Coal’s continued relevance in Colombia

Colombia

José Miguel Linares, Drummond’s president for Colombia, talks to The Energy Year about the scope of the company’s thermal coal mining operations in Colombia and the logistics set-up of the Drummond Port. Drummond is a US-headquartered mining company that is the largest coal producer in Colombia.

What is the scope of Drummond’s thermal coal mining operations in Colombia?
Drummond has been in Colombia for more than 30 years. We have developed the mining projects of La Loma, El Descanso and, more recently, El Corozo. For 2024, we have a projected production of 30 million-31 million tonnes of thermal coal. The La Loma site has an area of 6.56 hectares [65,600 square metres] and has an approximate production of 7.8 million tonnes per year while El Descanso, with an area of 31.559 hectares [315,590 square metres], produces around 21.4 tonnes, contributing around 70% of our total output.
All three of our mining contracts are in the same area in the centre of the department of Cesar. Their total combined reserves stand at 1.5 billion tonnes.
We have a fully integrated business model where we extract, transport, commercialise and export our own thermal coal. In 2023, our activities contributed COP 7.4 billion [USD 1.92 million] to the Colombian government in royalties and taxes.

Tell us about the logistics set-up of the Drummond Port.
Through the Ferrocarriles del Norte de Colombia (Fenoco) concession, the rehabilitation and expansion of the Atlántico railroad network has been undertaken. This network is used to transport coal to our port. We have a participating interest in Fenoco of almost 41%, and other mining companies, such as Prodeco and CNR, have the remainder of the interest.
Fenoco is in charge of maintaining and administering the line, dispatching trains, etc. Each user has its own trains, with its own wagons. We send 13 full trains per day to the port, each with three locomotives and 150 wagons. Each wagon has a capacity of 50 tonnes. We have loading stations at La Loma and El Descanso, and several car dumpers at the port.
Located in Ciénaga Magdalena, the Drummond Port is one of the most advanced in the region, with a capacity to store 1.5 million tonnes of coal and export around 60 million tonnes per year. The port can dock four large-scale cargo ships via its four berths, which can load vessels of up to 200,000 tonnes.
For the construction of the direct loading system, which came into operation in March 2014, around USD 440 million were invested to expand cargo, storage and discharge capacity with the latest technology.
In February 2024, we carried out the largest export of coal on a single ship in Colombia’s history via the Turkish cargo ship Samjohn Argonaut, with 192,500 tonnes. This says a lot about our capacities and the state-of-the-art port. In addition, in June of this year, we hit the milestone of 600 million tonnes exported since we began our operations.

What main markets are you exporting thermal coal to?
We export all of the coal we extract. When we started exporting in the mid-1990s, all of our product went to Europe. Today, a large chunk of what we sell is exported to thermal plants. We export our coal to over 20 different markets. Recently, some of the most important ones include the Netherlands, Mexico, Brazil and Chile.
However, our key market now is Asia, especially countries such as China, India, South Korea, Japan, Taiwan and Turkey. In countries such as Japan, the demand for coal is not only for thermal plants but also to make nitrogen-based fertilisers. Also, demand is growing in Central America, where we are exporting our coal to the Dominican Republic, El Salvador and Guatemala, for example. Asia and Central America together take in around 40% of our exports.

What impact have your mining activities had on the socioeconomic development of the Cesar region?
The impact of our mining activities in the Cesar region has been very positive, especially in the mining municipalities of Becerril, Agustín Codazzi, El Paso, La Jagua de Ibirico and Chiriguaná. While the index of unsatisfied basic needs measured by DANE in 1993 averaged 69% in these municipalities, in the last measurement done in 2018, the index had dropped to 27%. Notably, we started our export operations in 1995.
It is very important to measure the impact of mining projects in this country to understand the relevance the sector has as a critical pillar for the development of our economy and society.
The impact of halting E&P of coal would be huge, not only for public finances but also in terms of employment and the business that is generated around mining. It should not be a question of “either coal mining or other industries” simply because coal mining in Colombia could be an important source of revenue and support emerging industries to develop.
As long as global demand for thermal coal continues, our mining industry should be functioning. As a country, we have a huge opportunity. We are contributing 56 million-57 million tonnes per year to the world, a world which today consumes almost 9 billion tonnes. If Colombia stops producing coal, other major producers will take that market share we still have. Moreover, mining activities contribute with high royalties and taxes paid to the State, higher than other industries. Replacing this will be very difficult.
In addition, the company is investing an average of COP 70 billion [USD 17.1 million] yearly in its social projects: education, health, development and capacity building. All of this is done jointly, with the local administrations and with the communities with whom we have developed a very tight-knit relationship.
Today, coal mining occupies less than 1% of the Cesar department’s territory but represents over 40% of its GDP. We generate about 11,000 direct jobs, out of which 70% are held by people from the region. Our operation also creates 40,000-50,000 indirect jobs. As a consequence, support for mining activities in this region is 80%.

How critical is Colombia for Drummond and vice-versa?
Colombia is very important to Drummond. Our mines here are our only operating mines worldwide. For the time being, the company plans to maintain production in Colombia at the current level of 30 million-31 million tonnes per year.
The world produces circa 8.5 billion tonnes of coal per year, from which China alone produces 4.3 billion tonnes. But most of the coal produced is for self-consumption. What is traded on the international market is about 900 million tonnes, out of which Colombia exports 56 million-57 million tonnes. And Drummond alone contributes half of this volume.
This is why Colombia is such an important player in the international mining scene and why the country is so important within Drummond’s global portfolio, and vice-versa.

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