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April 10, 2017

Canadian miner Gran Colombia Gold has filed a US$700 million lawsuit against Colombia under the Colombian-Canadian free trade agreement after the government ordered the company to cease operations at the El Burro site in Marmato until it has further consulted with local residents.

The Marmato project has been plagued by controversy ever since operations began 10 years ago, with heavy resistance from traditional mining communities of the 500 year-old town.

The company has been unable to remove illegal miners from the area — by some reports, illicit mining is a US$2.5 billion industry in Colombia.

Gran Colombia’s plan to flatten a mountain and create an open pit mine has also met with resistance. Critics say the initiative would not only destroy the livelihoods of the miners, but also the surrounding community and the environment.

Marmato is one of the company’s two key mining assets and is estimated to contain 14 million ounces of gold. In 2016 it accounted for 16 per cent of the company’s total gold sales, more than US$29 million.

Issues in Marmato could add to existing doubts in the company’s future prospects, with its stock price having declined from $11.50 just five years ago to around $0.10 a share today.

The court’s decision could set a dangerous precedent, as Segovia, the company’s second key asset, also faces opposition from traditional mining communities.

The path to resuming operations in Marmato now seems unclear with Gran Colombia unlikely to give up its stake in such a profitable region and the local community unwilling to capitulate.

Marmato residents cheered the government’s decision. “The people of Marmato are happy, as what the court has effectively ratified is our right to continue living off the land as we always have,” said Rubén Darío Vanegas, president of the Association of Traditional Miners.

Officials from Gran Colombia were unavailable for comment.

Although many details are confidential, Gran Colombia’s suit alleges that the local government failed to evict illegal miners from their sites of operations in Marmato and Segovia, and didn’t stop the Marxist armed guerrilla group, the ELN, from interfering with their efforts to extract gold in the province of Antioquia.

The company also says the state failed to maintain public order by preventing strikes and riots which have resulted in damage to property. It claims that it has already had to halt operations several times due to the failures of local governments to comply with their legal responsibilities.

Gran Colombia Gold is not the only international company to be locked in a legal battle against the Colombian government, with South African miner, AngloGold Ashanti, also struggling to retain access to 33 million ounces of gold at their La Colosa site.

The Ministry of Commerce now has six months to find a resolution with the company, otherwise the case will be escalated to the Arbitration Committee of the World Bank. Officials from the ministry declined to comment due to legal sensitivities.

Vanegas described the lawsuit as a “shameless act” and called on the Canadian government to review the foreign activities of its companies.


Financial Post