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AngloGold Ashanti Ltd
Under a bright sun in northern Colombia this past April, heavily armed police raided a clandestine gold mining operation equipped with new excavators and other machinery. The police rounded up half a dozen workers at the site for questioning. The real quarry, however, was not there—the guerrillas and gangs who took a cut of the gold in return for letting mining equipment operate on their turf.
Colombian President Juan Manuel Santos has ordered more raids because gold has become a source of funds for the criminal groups that once relied solely on the cocaine trade. Criminals and rebels enriched by gold can recruit and arm men more easily, threatening to erode hard-won gains in security over the last decade, says Daniel Mejía, an associate professor of economics at University of the Andes in Bogota.
For a while it seemed that Colombia’s gangs and rebels were permanently on the run. Since the Revolutionary Armed Forces of Colombia (FARC), the largest rebel group, launched a rocket attack in Bogota during the 2002 presidential inauguration, a crackdown on cocaine production has cut its funding, while the military has killed its top leaders. Greater security helped drive foreign direct investment in Colombia to a record $13.2 billion last year. Mining companies such as AngloGold Ashanti (AU) are searching former rebel areas for deposits that would swell gold production of 55.9 metric tons last year to 93 tons by 2020, according to the government.
Now gangs and rebels may be getting a second wind thanks to gold. President Santos said last year that computers seized from the FARC showed it was expanding its gold mining business, including plans to mine the ore itself as well as extort. Guerrillas and gangs extort so-called artisanal miners—small-time, family operations—for a cut of their production, police officials say. President Santos said on June 5 that gangs were using the artisanal miners as a “shield” to hide criminal activity. To weed out small mine operators who might be connected to the gangs, Santos has just set up a more rigorous process for awarding gold mining concessions in an area covering almost one-fifth of Colombia’s territory.
The government hasn’t released estimates of the amount of gold produced by miners who face extortion, though Vice President Angelino Garzón said last year output is “high.” An operation like the one police broke up in April can produce 32 ounces or more a day, said Lieutenant Colonel Milton Lagos, who commanded the raid. At $1,577 per ounce of gold, that comes to at least $50,000 daily. “A mine like this can finance 200 armed and equipped men,” Lagos said. Gold, unlike drugs, can be transported and sold legally anywhere once it leaves the site.
Gold mining probably has become the second-largest source of revenue for rebels and gangs in Colombia, which is still the largest cocaine supplier to the U.S., Andes University’s Mejía says. Funding makes a difference in a country where terrorists are still active. A May 15 bombing killed two and injured dozens in Bogota.
The bottom line: With 55.9 metric tons of gold produced last year, Colombia is seeing criminals and rebels moving into the gold business.