Mining Update: Growth, Crime in South America

November 25th, 2015 by

Latin America’s gold mining and broader resource extraction industries have been beset with controversies of late. These have ranged from environmental degradation to local protests over big multinationals exploiting the country’s resources. At the same time, the South American continent remains a prime location for the mining of copper, gold, and especially silver.

South America Mining MapBoth the good and the bad mingle together in the region’s mining sector. We’ll take a look at two different cases that illustrate this paradox.

New Joint Project in Chile

Let’s start with the good.

In a 50-50 joint venture, Goldcorp’s (NYSE:GG; TSX, SWX:G) El Morro project will combine with Teck Resources’ (NYSE, TSX:TCK) Relincho project to create the collective “Corridor Project.” The two sites are separated by just 40 kilometers in central Chile, making the “corridor” moniker appropriate.

goldminerGoldcorp is a titan in the global mining industry with a market capitalization of $10 billion, while Teck is no slouch at a $2.5 billion market cap. The new partnership in Chile between the two firms is expected to facilitate future exploration in Chile’s Atacama region while also cutting costs for both companies. Where the individual El Morro and Relincho mining ventures cost between $4 billion and $4.5 billion each according to estimates, the combined project is expected to operate with just $3.5 billion in initial investment.

In addition to copper, the mines are expected to produce 315,000 oz of gold per year for the first decade of mining. The two firms project its lifespan to be 32 years.

Both companies saw their stock rise by more than 1% on Wednesday following the announcement.

Criminal Mining Activity in Colombia

A man operates a makeshift rig for illegal gold mining

A man operates a makeshift rig for illegal gold mining. Source:

Now for the not-so-good news.

Elsewhere on the continent in Colombia, guerrilla groups and loose crime syndicates are running roughshod over the country’s legitimate mining industry.

An exposé by the country’s news outlets has revealed that as much as 80% of the gold exported from Colombia is mined illegally by criminal groups. These groups, affiliated only by their common disdain for law and order, have been driving small legal miners off of their lands. They frequently force the workers to continue toiling at gunpoint, but these groups also engage in impromptu projects of their own. These makeshift operations unsurprisingly disregard environmental regulations and use dangerous, illegal practices like open-pit refining with mercury.

colombian_flagThe rash of illegal mining and intimidation from Colombia’s rebel paramilitary gangs has gotten so big, it’s surpassed cocaine as the country’s number one industry attracting laundered funds—over $2.5 billion annually. According to, “Goldex [CVE:GDX], once the country’s second-largest gold exporter, stands accused of laundering hundreds of millions in criminal profits and exporting illegal gold from conflict zones in Colombia to the United States

Though the Colombian government has gradually been implementing measures to formalize the country’s mining industry by 2032, these efforts have been stalled and wrought with problems.


The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

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