Colombia Attracting Oil Billionaires May Spur Auction of Gold, Coal Rights

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Colombia may auction rights to tap its coal and gold deposits after attracting investors such as billionaire Eike Batista to develop the nation’s oil industry.

The South American nation is seeking to spur exploration and production and also boost copper, platinum and coltan reserves to raise government income, Mines and Energy Minister Carlos Rodado said in an interview in the city of Medellin.

It’s “very, very possible in the future you’ll see auction rounds in the case of Colombian minerals like you saw with hydrocarbons,” Rodado said. The strategy may be the best way to “increase the value” of such reserves, he said.

President Juan Manuel Santos is counting on international investment in new oil wells and mines to spur exports amid rising demand for commodities. Batista’s OGX Petroleo & Gas Participacoes SA and Carlos Slim’s Grupo Carso SAB are among companies seeking to tap oil reserves after Colombia improved security and opened new swathes of the country to exploration.

The country may hold reserves of coltan, used in mobile telephones, in its eastern provinces, Rodado said Sept. 2. Identifying such areas is a first step toward auctions that will help bring more mining companies to Colombia, he said.

Colombia also has untapped reserves of thermal coal, used by power companies, and metallurgical coal that requires new infrastructure such as railroads to export, Rodado said.

Colombia wants to make the most of its reserves after coal rose 33 percent in Europe in 12 months. Copper rallied 16 percent in the same period and gold surged to a record.

Coal Production

Coal production this year probably will meet or surpass 80 million tons even after storms hindered output, he said. The country holds 45 percent of Latin America’s reserves and produced about 74.4 million tons last year.

Mining companies across Colombia will have to brace for more rains as seasonal storms begin next month after hampering production earlier this year, Claudia Jimenez, executive director of Bogota-based Large Scale Mining, an industry group that represents companies, said Aug. 31. In June, coal exports tumbled 16 percent to 5.85 million metric tons from a year earlier.

In northern Colombia, Drummond Co., Batista’s MPX Energia SA (MPXE3), Glencore International AG and BHP Billiton Plc are among companies seeking to expand coal production after prices rose. BHP, Anglo American Plc (AAL) and Xstrata Plc (XTA) decided last month to invest $1.3 billion to expand their Cerrejon mine.

Auctions of oil blocks in Colombia, South America’s third- largest supplier of crude, helped increase production by 21 percent to 953,000 barrels per day last month from a year earlier. Oil blocks auctioned in 2010 will spur more than $1 billion in exploration spending over three years, according to government estimates.

Bloomberg.