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The risky business of resources in conflict zones

Colombian soldiers stand in formation at the military fort in La Macarena, Meta department, Colombia.

STR/STR/AFP/Getty Images

It was supposed to be Colombia's moment to shine before an international audience at the world's largest mining-industry gathering.

Instead, Colombian officials in Toronto were doing damage control on Tuesday after reports a rebel group kidnapped 23 oil workers for Canada's Talisman Energy Inc. on Monday night in the eastern part of the country, near the Venezuelan border.

Twenty-two of the workers were freed by Tuesday morning, after the Colombian army stepped in with foot soldiers and helicopters, and a Colombian official said the 23rd escaped captors. But the incident cast a pall over the country's plan to pitch a "revamped image" as a prosperous emerging economy with a "remarkable improvement in national security."

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As oil, metals and other commodities surge in price, resource-rich countries such as Colombia are increasingly competing to attract investment and prove they are safe for foreign companies.

But kidnappings in Colombia, drug wars in Mexico and violence in Venezuela highlight the risks that persist even in countries that have worked hard to promote stability for business.

From Mexico to Afghanistan, officials are putting out the message that their countries are ripe for more resource investment.

But political and financial risks abound.

Colombia's mines and energy minister Carlos Rodado Noriega offered assurances Tuesday that his country is stable, despite the abductions the night before. He argued the army's swift action is proof the country has greatly improved its security measures.

"It was a very clean operation. It shows the capacity of the Colombia police and army," Mr. Noriega said on the sidelines of the Prospectors and Developers Association of Canada convention in Toronto.

The government said Colombia's largest rebel group, the Revolutionary Armed Forces of Colombia, or FARC, is to blame for the kidnapping and that they have been reduced to a small group. Mr. Noriega said Monday's kidnappers have since fled to Venezuela.

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"We can guarantee that all the companies can now act safely in our country," he said.

Talisman has halted its seismic work in the area where the workers were seized, said David Mann, the company's vice-president of corporate and investor relations. "It's a tragic situation," he said, declining to comment on how the kidnapping might affect Talisman's investments in the country.

Colombia will need to work extra hard now to promote business, which includes a promise the government has made not to increase royalties and to stick with only a small tax increase. The vow comes as many resource-blessed nations hike royalties and taxes to cash in on soaring commodity prices.

For instance, copper-rich Chile, considered one of the world's most mining-friendly countries, raised taxes recently to help it share in the bonanza of record-high prices for the widely used metal. The money will be used to help fund a $1-billion reconstruction effort as a result of last year's devastating earthquake. An original plan to hike royalties was tossed by Chile's congress last summer.

Chile's mining minister Laurence Golborne said the taxes are necessary to help rebuild damaged infrastructure and allow it to better compete for investment.

"When we talk about mining, we talk about decades," Mr. Golborne said in an interview in Toronto this week. "We have to work today for the mines we are going to exploit in the next 50 years … We need investment in exploration, prospecting and development. We want to promote Chile as a target for investment of any developer around the world."

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Another country entering the competition for foreign resource investment is war-torn Afghanistan, which is lobbying hard to be recognized as a prospective place for resources such as oil and gas and iron ore.

Last year, Afghanistan, alongside a team of U.S. geologists backed by the Pentagon, announced the country may be sitting on an estimated $1-trillion (U.S.) in untapped mineral deposits including huge veins of iron, copper, cobalt, gold and lithium.

Still, many investors are skeptical of doing business in such a dangerous nation. There is also the issue of how to transport commodities out of the landlocked country.

On Sunday, Afghanistan aimed to address the security concerns by announcing with its partner, the U.S. defence department's Task Force for Business and Stability Operations, the hiring of independent legal and technical experts to speed up investment in the country.

Afghan mining minister Wahidullah Shahrani said in an interview that consultants will help make the mining industry more transparent.

He said the mining ministry has been transformed in the past year, promising to put government security at each mine to ensure security of its operations.

Mr. Shahrani said Afghanistan is working to develop international investor confidence which is "key to sustainable economic growth in our country."


Mining-friendly, and not

Top 10 places that encourage mining investment:











Bottom 10 places:








DRC (Congo)



Source: Fraser Institute annual survey of mining companies. Policies considered include environmental, regulatory, taxation, land claims, infrastructure, socioeconomic, political, labour, security etc.

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About the Author

Brenda Bouw is a freelance writer and editor based in Vancouver. She has more than 20 years of experience as a business reporter, including at The Globe and Mail, The Canadian Press, the Financial Post and was executive producer at BNN (formerly ROBTv). Brenda was also part of the Globe and Mail reporting team that won the 2010 National Newspaper Award for business journalism. More

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