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Written by October 18 2017 0

The U.S. Agency for International Development (USAID) announced October 18 that it’s teaming-up with European-based gold buyers to promote environmentally, economically and socially responsible gold mining in Antioquia specifically and Colombia generally.

Noting that gold production in Colombia is up year-on-year -- and development projects underway are expected to triple output -- USAID nevertheless cited discouraging statistics indicating that only 12% of Colombian gold currently is produced safely and legally.

But new projects such as the European “Better Gold Initiative” (BGI) spearheaded by the Swiss Better Gold Association (SBGA) and the Swiss Secretary of State for Economic Affairs (SECO) could help boost safe and legal production – while also bringing greater benefits to more miners, according to USAID.

Switzerland hosts Europe’s four biggest gold refineries, which produce an estimated two-thirds of global finished gold, the agency noted.

The BGI would complement the USAID-sponsored “Oro Legal” (Legal Gold) program, which aims to convert many small, artisanal, illegal miners to legal mining, according to the agency.

“We establish contacts between small producers of legal gold and the gold refiners,” explains BGI director Thomas Hentschel. “Once they agree on a price, we move to the export phase, and with partners in the supply chain we seek companies that pay a special price and offer an additional incentive of up-to-US$1,000 per kilo, which [miners] can invest in social infrastructure, technical assistance and technology to substitute for the use of [toxic] mercury,” Hentschel added.

BGI already works with certification organizations including Fairtrade, Fairmined and the Responsible Jewelry Council.

However, SBGA is developing a parallel gold-buying strategy that includes 16 criteria for mining responsibility -- including environmental protection, labor rights, social responsibility and community relations.

Miners that comply with these criteria are considered “responsible gold producers” via a certification scheme that’s “less demanding and more flexible than existing certification systems,” Hentschel added.

In Colombia, the BGI scheme is already advancing toward certification with two companies in the department of Caldas, while BGI officials expect to see more miners in the Bajo Cauca region of Antioquia joining soon.

The goal is to achieve BGI certification and export of at least one tonne per year of qualified gold over the next four years, according to USAID.

Legal Gold More Profitable: USAID Study

Meanwhile, USAID noted that while Colombia has exported an annual average of 60 tonnes of gold in recent years, only 12.5 tonnes/year (20%) have been produced by legal miners. The other 80% of production by illegal miners fails to pay required royalties, taxes or obey environmental and labor-protection laws, USAID noted.

What’s more -- contrary to popular belief -- illegal miners lose between COP$18 million (US$6,000) to COP$30 million (US$10,000) per kilo of gold produced, compared to what they would earn via legal mining, according to a new USAID study.

The study examined a more-or-less typical illegal underground mining operation with seven employees working 25 days per month, extracting one kilogram of gold per 300 tonnes of rock mined each month.

That study employed baseline data including current international gold prices, the relative inefficiency of artisanal mining, the price paid by illegal versus legal gold buyers, and the relatively high price of mining explosives in the black market. Eliminating the high cost of illegal explosives would by itself cover much of the cost of converting to legal mining, the study found.

In the legal market, a package of “Indugel Plus” mining explosives including 154 sticks, 100 initiators and 200 meters of cord today costs about COP$700,000 (US$235), whereas the black-market cost oscillates between COP$2.5 million (US$830) to COP$5 million (US$1,600), the study found.

“With the money saved by buying legal explosives, miners could pay social security to their workers and make advances in environmentally responsible and safe mining,” explained Beatriz Duque Montoya, USAID’s “Oro Legal” coordinator.

Buyers of legal gold today pay miners 97.5% of the London gold reference price. But miners lacking certificates-of-origin get only 82% of the London reference price, the study found.

“If we assume that a small legal miner produces one kilogram of gold per month and the international reference price is COP$120,000 [US$40] per gram, then this miner would receive COP$117,000 [US$39] per gram or 97.5% of the reference price,” Duque said.

“On the other hand, the illegal miner would get, optimistically, COP$98 milllion [US$32,000] per kilo or 82% of the reference price. In a more realistic scenario, the illegal miner would obtain only 70% of the reference price, or COP$84 million [US$28,000] per kilo, which means that in the process of commercialization, the illegal miner would lose between COP$18 million [US$6,000] and COP$33 million [US$11,000] per month,” she concluded.

Besides losing money from illegal commercialization, the illegal miner also cuts net gold yield by using toxic mercury, the study found.

“It is proven that by using [mercury], losses of 40% to 50% of gold are realized,” according to the study. In contrast, when mercury-free processing is employed, then gold losses are only 8% to 15%, according to the study.

What’s more, if miners can achieve BGI certification, then they could earn a bonus up-to-COP$3 million (US$1,000) per kilo of gold -- and if they further achieve Fairtrade, Fairmined or Responsible Jewelry Council certifications, then bonuses could rise to as much-as-COP$12 million (US$4,000) per kilo, the study added.

Written by October 07 2017 0

Avianca – Colombia’s biggest airline – hailed an October 6 decision by a District Court Tribunal in Bogota declaring a strike by some 700 pilots belonging to the Asociacion Colombiana de Aviadores Civiles (ACDAC) labor-union as illegal.

ACDAC-- the smaller of two unions representing Avianca pilots -- represents a tiny fraction of the more than 22,000 Avianca employees that work in 26 countries. The ACDAC union said it would appeal the Tribunal decision to Colombia's Supreme Court.

About half of Avianca’s daily flights have had to be cancelled because of the ACDAC strike -- stranding thousands of travelers and hurting many businesses in Colombia that depend upon business-and-pleasure tourism.

In its lawsuit against the strike, Avianca contended that airlines are a “public service,” which under Colombia’s constitution forbids “public” union strikes.

However, Avianca also pointed out that even if such strikes conceivably could be allowed under the constitution, the 700 members of ACDAC shouldn’t be allowed to dictate labor terms to the 21,000 other employees of the company.

“After 17 days of illegal cessation of activities by the ACDAC pilots, which has gravely affected travelers, the economy, competitiveness and connectivity of our country, the Tribunal recognized the illegality of the strike pushed by this union,” according to Avianca. “Avianca hopes that given this court decision, the ACDAC pilots will now return to work at the earliest moment.”

In parallel to the court action, an arbitration panel organized by Colombia’s Labor Ministry would require ACDAC pilots to return to work while negotiations over contract terms would continue, Avianca pointed out. However, ACDAC has rejected this contention.

“As pilots return to work, we will continue to operate under contingency plans, aiming to serve our passengers without delays and with the security that has always characterized our operations,” added Avianca CEO Hernán Rincón.

Avianca pilots are already among the best-paid employees in all of Colombia and enjoy numerous perks. The ACDAC union, however, is pushing for a wage-and-benefits package equivalent to a 60% hike in pay – wildly in excess of the wage increases realized by all other workers’ unions in Colombia, and vastly in excess of the national 4% annual inflation rate.

One contract change proposed by Avianca but opposed by the union is usage of cell-phone messages to notify pilots of flight delays or cancellations. Today, pilots get such notices via motorized couriers, an archaic and costly system.

In response, the ACDAC pilots are demanding that Avianca buy them new iPads or laptops -- just to receive company messages and do telecommuting work.

The ACDAC pilots also are demanding a 40 hours/month cutback in work hours – meaning they’d work 160 hours/month instead of 200.

They’re also demanding a COP$2 million (US$680) payment for upgrading personal office spaces, a COP$300,000 (US$100) per month subsidy for internet and phone connections, and extra pay for telecommuting work -- equivalent to 300% of what they’re paid while flying.

The pilots also are demanding unlimited free vacation flights for themselves and their families, free medical insurance for family members, lifetime free medical care upon retirement, a 70% reduction in income tax payments, and a COP$500,000 (US$170) monthly bonus if planes occasionally transport “dangerous” materials.

Finally, the pilots are demanding a COP$6 million (US$2,000) contract signing bonus.

Entry-level copilots at Avianca start out with salaries of COP$9.4 million (US$3,200) per month but can reach COP$17 million (US$5,790) per month after several years of seniority. Avianca pilot captains start out at COP$18 million (US$6,000) per month but salaries can go as high as COP$28 million (US$9,540) per month with more seniority.

Written by October 04 2017 0

Medellin-based FCM Global announced October 3 that it has become the first Colombian medical-marijuana producer to win all four required licenses for cultivation, processing, manufacture and export of “low-THC” cannabis-oil extracts.

“Recently issued by the Colombian Ministry of Justice, this export license complements FCM’s existing regulatory approvals, granted to the organization in August 2017, to legally cultivate, process, and manufacture low-THC medical cannabis oil extracts,” according to FCM.

FCM is “well-positioned to create CBD [cannabidiol hemp oil] extracts at a low cost of production and to distribute finished oils for domestic and international markets with legalized medical/research frameworks,” according to the company.

“Our purpose is to serve as a collaborative partner to pharmaceutical firms, research organizations, and other wellness-focused companies, and to help develop new scientific formulations and extracts that meet our clients’ specific needs within these critical sectors,” added FCM CEO Carlos Velasquez.

Colombia’s regulatory framework, “ideal equatorial growing location, and deep talent pool of medical cannabis experience makes it the best place on Earth to produce scalable volumes of terpene-rich cannabinoid extracts in an environmentally-friendly way,” according to the company, which has offices in Medellin and operations in the nearby suburb of La Ceja, Antioquia.

FCM’s “co-sourced Colombia” model “enables finished goods manufacturers globally to benefit from Colombia’s comparative advantages in medical cannabis (accelerated and lower-cost research, cultivation, and oil extraction) without sacrificing levels of control, efficiency, or quality,” according to the company.

PharmaCielo Update

Another Medellin-based medical-marijuana company that’s well-along in obtaining all required licenses is PharmaCielo (see "PharmaCielo Buys Marijuana Farm, Nursery in Rionegro," Medellin Herald, July 25, 2016.)

Aside from PharmaCielo and FCM Global, other Colombian companies obtaining some (but not all four) licenses include Cannavida, Ecomedics, Cannalivio, Econnabis and Pideka, while 22 other companies have petitioned for licenses, according to a recent report from Colombian business newspaper Portafolio.

The proposed licenses are for operations in Antioquia, Cauca, Casanare, Magdalena, Meta, Santander, Cundinamarca, Tolima and Valle del Cauca, according to that report.

Written by September 27 2017 0

At a September 26 event celebrating the fiftieth anniversary of Medellin-based ISA -- Colombia’s national electric-power transmission operator and power-market trading hub – speakers praised ISA for revolutionizing and rationalizing Colombia’s power industry.

In a speech here at Medellin’s Plaza Mayor convention center, Colombia President Juan Manuel Santos recounted the painful history of Colombia’s catastrophic power outages for 13 months during 1992 and 1993, which cut a full three percentage points out of gross national product (“PIB” in Spanish initials).

That event spurred ISA to adopt measures that have since helped to avoid a repeat of similar power disasters.

However, Colombia’s heavy reliance on hydropower – about 70% of the national total – makes the nation especially susceptible to occasional “El Niño” droughts (as in 1992 and 2016) that slash water supply to hydroelectric plants, Santos warned here.

What’s more, global climate change could worsen this situation, which makes it even more important for Colombia to deploy more alternative sources including wind and solar power, which feasibly could rise from a 1% national share today to around 15% in years ahead, he added.

Aside from global warming threats, the Colombian electric power industry is facing radical market changes that threaten the historic business models of generators, transmitters and utilities, as noted by several panelists at the event.

Notably, Medellin Mayor Federico Gutierrez was among the audience members paying close attention to these warnings -- especially since dividends from the city-owned, multinational power utility EPM provide about 20% of Medellin’s annual income.

What’s more, EPM is part-owner of the under-construction, 2.4-gigawatt “Hidroituango” hydroelectric plant in Antioquia – which will be by far the nation’s biggest single power plant when it reaches full capacity in 2021. Future “El Niño” droughts aggravated by “global warming” could pinch EPM’s future revenues from that plant.

One of the panelists here -- Navneet Trivedi, chief operating officer of Vrinda, a New York-based electric power consultancy – warned that while ISA has enjoyed tremendous, profitable growth in moving electrons since its founding 50 years ago, the future for ISA likely will be one of less demand for long-distance, high-tension transmission.

Many factors account for this forecast, including greater efficiencies in power technologies and the growth of distributed energy generation (DEG) --including home, office and factory generation schemes that for example may employ diesel/natural gas generator-sets, or solar power paired with battery or hot-water storage.

Such efficiencies and innovations help explain why (for example) the Washington, DC, population has grown 13% in the last five years, yet electricity demand over that same period has fallen 6%, he said.

DEG, technology evolutions and efficiency schemes similarly are likely to cut demand for long-distance, high-tension power transmission and “change the role of the [power] grid” in Colombia, Trivedi added.

What’s more, Pablo Corredor – director of ISA’s Medellin-based power-trading subsidiary “XM” – pointed-out in his presentation that future growth of electric vehicles (EV) in Colombia could have mixed results: a favorable reduction in vehicle air pollution, but a potential power-market disruptor. Reason: EV’s potentially could represent gigawatts of stored power, newly made available to local grids through reverse transmission (vehicle-to-grid).

While Vrinda’s Trivedi told Medellin Herald that “I don’t think vehicles-to-grid will be an easy solution,” Trivedi did emphasize that ISA, power generators and utilities will need to adjust their business models radically to accommodate the coming changes in power supply and demand.

“There are multiple ways” to address these challenges, he said. “But they [power-industry players] need to focus more on services than product delivery,” he added.

In a recent column published in the U.S.-based energy journal Energy Central, Trivedi explained that “there are at least three values/colors of electricity: energy, infrastructure and services, instead of one black-and-white value: kilowatt-hours (kWh).

“In their zeal to simplify electricity charges, utilities have made a monolithic unit (kWh) and when that was not sufficient they pushed [power regulators] for a fixed charge (demand charge). Even the vocabulary is wrong! There is nothing fixed about fixed charges -- they vary and in fact now utilities want to see steep increase in them.”

On a parallel front, emerging technologies that could radically change power markets would benefit from carefully supervised demonstration-and-trial programs such as the “NY REV” project now underway in New York, according to Trivedi.

“We recommend that a framework should be developed and institutionalized for demonstration projects to ensure that NY REV [or a similar program elsewhere] is implemented with its intended benefits,” he wrote in a recent column.

Participants in technology demonstrations need to “publish methodology, selection criteria, implementation approach and monitoring mechanism for demonstration projects,” while “demonstration projects should clearly identify the need for bringing private capital, proven technology and examples of service models,” he added. “Quantification of benefits should be part of the monitoring of demonstration project governance,” he concluded.

ISA president Bernardo Vargas added in his presentation here that the Colombian power industry is heavily regulated. As a result, new-technology demonstration programs and new business models will require effective communications and close cooperation between the power industry and government regulators.

“We need to avoid obsolescence,” he added. “We have profound government restrictions on what we can do, so we have to work with government to be proactive.”

Written by September 20 2017 0

The U.S. Agency for International Development (USAID) and Medellin-based gold-mining giant Mineros SA jointly announced September 20 that they’re boosting funds and technical aid to formerly artisanal or illegal miners in the Bajo Cauca region of Antioquia.

“The productive and commercial capacity of beekeepers of Bajo Cauca will be strengthened thanks to the agreement established between USAID and Fundacion Mineros SA, and the Association of Beekeepers of Bajo Cauca and the South of Bolivar (Asapibas), through the ‘Oro Legal’ [Legal Gold] program,” according to the agency.

Funding for the program now tops COP$2 billion (US$692,000).

“The direct beneficiaries are 88 families from Asapibas, who contributed with the initial assembly of the core [beekeeping] laboratories. In the first phase of the project they were given tools, elements of protection, inputs, technical assistance and training. In a second phase they will receive a certain number of hives to expand their apicola [bee-honey] production units.

“The goal is for each family to have at least 45 populated hives, which will allow them to generate monthly income of between one and two minimum wages,” which in Colombia is COP$738,000/month or about US$255 today.

The “Oro Legal” project organizers first established two test laboratories for the production of biological cores -- in the Naranjal village of the municipality of Zaragoza and the second lab in the village of Bocas de la Llana, municipality of El Catre .

“These laboratories will be responsible for supplying the bee population to 3,180 hives, which will be delivered to families for the production of honey and other by-products,” according to USAID.

“The Mineros S.A. Foundation for its part provided the premises for the assembly of the laboratories, professionals for installation, specialized advice with experts from the Universidad Nacional and the business strengthening program ‘Avanza,’ in addition to the assembly of an associative plot for a laboratory adjacent to the mine La Ye.

“In addition to receiving materials and supplies for the apiaries, the beneficiaries were trained in the production of apitoxin, pollen and propolis, by-products of the hive that will represent additional [income] resources," according to the agency.

“Before, I worked as a barequero [informal gold miner],” added Juan David Pedroza, a member of Asapibas. “Now that I know the world of bees, I bet on beekeeping. After training, I also got the opportunity to work as an extension technician on this project,” he added.

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About Medellin Herald

Medellin Herald is a locally produced, English-language news and advisory service uniquely focused upon a more-mature audience of visitors, investors, conference and trade-show attendees, property buyers, expats, retirees, volunteers and nature lovers.

U.S. native Roberto Peckham, who founded Medellin Herald in 2015, has been residing in metro Medellin since 2005 and has traveled regularly and extensively throughout Colombia since 1981.

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