Extension of the mining concession contract of La Loma

After a three-year negotiation process, with the oversight of the Attorney General’s Office, Drummond Ltd. would like to report that it signed with the National Mining Agency (ANM in Spanish) the extension of the mining concession contract of La Loma for 20 years, starting in May 2019. This contract represented 30% of Drummond´s mining operation production in 2018 in Colombia, as well as a large portion of the total coal production in the department of Cesar.

The extension includes a social investment program that includes a one-time payment of US$10.8 million, plus annual installments of approximately US $1 million per year of production.  Additionally, 200 university scholarships (ten per year) will be awarded to young people from the neighboring municipalities of El Paso, La Jagua de Ibirico and Chiriguaná. This adds to the scholarships the company already as part of its social commitments in the El Descanso mining Project. Drummond’s scholarships cover the full tuition, and during the school months, the students get a room and board allowance. 

“Drummond Ltd. reiterates its commitment to the sustainable development of Colombia and its mining municipalities, and we welcome the extension of this contract, which guarantees the continued development of an integrated mining project. This also allows us to contribute to the development of a society of which we have been a part for more than 30 years,” said José Miguel Linares, president of Drummond Ltd.

One of Drummond´s main contributions has been the generation of job opportunities. The mining operations of La Loma and El Descanso, in the Cesar department, and, those of the rail and maritime transport operations in Ciénaga (Magdalena), currently generate close to 5,200 direct jobs, and there are 3,900 contractors. More than 70% of the workforce is native to the region.

Since its arrival in Colombia, Drummond Ltd. has been an ally of the development of the municipalities in the area of ​​influence. Its Corporate Social Responsibility strategy has sought to share and increase the benefits of the project with all stakeholders, using as a basis the Sustainable Development Goals (SDG) of the United Nations. In 2017 alone, the company´s social investment added up to COP $74,255 million.

Our social responsibility strategy based on the pillars of Peace and Human Rights, Governance for Development, Integral Development and Environmental Performance, has been the basis for promoting peaceful coexistence, reconciliation and social dialogue. In addition, Drummond Ltd. has worked to strengthen the capacities of local institutions to generate greater efficiency in planning and public management, as well as generating tools for the benefit of our employees, their families and communities, without forgetting the search and constant implementation of mechanisms that guarantee a responsible environmental performance.

Significant numbers

The area of this renewed concession has proven reserves of approximately 60.5 million tons. The royalties that the ANM will collect, as a result of this extension, will add up to approximately US $557 million, with an agreed rate of 15%, which is higher than what is required by law, and it makes La Loma the mining contract in Colombia with the highest royalty rate. In addition to royalties, taxes and other obligations, there will be a participation of the State in a scenario of high prices.

Currently, according to the ANM, royalties from Drummond Ltd. represent 42% of those generated by the coal industry in Colombia, and in the last three years it has been the country´s biggest coal exporter. Since the beginning of the operation of the contract of La Loma, the company has made payments in royalties totaling USD $ 2,090 million. In addition, the royalties generated by the El Descanso project add up to USD $561 million, so the company has paid a total of US $ 2,651 million in royalties alone. In terms of the contribution to the national economy, one can add to these figures what is paid in national and local taxes, as well as other financial obligations.