Zijin wants to be the first Chinese mining company in Colombia

This year, state-owned Chinese company Zijin expects to start operating the Buriticá gold mine, known for its high social standards
<p>Zijin acquired the Buriticá gold mine from Canada&#8217;s Continental earlier this year (image: Zijin)</p>

Zijin acquired the Buriticá gold mine from Canada’s Continental earlier this year (image: Zijin)

With the Buriticá gold mine expected to become operational in the second half of 2020, Zijin Mining is close to becoming the first Chinese mining company to operate in Colombia. Interest stems from the fact that China is the country with the highest gold demand in the world, buying 1,003 tonnes in 2019.

Buriticá, some 100 kilometres from second city Medellín, is one of the few significant gold mines in Colombia, a country where successive governments have tried to promote mining, but the sector is almost entirely oriented towards three coal projects. Royalties from coal account for 88% of all mining activities in Colombia, followed by gold (5.6%) and nickel (5.3%), according to the National Mining Agency.

Zijin: the arrival of Chinese miners

Zijin opened its offices in Bogotá in February 2020, having bought Buriticá from Canada’s Continental Gold, which in 2016 obtained an environmental licence to begin exploitation.

Yet, after a decade of work, Continental was not able to begin production. The delay is partly due to the company’s high standards of social responsibility, which aimed to appeal to both foreign investors and local communities. Continental achieved this despite frequent socio-environmental conflicts in Colombia over the last decade over oil, coal, nickel and gold projects.

While some social leaders in Buriticá’s municipality of 7,000 say the process had ups and downs, Continental Gold was recognised for achieving relatively good community relations – a rarity in Colombia.

Continental claims to have provided professional training and put in new infrastructure, along with support for productive projects, and formalising the area’s artisanal miners. In 2019, Continental received an award from the Governor’s Office of Antioquia Department and was listed as the best qualified mining company on the Brújula Minera (Mining Compass)’ social investment index, a national survey of the mining sector conducted by consulting firms and the media.

Surprisingly, last December, Continental announced that it was in the process of selling Buriticá to China’s Zijin Mining Group, which aspires to be one of the world’s largest mining companies by 2030. Zijin has projects in 14 provinces in China and 11 countries around the world, including the Rio Blanco copper project in Peru. On 28 January, Continental’s Board of Directors approved the sale for US$1 billion.

“When people saw that the exploration results and the size of the deposit were real and that we were indeed building a mine and a plant, it sparked interest,” León Teicher, former chairman of Continental Gold’s board of directors, told Dialogo Chino. “In 2019, we were in negotiation with multiple companies that submitted proposals. Almost all of them were rejected. Even with Zijin, there was a first round of negotiations that broke down, but they came back with an extremely attractive, revamped proposal.”

Industry observers and Buriticá residents are waiting to see if Zijin will maintain Continental’s standards.

Three employees in a tunnel at the Buriticá gold mine, operated by the Chinese company Zijin.
After obtaining the environmental license in 2016, Zijin hopes to begin gold mining in Buriticá in 2020. Image: Zijin.

What Continental is delivering to Zijin

After Continental received mining titles for Buriticá, its directors proposed using social and environmental standards aligned with those of the International Finance Corporation, the financial arm of the World Bank.

“Continental Gold’s Board of Directors had given a clear mandate to do things responsibly so that the project would have community acceptance, in part to avoid the kind of opposition to mining that had been occurring in Colombia and Latin America,” explains one person who worked with Continental Gold and asked to remain anonymous.

The company appointed executives with extensive experience. Teicher was at the head of the operations. He had already managed Carbones del Cerrejón, the largest mining company in the country. Its president, Mateo Restrepo, advised former President Álvaro Uribe. Continental’s manager for international standards, Alexandra Guáqueta, was one of five members of the United Nations Working Group on Business and Human Rights and later director of post-conflict affairs during the peace process with the Revolutionary Armed Forces of Colombia (Farc). The vice president for sustainability, Carlos Franco, was a former human rights director for the Colombian vice president. Both Guáqueta and Franco worked with Teicher in Cerrejón.

In short, Continental went beyond the legal minimum required in its social management, says Guillén Calvo, Latin America director at Insuco, a consulting firm that created an information platform for the channel investment into social projects. “Not all the changes are due to the company, but the work that has been done in public-private partnerships, which is where the key to the issue lies,” he says.

One such effort was the Buriticá Plan, designed by the Inter-American Development Bank, the Buriticá Municipal Mayor’s Office and Jaime Arteaga and Associates, a consulting firm. The plan sought to resolve problems in a municipality where illegal mining is widespread. Between 2012 and 2015, the presence of 20,000 informal miners triggered a deep social crisis.

“Confronting this problem required constant public, private and community collaboration. For Continental, this experience is very valuable, because if not, with the expectations generated by a project of this size, they would have to solve all the problems of the municipality’s people,” says Francisco Montoya, Regional Director of Jaime Arteaga & Associates.

That crisis may have helped communities to perceive Continental Gold as a lesser evil, which could help counteract the negative impact of informal mining.

“In Buriticá, the dynamic did not involve only the community and the company. There was this third player, the ‘informals’, and this had a profound impact on all concerned,” says María Maya, a researcher on socio-environmental conflicts at the University of Antioquia. “The community found benefits of corporate responsibility that were not present in informal mining. However, the mining company still has to acknowledge the future aspirations of the communities.”

The buy-out as seen by the community

While not everyone in Buriticá praises Continental Gold, nor do they view its work negatively.

Daniela López is one of its beneficiaries. Together with 10 other women, she set up a laundrette for Continental’s employees and other contractors. They were trained, and wash between 700 and 800 garments daily, using four Haceb washers, an industrial washer and two semi-industrial dryers, all donated by the mining company.

“The company wanted to test us to see if we would meet their expectations. I think that’s good, because if they give away everything, you don’t know what something costs,” she says.

For other leaders in Buriticá, Continental’s contributions are not enough for the magnitude of the project and the amount of gold to be extracted.

“They sold the company for millions of dollars, and what does Buriticá have left? The miners’ formalisation contracts are indeed well-intentioned, but they haven’t worked,” says Fredy Díaz, president of the Association of Community Action Boards of Buriticá. In his opinion, it is necessary to accelerate artisanal miners’ formalisation, make more land purchases for agricultural projects and invest in a hospital, schools and rural development.

“I would give Continental Gold’s work with communities a 7 out of 10. It hasn’t all been bad and not all the problems are the company’s fault,” he adds.

Hugo Valle, a member of an organisation that has a formal mining subcontract with Continental – and now Zijin – says the inclusion of mining and environmental authorities was not enough. Only 500 miners’ contracts have been ratified and he estimates some 3,000 people have informal arrangements. That is, extracting gold without the state’s permission and with the involvement of mafias. In September 2018, a Continental Gold engineer was murdered in Buriticá.

“The company has made great strides, but it has not been entirely satisfactory,” says Montoya. “The miners are critical, saying the agreements are too biased in favour of the company and are not profitable, nor as advantageous to them in terms of remuneration. They can barely cover their expenses.”

“The lives of our community changed 180 degrees. Before, the community depended on agriculture and used to wake up to singing birds, and now what wakes us up is the sound of a machine,” says Sergio Moreno, president of the Higabra Community Action Board, one of the villages closest to the mine.

Mr Moreno also complains that the benefits received in other communities in Buriticá have not reached his community. He says projects do not meet the expectations created by Continental and that there should have been more pressure exerted on the company, so that they could use the road they built in their area.

“It’s not that I don’t agree with the company. What I am asking is that you do the right things and that the community and company work hand in hand. To get there, much discussion is needed and there is a lot of ground to cover,” he says.

Two employees operating machinery at the Buriticá gold mine operated by Zijin.
Zijin has publicly and locally insisted that it will maintain the social and environmental standards that its predecessor, Continental Gold, set as a goal. Image: Zijin.

High expectations for Zijin

Zijin Mining seems to see the advantages of continuing Continental’s social projects. It is on the same page on social standards and mining formalisation, something those consulted by Diálogo Chino highlight as important for building trust.

“The work route has been mapped out for several years. While they were waiting for approval of the environmental licence, and all through the construction phase of the project, high social and environmental standards have been met, which we will no doubt continue to strengthen,” Zijin’s Communications Office told Diálogo Chino.

Indeed, when James Wang, the Chinese president of the mining company in Colombia, visited Buriticá as soon as the company changed hands in February, he stayed for several days.

“What little we have discussed with the Chinese about the company, is that they are very correct people and they appear to be very aware of the realities,” says Díaz. “When the representative in Colombia came to talk to us, he said he knew nothing about the complaints we were making. When he made the deal, they told him that everyone here was happy and everyone was singing their praises, but the reality was not conveyed to him.”

The experience is different to the mining company’s one in Peru, where it bought the Rio Blanco project from the British Monterrico Metals and ended up inheriting several conflicts with communities that prevented operations beginning on time.

Weijun Xie, vice-president of MinMetals, said in an interview with the Centre for Sustainable Investment at Columbia University that negative experiences like the ones in Río Blanco have taught Chinese mining companies to improve communications with all players affected by a project.

Although Zijin has made a good first impression, it has a history of violating environmental regulations and threatening governments that make decisions contrary to its interests. Barely one month ago, the chairman of its board of directors warned Papua New Guinea’s prime minister that if their government did not renew the environmental licence at the Porgera gold mine, his country’s diplomatic relations with China would be affected. Ten years ago, in China’s Fujian province, one of Zijin’s copper mines poisoned the Ting River, with disastrous consequences for local communities.

Last week Zijin announced that the purchase of Guyana Goldfields, owner of the Aurora gold mine in Guyana.

Zijin Mining has said that operations in Buriticá will start in the second half of 2020. On 28 May, it confirmed that one of its workers had been infected with Covid-19. If the pandemic does not alter its plans, it will become the first Chinese mining company to operate in Colombia.