Colombia Mining Report Q2 2016
BMI View: Colombia's mining sector will experience solid growth, as vast mineral reserves, low operating costs and an improving business environment attract increasing investment over the coming years.
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Colombia's mining sector will be a regional growth bright spot due to competitive operating costs and a solid project pipeline over the coming years. We forecast Colombia's mining industry value to increase from USD21.6bn in 2016 to USD25.5bn by 2020, averaging 4.0% annual growth. While this rate represents a slight slow-down from the average growth of 6.2% over 2011-2015, Colombia's mining industry will experience the third fastest rate of growth among its Latin American neighbours.
The country's coal sector will drive mining industry growth, as key producers plan to ramp up output. Colombia will remain the top Latin American coal exporter, and increasingly stringent environmental regulations in the US will boost investment in Colombia. We forecast the country's coal production to increase from 87.2 million tonnes (mnt) in 2016 to 105mnt by 2020, averaging 4.2% annual growth.
Canadian gold miners will support production growth in Colombia's gold sector, due to low operating costs and vast reserves. While weak prices will stall some projects, we forecast Colombia's gold production to increase from 2.5 million ounces (moz) in 2016 to 2.8moz by 2020.
Colombia's nickel sector will be the mining industry growth underperformer, as the key mine contends with underinvestment due to weak prices and declining ore grades.
Miners operating in Colombia will continue to face headwinds due to relatively elevated crime levels, labour strikes and logistical disruptions. For instance, the government's ban on night-time rail transport between February and November of 2015 resulted in the 3.5% decline in coal production.
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