

Eventually, we see the potential for Colombian metallurgical coal to be among the lowest cost production globally."