Gold is the new cocaine

Colombia, the world’s largest cocaine producer, says illegal gold mining is becoming the “next major threat” to security, as government efforts to crack down on drug crops prompt rebels to seek new revenue sources.

Unlike cocaine, gold could easily be sold into the economy and be used to finance terrorist groups, Mines and Energy Minister Mauricio Cardenas said in an interview.

“It’s something that has been growing fast, and in some ways it’s Colombia’s next major threat from the point of view of illegal groups,” Cardenas said last week at his office in Bogota.

“We have to combat this very effectively, very fast. We cannot let this problem grow,” he said.

Colombian gold deposits, which enriched Spanish conquistadors more than four centuries ago, have attracted investment from billionaire Eike Batista and AngloGold Ashanti.

Guerrilla and paramilitary groups, whose suppression has been the cornerstone of government efforts to boost security and lure investments, have also been drawn to mining for the precious metal as gold trades near record levels.

Gold’s rally has made illegal mining “a lot more profitable”, threatening to bring “reinvigorated strength” to terrorist groups, according to Cardenas.

Alfredo Rangel, a former member of Colombia’s Security Council, said: "A stronger guerrilla would recruit better, make it easier to extort people and companies, and attack infrastructure and the military. All of this would have a terrible effect on security and investment expectations, and be very negative for economic growth."

Improved security has helped President Juan Manuel Santos to draw international investment in mines, oilfields and coal projects.

Foreign direct investment may rise to a record R94bn this year, according to the finance ministry, more than quadruple the levels a decade ago.

Batista’s AUX Canada Acquisition bought control of Ventana Gold Corp this year to gain gold deposits in Colombia, while AngloGold Ashanti, the gold producer whose largest shareholder is billionaire John Paulson, is developing the La Colosa gold mine.

According to Colombia’s vice-president, Angelino Garzón, guerrilla groups and organised crime gangs are also tapping the deposits as a way to expand beyond drug trafficking, fund weapons purchases and manpower.

He estimates a “high” amount of output from illegal gold mining. “It’s a diversification of revenue,” Garzon said.

The government had increased arrests and seizures of equipment at illegal mines this year, Cardenas said.

Colombia is studying additional steps to combat the operations, such as tracking raw materials used to extract gold.

Guerrilla and paramilitary groups thrived on drug revenue in the 1990s, fuelling violence that led investors to shun the Andean nation.

Since then, cocaine output in Colombia, still the world’s largest producer of the drug processed from coca leaves, has plunged amid government eradication and anti-trafficking efforts, according to UN figures.

Colombian production shrank to 350 tonnes last year from 410 tonnes in 2009, the UN said. Declining output means Peru may be on track to become the world’s top supplier of cocaine, the International Narcotics Control Board said in March.

Eradicating coca production over the past decade has weakened the Revolutionary Armed Forces of Colombia, or FARC, Latin America’s oldest guerrilla group, as well as the smaller ELN and paramilitary groups that purchase weapons and manpower with drug money, kidnappings and extortion.

As cocaine production fell, gold output climbed to a record 53.6 tonnes last year, according to Colombian government figures.

Output has more than tripled from 15.5 tonnes in 2007. The government doesn’t have an estimate on how much gold is mined illegally because, like coca cultivation, it often takes place in isolated areas with few roadways and steep terrain, Cardenas said.

Guerrillas, already long present in some mining areas, are now bringing in heavy equipment and consolidating to increase output in provinces in central and southwestern Colombia, Rangel said.

“Unlike drugs, illegal gold mining is easy to legalise once you have a gram of gold in your hands because then you can sell it anywhere,” Cardenas said.