Social conflicts and illegal mining to remain industry flashpoints in 2024

Though mining is an important economic driver in Latin America, the industry faces strong resistance from some local communities and environmental activists, which is hindering operations. 

In Peru, protests have repeatedly halted operations at Las Bambas, one of the largest copper mines in the world; in Ecuador, a referendum banned mining in the biodiverse Chocó Andino area; and in Panama, the supreme court declared the State's contract allowing First Quantum Minerals to operate its giant Cobre Panamá copper mine unconstitutional.

BNamericas speaks with Lucas Marsden-Smedley, a senior consultant at FTI Consulting, about the regional mining outlook and why Colombia urgently needs to address illegal mining.

BNamericas: What is the situation in the mining sector in Latin America? Are more social conflicts on the horizon?

Marsden-Smedley: We see an increase in protests by indigenous communities and activists across the continent, but the protests are now much more coordinated. They are much more efficient because those who protest know how to disrupt trade chains and impact operations.

For example, at the beginning of the year, the Las Bambas copper mine in Peru closed due to protests.

Another aspect is that the protests are giving way to major policy decisions, for example, what we see in Panama, or with the mining referendum in Ecuador [which took place alongside the presidential elections in August].

We recommend constant monitoring of the communities to understand exactly who is who, who is in the territory, what is moving in the territory, because no protest comes out of nowhere.

The protests in Panama were being organized about eight months ago. Regardless of the terms of the contract, there were still going to be protests because they were organized a long time ago.

BNamericas: What can Colombia’s mining sector expect in 2024?

Marsden-Smedley: We are going to see a more important role for the State and that is going to carry risk. We'll see more resistance to projects and will continue to see illegal mining, which is currently the largest illegal activity in Colombia.

What is most important for mining companies is legislative certainty, knowing that the rules of the game won’t change. Regarding Colombia, it should also be noted that the permitting process is taking longer. Environmental agencies and other regulators are against giving exploration permits and that has caused big problems.

Looking at the 30-year horizon, we know that there is a great possibility of at least one populist president emerging and the question is how much power that president will have and if he will be able to reduce the powers of institutions.

At a general level, countries like Colombia, Chile, Peru, Brazil or Paraguay have independent and solid legislative institutions and that is a great opportunity and a great advantage in the eyes of investors, but there are countries such as Argentina where history is different.

BNamericas: How do you see the risk of illegal mining in Colombia?

Marsden-Smedley: Illegal mining is the biggest risk in this country.

The figures surprise those who are not Colombians: Armed groups earn US$1.9bn a year from cocaine, but it is estimated that they earn US$3bn from illegal gold, which is a huge business because there is less risk of punishment from the State, there is no risk of extradition, gold is a legal product so it is much easier to transport and launder.

Gold is much more profitable than cocaine and is being widely used to launder money.

This illegal activity is greatly affecting mining, artisanal mining and the communities that live near these operations.

Colombia banned the use of mercury in mining in 2018, and since then smuggling has increased. Much of it comes from Mexico and is used in illegal gold mining, which has created major water pollution problems in indigenous communities, to the point that Colombia is the third country in the world with the highest mercury emissions and the country with the largest per capita emissions of mercury.

Illegal mining should be the first point the mining law addresses because it is the greatest risk that affects mining operations, their workers and the country's economy.

BNamericas: Will Colombian mining projects advance in 2024?

Marsden-Smedley: President Gustavo Petro is a climate activist and one of his goals is the energy transition, but we have not seen that translated into certain policies.

If we want to meet climate goals, we have to double the consumption of critical minerals every five years. There is huge demand, and Colombia is in a very good position to diversify its metal exports and reap benefits.

Colombia is a producer of zinc and nickel, crucial minerals for the transition not only for electric vehicles but also for energy storage, and it has significant copper resources, which points to a bright future for mining.