US embassy cable - 05BOGOTA5979

UNCLAS BOGOTA 005979 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG, EMIN, CO 
SUBJECT: DRUMMOND LTD. SITE VISIT - LA LOMA COAL MINING 
PROJECT 
 
REF: BOGOTA 5565 
 
1.  Summary.  In a recent visit related to the Cartagena 
Energy Conference (reported reftel), Department of Energy 
Deputy Secretary Clay Sell and the DCM conducted a site tour 
of one of the world,s largest surface coal mining operations 
in Cesar Department, northern Colombia.  Mike Tracy, 
President of the Mining Division and other Drummond 
executives provided briefings and a tour of the Pribbenow 
Mine or the La Loma Coal Mining Project.  During the tour 
portion, Drummond officials showed the seams where coal 
extraction takes place using a 6,500 ton dragline crane, 
GPS-guided dump truck transportation and coal processing 
operations, and the railcar loading site.  Drummond officials 
provided summary production figures and outlined successful 
local employment and social investment practices.  End 
Summary. 
 
2.  In the late 1980s, Drummond acquired the rights to 
explore, exploit, and export coal from Cesar Department near 
the city of Valledupar.  From 1995-2003, approximately 75 
million tons of coal has been mined at the Pribbenow Mine. 
Current production rates average 25 million tons per annum 
but Drummond expects to increase this rate to 40-45 million 
tons over the next three years.  By contrast, the largest 
U.S. coal mine east of the Mississippi River produces 4 
million tons a year according to Drummond officials.  The 
mine generates high quality coal with an average energy of 
11,700 BTUs per ton.  Ash and sulphur content is low, 
averaging 4.9 percent and  0.37 percent respectively. 
Consequently, coal from the site garners a high market price 
of USD 150-180 per ton.  The Pribbenow tract contains over 
500 million tons of remaining reserves.  Drummond is 
preparing to begin extraction at the neighboring El Descanso 
tract that contains an estimated 1-2 billion tons of 
reserves.  Other tracts have yet to be fully explored so 
reserve estimates are not yet available. 
 
3.  Drummond concessions include a large quantity of natural 
gas.  Company officials stated they use this source to create 
their own ammonium nitrate, eliminating the need to import 
explosives.  Drummond also maintains a natural gas power 
plant on site so the company is able to provide much, but not 
all of its own power.  The company has plans to explore for a 
larger quantity of natural gas which would be produced for 
sale to others. 
 
4.  Drummond transports coal by rail line from the mine to a 
Caribbean port facility in Santa Marta.  The company uses 29 
locomotives to move 17 shipments per day on the 193-kilometer 
journey.  Each shipment contains 80 railroad cars and carries 
about 4,500 tons of product.  Once the shipment arrives at 
the port facility, it is loaded on lighter barges and 
transferred offshore to large vessels for shipment. 
 
5.  Drummond secures its operations through a combination of 
contracting security forces from the Colombian government and 
an active social development program that solidifies support 
for company operations from the local population.  While the 
company contracts approximately 930 security forces to 
provide perimeter security around the mine, Drummond 
officials credit their recruiting and training of a 6,000 
member local labor force (direct and indirect hires) and 
their investment in social programs for their enhanced 
security.  Drummond decided early to use the local labor 
force and not import labor and company officials are proud 
that 90 percent of mine employees are from Caribbean 
provinces of Colombia. 
 
6.  Drummond has invested heavily in training programs to 
develop its workforce and contributes to technical 
development programs in local schools to better prepare 
potential future employees.  The company also spends about 
USD 5 million per year in seed money for use in partnering 
with local government in towns located near the mine and the 
rail transport corridor.  Drummond social investments support 
grants to hospitals, schools and infrastructure development. 
Company officials stated Drummond,s decision to develop a 
local labor force and make significant social investments 
have increased the area,s standard of living and enhanced 
community relations.  As a result, assert Drummond officials, 
illegal guerrilla group activity has greatly diminished and 
been deterred.  For example, guerrilla attempts to blow up 
rail operations were thwarted by reports to authorities from 
the local population before any damage occurred. 
WOOD