Glencore Plan That Halves Coal Royalty Deemed Legal by Colombia
(Bloomberg) — Glencore Plc may use multiple concessions at its La Jagua coal mine in northern Colombia to reduce royalty payments by 50 percent, according to the Andean nation’s mining agency.
Negotiations over royalties at La Jagua, mined by the Swiss commodities trader’s subsidiary Prodeco, have been ongoing for more than two years as Colombia seeks to maximize revenue from its largest export after oil, mining agency president Natalia Gutierrez said.
“Prodeco has shown that legally there are separate companies, despite them being holders of the five concessions,” Gutierrez said yesterday in an interview. “According to consultations with the regulator, we can’t say that it’s the same project.”
Large-scale mining operations pay a 10 percent royalty in Colombia, compared with 5 percent for small operations. The five permits at the open-pit La Jagua mine are held by three companies, purchased in 2005, 2006 and 2007, Glencore said in e- mailed response to questions.
Unification
“The concessions awarded by the ministry of mines provides that royalties are paid by concession, not by mine,” the company said.
Prodeco produced 18.6 million tons of coal at its two Colombian mines in 2013, making it the third-largest producer after Cerrejon and Drummond Ltd. Colombia aimed to produce approximately 95 million tons of coal in 2014.
The mining agency extended one of the concessions at La Jagua last year to allow discussions to continue. Prodeco may ultimately unify all five and pay the higher royalty rate, Gutierrez said.
“The mining development won’t go ahead if the concessions aren’t integrated,” said Gutierrez, a former deputy mining minister.
Last month the agency completed Colombia’s first ever industry-wide inspection of over 10,000 mining concessions. The results show large companies including Prodeco, Drummond, Cerrejon and BHP Billiton Ltd.’s Cerro Matoso nickel mine are largely complying with Colombian laws, she said.
To contact the reporter on this story: Andrew Willis in Bogota at awillis21@bloomberg.net To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Jim Efstathiou Jr., Robin Saponar
