Wednesday, August 21, 2019

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Medellin-based electric power giant EPM announced August 15 that local leaders from communities around Puerto Valdivia, Antioquia are now participating in a broad government/citizen/EPM expert panel examining possible stability issues with the main rock massif adjacent to the giant Hidroituango hydroelectric dam in Antioquia.

The decision to include the “MEDAV” (Mesa de Dialogos y Acuerdos-Afectados por Hidroituango, Valdivia) leadership group came following an August 10 letter from MEDAV to a Colombian court judge charged with overseeing the multiparty panel now studying the Hidroituango stability issue.

In its letter, the MEDAV group pointed out to the judge that the left-wing political organization “Rios Vivos” – a current member of the multi-party study panel -- fails to represent the affected Valdivia community and “hasn’t made any positive contribution to solving the problems generated” by the May 2018 collapse of a Hidroituango diversion tunnel.

That tunnel collapse last year triggered a flood that temporarily forced evacuation of many homes in Valdivia downstream of the dam.

“Rios Vivos” has fought the Hidroituango hydroelectric project since its inception -- and publicly calls for the dam’s destruction now, no matter whether it would operate safely, and no matter that such a destruction would cost Antioquia untold billions of dollars in future public revenue via the production of zero-emissions, clean electricity for all Colombian citizens.

Instead, Rios Vivos “has dedicated itself to creating panic and delaying the process of bringing about positive solutions for our community,” according to MEDAV.

Since the Hidroituango dam has now been completed, and since the Cauca River is now safely flowing over the dam’s engineered spillway, Valdivia residents are gradually returning to homes previously evacuated.

“Persons and families that suffered from the [sudden, temporary flooding that resulted from the diversion tunnel collapse in May 2018] don’t consider themselves ‘victims’ of Hidroituango, but rather ‘temporary casualties’ affected by the [temporary flooding] -- and we value the efforts by EPM to repair all the damages caused,” according to the MEDAV letter.

“Contrary to what ‘Rios Vivos’ claims, the communities around Puerto Valdivia have built relations of trust with EPM, because this company has kept us informed about the measures they have taken to repair the damages and to minimize the risks of the project. In addition, EPM has complied with the commitments they have assumed to help those affected,” the letter concludes.

In an August 15 press bulletin, EPM added that the technical panel has now met six times, with a seventh meeting scheduled August 28 and a site visit scheduled for September 2-3.

The panel eventually aims to produce a technical study analyzing the stability of the rock massif adjacent to the dam -- in order to decide whether the Hidroituango project should continue to move forward.

The US$5 billion Hidroituango project is scheduled to start producing power in late 2021, then reach its full 2.4-gigawatts capacity in 2024 -- providing 17% of the entire Colombian electric power output.


Medellin-based socially responsible gold miner Mineros SA announced that its second quarter (2Q) 2019 net income fell 41% year-on-year, to COP$11 billion (US$3.2 million).

“The decrease in net income is mainly explained by an increase in financial expenses -- close to COP$6.6 billion (US$1.9 million), derived from the acquisition of Gualcamayo [mining in Argentina], as well as [currency] exchange [costs] on the order of COP$3.7 billion [US$1.07 million) and higher exploration expenses” for proposed mining projects in Argentina and Chile, according to Mineros.

On the other hand, earnings before interest, taxes, depreciation and amortization (EBITDA) rose 47% year-on-year, to COP$94 billion (US$27 million). EBITDA margin for the latest quarter rose slightly, to 31.5%, compared to 31.1% in 2Q 2018, according to Mineros.

Revenues also rose 45% year-on-year, to COP$298 billion (US$$86.7 million), “explained by a 30% increase in production due mainly to the new ounces from our [recently acquired] operations in Argentina, at an 11.8% higher sale price of gold” as measured in Colombian pesos, according to the company.

Operating costs also rose 55% year-on-year, hitting COP$235 billion (US$68 million), “due to the operating costs (about COP$75 billion/US$22 million) in Argentina that did not exist in the prior year, as well as greater purchases of mining material in Nicaragua [at COP$9.3 billion/US$2.7 million],” according to Mineros.

Gross profit for 2Q 2019 grew 17%, reaching COP$63 billion (US$18 million), with a margin of 21.2%, versus COP$54 billion (US$15.7 million) with a margin of 26.3% in 2Q 2018.

Gold production rose 30% year-on-year, of which Colombia accounted for 15,172 ounces, while Nicaragua contributed 31,610 ounces and Argentina contributed 23,935 ounces.

Full-year 2019 gold production is now estimated in the range of 280,000 to 300,000 ounces of gold equivalent, with “expectations that gold prices continue with high volatility and with an upward tendency,” according to the company.

Colombia Permit Update

Regulatory permitting delays had been holding-up expansion of Mineros' environmentally responsible alluvial mining in Antioquia, although “we have made some progress,” according to Mineros.

The company recently won permit approval from the Forest Directorate of the Ministry of Environment, following an environmental study on possible impacts on epiphytic species. The company also eventually convinced Corantioquia to lift a prior ban on riverbank mining.

On another front, Mineros recently completed a required impact study for Colombia’s national environmental licensing agency (ANLA) for some proposed logging near a mining site. Then, in an August 16 filing with Colombia's Superfinanciera corporate oversight agency, Mineros announced that it has finally won crucial ANLA approvals. 

"Mineros S.A. informs the market that via 'Resolución No. 01612' of August 15, 2019, ANLA resolved our request to modify the environmental management plan for our alluvial operation, unifying some of the resource-use permits," according to the company announcement. 

"Through this modification it is [now] possible to continue our alluvial operation, which had been restricted because of delays in obtaining permits," the company added. 


Medellin-based multinational Grupo Orbis – which includes paint manufacturing giant Pintuco – on August 15 reported COP$6 billion (US$1.7 million) net income for second quarter (2Q) 2019, a big reversal from a COP$17 billion (US$4.9 million) net loss in 2Q 2018.

Earnings before interest, taxes, depreciation and amortization (EBITDA) skyrocketed by 490% year-on-year, to COP$43.6 billion (US$12.6 million), according to the company.

“This good result was due to the dynamics of its businesses in Colombia and its subsidiaries abroad,” according to Orbis.

“In the paints business, [profits growth were from] significant growth of Pintuco stores and high performance coatings in Colombia, the recovery of profitability in Central America, and the optimization of raw material costs and operational expenses,” according to the company.

“In the [Andercol] chemical business, the good results of Brazil and the profitability of the companies in Colombia [can be credited to] finishing the process of stabilization of the new production plants.

“In O-tek [water-treatment technologies subsidiary], results are tied to the good performance of our subsidiary in Argentina and in the [favorable] positioning of the cleaning business, with 7.3% growth in its brands,” according to Orbis.

For first half (1H) 2019, corporate-wide revenues grew 4.11% year-on-year, to COP$680 billion (US$197.6 million), while gross profit rose 12%.

“These results are due to various dynamics within our businesses, among which the following stand out: a 10% increase in sales of the paints business, where the decorative painting and high performance coatings businesses stand out; the completion of the transfer of Colombian plants for chemical business to Cartagena; and better results of the group’s subsidiaries abroad, especially in Brazil, Central America and Argentina,” according to the company.


After decades of delays, a new, COP$1.1 trillion (US$317 million), 24-kilometers-long highway -- including Colombia’s longest tunnel – on August 15 opened to link Medellin directly to the Jose Maria Cordoba (JMC) international airport at Rionegro.

According to Concesion Tunel Aburra-Oriente (CTAO, the project consortium involving 74 companies), the new highway -- including two long tunnels, one short tunnel and nine viaducts -- would cut travel time from Medellin to JMC to 18 minutes, compared to 45 minutes currently.

The route also will cut other personal transit times to and from Medellin and the rapidly growing “oriente” (east of Medellin) region. Drawn to its pleasurably cooler climate, cleaner air and more wide-open spaces, Medellin residents are increasingly moving east into thousands of new “oriente” homes and businesses every year, toward what locals dub “Medellin’s second floor.”

“The Aburrá-Oriente Road Connection is a mega-project that connects the Aburrá Valley Metropolitan Area with the San Nicolás Valley -- two regions of great importance for our [Antioquia] department, including large-scale industrial, tourist, environmental and mobility dynamics,” according to CTAO.

“Starting in Medellín, in the Baltimore sector of the Las Palmas highway, a new road interchange allows access to the first tunnel, with a length of 774 meters.

“After this tunnel, there is an open-sky track in the east-central area of the Aburrá Valley, then comes a second tunnel of 8.2 kilometers in length.”

A parallel tunnel alongside the new tunnel has already been excavated in anticipation of converting the two-lane highway into four lanes -- divided for faster travel in both directions.

While some politicians and local residents historically had raised concerns that the tunnel might drain vital groundwater from local farms near the route, the CTAO consortium responded by employing the most advanced European tunnel-construction technologies, according to CTAO.

Beyond employing a special cement to prevent water escape into the tunnels, the consortium also installed 77 groundwater monitoring systems, according to CTAO.


The “Covipacifico” highway construction consortium announced August 14 that its engineers have begun initial work towards recovery of a 300-meters-long section of the crucial, under-construction “Pacifico 1” highway wiped out by a landslide last May.

The landslide not only destroyed the new section of highway but also wrecked a 300-meters-long section of existing highway below, blocking the traditional route between Medellin’s southern suburb of Caldas and the town of Bolombolo alongside the Cauca River.

As a result, freight traffic southwestward from Medellin toward the main Pacific port of Buenaventura has been forced to take lengthy and costly detours. Final resolution of the landslide problem is likely to take many more months.

“After the [land] mass movement that happened suddenly on May 28 that affected the existing road and the Pacifico 1 divided highway under construction, Covipacifico now works constantly and responsibly in the search for solutions that allow to recover mobility in the Sinifaná sector (PR 59 + 600 and PR 60 + 000) of Colombia Route 6003,” according to the consortium.

“Thanks to the best climatic and safety conditions that have occurred in the affected area in the last 15 days, it has been possible for specialist [engineers] to access the site in order to establish mitigation measures.

“Currently, Covipacifico through its construction contractor mobilizes the resources necessary to advance the actions recommended by the experts.

“Part of the approaches to be implemented [include] the construction of canals and drain structures for water management, critical [land-] mass management, implementation of deep drains in slopes and control structures at the top of the slope.

“Additionally, an early warning monitoring system will be implemented that will allow for timely reaction to any eventuality.

“The implementation and progress of this mitigation phase will define technical alternatives that enable removal and recomposition activities in the area, and thus seek to obtain a temporary, gradual and secure solution for [traffic] user mobility,” according to the consortium.


Toronto, Canada-based Gran Colombia Gold (GCC) – operator of Colombia’s largest underground gold-mine in Antioquia – on August 14 reported second quarter (2Q) 2019 adjusted net income of US$14 million, up from US$8.2 million in 2Q 2018.

Meanwhile, for the first half (1H) 2019, adjusted net income rose to US$27 million, up from US$18.1 million in 1H 2018.

“Improved earnings in the second quarter and first half of 2019 compared with the corresponding periods last year continued to reflect the significant contribution of Segovia [Antioquia] operating performance in 2019 on revenues, total cash costs per ounce, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and income from operations,” according to GCC.

“With the recent run up in gold prices, well above the average for the first half of this year, our second half earnings, cash flows and cash balance are poised to benefit from our leverage to gold prices,” added GCC CEO Lombardo Paredes.

“We’ve continued to improve our liquidity in the second quarter, bolstering our mid-year cash position to US$51.3 million, including the net proceeds of the convertible debentures financing completed in April.

“The recently announced high-grade results from our drilling program at Segovia in the first half of 2019, and the work we are doing to identify and prioritize step out and brownfield drilling targets, increase our confidence in the potential to add mineral reserves and extend mine life at our flagship operation.”

GCC raised its annual gold production guidance for 2019 to a range of between 225,000 and 240,000 ounces. Total gold production of 57,882 ounces in the second quarter of 2019, up 9% over the second quarter last year brought the total for the first half of 2019 to 118,483 ounces, up 12% over the first half last year.

“With another 18,166 ounces produced in July, the company’s trailing 12-months’ gold production at the end of July 2019 now stands at 229,776 ounces, up 5% over 2018’s annual production,” according to GCC.

“Despite a 1% year-over-year decline in spot gold prices to an average of $1,307 per ounce in the first half of 2019, the company reported a $6 per ounce improvement in realized gold prices to an average of $1,296 per ounce in the first half this year.

“This was the result of lower charges in a new refining contract that the company entered into in January 2019 with an international refinery, saving approximately $20 per ounce sold compared with its previous arrangement.

“With the ‘London P.M. Fix’ gold price ranging from a low of $1,390 per ounce to a high of $1,506 per ounce thus far in the third quarter, the company expects to see a significant increase in revenue and operating cash flow in the second half of 2019 compared with the first half of 2019 if spot gold prices remain at the current level.”

Total cash costs per ounce came-in at $655 per ounce in 2Q 2019, down from $696 per ounce in the 2Q 2018, bringing the average for the first half of 2019 to $638 per ounce, down from $683 per ounce in the first half last year.

Adjusted EBITDA rose 25% year-on-year to US$33.2 million, bringing the total for the first half of 2019 to $68.5 million, up 27% over the first half last year.


Exito Posts 2Q 2019 Net Loss

Thursday, 15 August 2019 11:07 Written by

Medellin-based multinational retail giant Grupo Exito on August 14 reported a COP$18 billion (US$5.2 million) net loss for second quarter (2Q) 2019, down from a COP$114 billion (US$33million) net profit in 2Q 2018.

Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) were flat year-on-year, at COP$868 billion (US$252 million).

Meanwhile, operating revenue (measured in Colombian pesos) rose 12.3%, to COP$14.5 trillion (US$4.2 billion).

Revenue growth was strongest in Brazil (up 11.2%) and in Colombia (up 3.3%) thanks to the “multichannel” strategy, which combines conventional store sales with growing on-line (internet) and home-delivery sales.

Colombia sales so far this year have benefitted from a 47% jump year-on-year in internet and home-delivery sales, totaling 1.7 million shipments in first-half 2019, representing 4.7 % of total sales of Grupo Éxito Colombia, according to the company.

“The positive results of the organization in Colombia were also leveraged on [store] innovation, with the Éxito ‘Wow,’ Carulla ‘FreshMarket’ and ‘Surtimayorista’ value formats, which grew double-digit sales,” according to the company.

Meanwhile in Brazil, the Grupo Pão de Açúcar (GPA) division “continued to report outstanding figures, due to the consistent growth of the ‘Assaí’ wholesale model and the digital transformation actions,” according to Exito.

As for Uruguay operations, this division “had a solid growth in profitability.”

As for Argentina operations, this division “achieved positive EBIDTA margins amid a challenging macroeconomic context,” according to Exito.

“The joint work between the four countries where the company has a presence continues to focus on digital transformation initiatives and synergies of best commercial practices and joint purchases,” according to Exito.

Grupo Éxito ended the second quarter of 2019 with 1,510 food outlets: 531 in Colombia, 864 in Brazil, 91 in Uruguay and 24 in Argentina, with a consolidated sales area of more than 2.8 million square meters.


Medellin-based insurance giant Grupo Sura announced August 14 that its second quarter (2Q) 2019 net income jumped 37.4% year-on-year, to COP$951 billion (US$276 million).

“An improved performance on the part of its investment portfolios along with higher revenues obtained from its associates via the equity method were key factors in achieving this level of results,” according to Sura.

“On a consolidated level, operating revenues stood at COP$10.5 trillion [US$3.05 billion] for a growth of 13.3%, this driven by higher levels of investment income (+50.1%) revenues obtained from associates via the equity method (+48.0%) and higher revenues from services rendered (+21.9%).

“On the other hand, operating expense came to COP$9.0 trillion [US$2.6 billion] for a 11.7% increase, which is lower than that recorded for operating revenues. Here, lower adjustments to reserves compensated for higher costs of services rendered for our healthcare business as well as higher broker commissions and other expenses.

“Consequently, operating earnings came to COP$1.5 trillion [US$436 million], for a growth of 23.7%.”

Sura’s “Asset Management” division net income jumped 48% year-on-year, to COP$430 billion (US$125 million).

Meanwhile, the “Suramericana” insurance division “continues to post significant growth rates with written premiums rising by 12.3% and revenues from services rendered increasing by another 21.9%,” according to Sura.

“The reduction in the retained claims rate is worth noting -- this including net level reserves -- as well as higher investment income that rose by 15.1%. However, in spite of these good growth dynamics, year-to-date net income at the end of 2Q 2019 reached COP$173 billion [US$50 million] for a decline of 33%, this due to certain specific circumstances that are not comparable with 2018, such as:

“- Life insurance segment: an increase in expense related to the latest tax reform which taxed with value-added tax (nondeductible) the commissions paid on sales of life insurance policies.

“- Property and casualty insurance segment: showing higher reinsurance costs in Chile and the inflation adjustment expense in Argentina that began to be accounted for in October 2018.
“- Healthcare segment: the current situation of the public healthcare system in Colombia produced a considerable reduction in the net earnings of the mandatory healthcare business (EPS),” according to the company.

Grupo Sura profits during 2Q 2019 also benefited from its partial holdings in Medellin-based banking giant Bancolombia and Medellin-based foods multinational Grupo Nutresa, “along with lower interest expense and the positive [Colombian peso to U.S. dollar] exchange rate effect corresponding to hedging arrangements as well as exchange differences on the Group’s indebtedness,” according to the company.


Medellin-based highway construction giant Construcciones El Condor on August 14 posted a special COP$13 billion (US$3.7 million) net loss for second quarter (2Q) 2019, but expects to recoup this accounting loss by year-end.

“This loss is entirely associated with the result of the ‘Vías de las Américas’ [highway] concession, which will affect the company temporarily during this accounting period,” according to El Condor.

“The ‘Vías de las Américas’ concession corresponds to the third generation [3G] of highway concessions and was awarded in August 2010. The initial schedule for this project estimated its completion for 2016, but its execution period was extended due to the occurrence of various events involving responsibility over property and environmental issues, as well as different controversies around the application of the specifications and scope of the contract.

“However, the foregoing [complications] are expected to be finalized and a definitive reversal [of financial penalties] will be completed by the month of December 2019, with 98.5% progress already in execution and an 80.5% [financial penalty] reversal of the intervened [highway] sections.

“Throughout the execution of this project, the obligations of the different interested parties (client, funders, communities, suppliers, employees) have been fully complied with, although in order to achieve this it has been necessary to assume, on the part of the shareholders, the economic impact derived from the displacement in time of the interventions, the delays in the reversion and the multiple controversies that today are being solved via different mechanisms foreseen in the contract, from which in the future it is expected we will receive positive results that allow mitigating the negative impact observed today on our financial statements,” the company added.

A new joint venture between Medellin-based electric-power transmission and highways concessionaire giant ISA and El Condor – inked last December – is moving ahead, according to the companies. The alliance aims to develop new road concessions in the Colombian and Peruvian markets.

Meanwhile, the future pace of highway construction in Colombia will depend upon “financial closures and execution of other fourth-generation [4G] projects,” according to El Condor.

Revenue from ordinary activities during 2Q 2019 rose 1.9% year-on-year, to COP$413 billion (US$119 million), according to the company.

“These revenues were mainly composed of the provision of construction services in different projects [mainly in Antioquia], with the greatest contribution being concentrated in ‘Ruta al Mar’ (COP$166 billion/US$48 million), ‘Pacifico 2’ (COP$80 billion/US$23 million) and ‘Pacifico 3’ (COP$76 billion/US$22 million),” according to the company.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 38% year-on-year, to COP$64 billion (US$18.5 million). However, the year-on-year quarters “are not comparable due to non-recurring expenses that affected the second quarter of 2018,” according to El Condor.

Before taxes, the company recorded a 2Q 2019 profit of COP$3.2 billion (US$925,000), “which, compared to operating income, is significantly affected by the accounting effect of the fall in value of the investment in the ‘Transversal of the Americas,’ which is in the stage of completion and closure,” according to El Condor.

As of June 2019, El Condor had a backlog of contracts worth COP$1.49 trillion (US$430 million), the company added.


Medellin-based Grupo Argos – holding company for electric power producer Celsia, cement maker Cementos Argos and highway/airports concessionaire Odinsa – on August 12 reported a 5.7% year-on-year dip in second-quarter (2Q) 2019 net income, at COP$219 billion (US$63 million).

However, 2Q 2019 earnings before interest, taxes, depreciation and amortization (EBITDA) rose 18% year-on-year, to COP$1.05 trillion (US$304 million), according to the company.

“Despite non-recurring charges that impact the figures for the [second] quarter, net income of the parent company grew 16% in the first half [1H 2019],” according to Grupo Argos.

For 1H 2019, Grupo Argos consolidated EBITDA hit COP$2.1 trillion (US$609 million), up 12% over 1H 2018. “This result has allowed the holding company, in a period of five years, to double EBITDA,” according to the group.

“The AAA [bond] rating of Fitch Ratings that Grupo Argos received for the first time in its history stands out,” the company added. “This is the highest note delivered by this entity in Colombia and demonstrates the confidence of the capital market in the strategy of the organization to achieve an increasingly efficient and profitable portfolio.

“Several [other] milestones that will positively impact the long term materialized in this period -- among others, the incorporation of [Tolima department] transmission and distribution assets in our energy subsidiary Celsia, for about COP$2 trillion [US$580 million], and financial optimization operations in our business of [highway/airport] concessions, which included bond issues for about COP$2.5 trillion [US$725 million],” stated Grupo Argos president Jorge Mario Velásquez.

“In addition, it is important to highlight two recent relevant facts: in energy, we have announced the signing of an agreement for the divestment of thermal [power generation] assets in Zona Franca Celsia, for US$420 million, which will allow for a cleaner and more balanced generation matrix, and whose resources will give greater flexibility and profitability on the capital invested in this business,” Velásquez added.

In the concession business, revenues dipped 8% year-on-year, “which is mainly explained by the decrease in income by equity method from Quiport, as a result of the decrease in the net profit of the concession after [reconfiguring] the debt in this asset to optimize the capital structure at the level of the portfolio of Odinsa. We also saw a decrease in construction activity, given the optimization of working capital in the ‘Farallones de Pacífico 2’ highway consortium.”

As for the group’s real-estate business, the “Pactia” commercial real estate joint venture [of which Argos has a 32% shareholding] “has had effective annual yields of 7.25% since its incorporation date on January 20, 2017,” according to the company.


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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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