BHP Billiton (BHP) could lose its very successful Cerro Matoso nickel mine in Colombia because of a dispute over iron ore royalties. Billiton has increased production at Cerro Matoso by 72%, but it could lose its concession to mine there this year. Reuters reports that Billiton has been trying to negotiate a new concession to replace one this year, but has not had any success.
The Colombian government has refused to extend the contract, because negotiations over royalties on iron ore from Cerro Matoso are not going well, according to government officials Reuters talked to. The government wants to collect more than the 12% royalties that it is currently getting on iron ore from the mine.
It is obvious that Billiton does not want to leave Cerro Matoso any time soon. Production at the mine has risen by 72% from 7,800 tons last year to 13,400 tons this year. The Colombian government agency that overseas mining told Reuters that it expects nickel production at Cerro Matoso to be 51,000 tons in 2012. The production there has increased because of a new furnace installed by Billiton.
This would seem to indicate that both the Colombian government and Billiton want Cerro Matoso to stay open, so. So, it is not likely that the company will let this dispute interfere with production. Nor would Billiton be installing new equipment if its management did not think it was planning to stay there.
Colombian government officials have been willing to talk about the dispute, but Billiton has not.To continue reading, click here.