Colombia Aims to Make El Dorado Gold Myth a Reality

Colombian gold production is expected to more than double over the next decade as a crackdown on leftist rebels makes wide areas of the country safe for exploration after decades of violence.

Colombia, home to the legend of a gold-filled lake called El Dorado, will produce 41.5 tons (t) (1.463 million ounces) of the metal this year, twice what it did before the government went on the attack against the guerrillas six years ago, director of mines Beatriz Duque told Reuters on Tuesday.

In 2002, when popular President Alvaro Uribe was first elected on promises of crushing the 44-year-old insurgency, Colombia produced 20t of gold. The rebels, financed by cocaine smuggling, have since been pushed deep into rural areas having lost several top leaders this year.

Speaking from her offices in the capital, Bogota, Duque said gold output would likely hit 106t by 2019 as new mines come on stream.

"We are still an underexplored country on a detailed level in terms of mining, precisely due to the fact that security conditions kept us closed to investment," Duque said.

Indeed until recently, Colombia had little chance to realise its mythical promise of golden wealth as investors were scared off by crime. But kidnappings are down and the highways are safer thanks to the US-backed security push.

As opposed to neighboring Ecuador and Venezuela, governed by leftist presidents suspicious of free markets, Colombia has lowered barriers to investment since Uribe took office.

The corporate income tax has been cut to 33% from 38.5% and the country's mining laws have been revamped, switching the state's role to that of facilitator for the sector and ending its direct participation in mining.

"These changes make Colombia very attractive because, man, it is practically untouched in terms of exploration," Duque said.

El Dorado: myth or reality?

Duque's job is to jump-start the flow of information and other services to investors as the sector draws new interest. 54 companies, more than half of them Canadian, are exploring for gold and other metals in Colombia.

Improved security is drawing prospectors in droves, just as the Spaniards were lured to Colombia centuries ago by the myth of El Dorado.

Foreign investment in the overall mining sector was $798m in the first quarter of this year compared with $466m in all of 2002, according to central bank figures.

The country is already a big producer of coal and ferronickel.

Anglogold Ashanti of South Africa has found what it says is one of the world's 10 biggest gold reserves in the central province of Tolima.

A mine with 13 million ounces of estimated reserves - worth about $1.3bn at current market prices - could be ready to start producing sometime between 2012 or 2014.

"We are in an all-out effort to improve the investment climate," Duque said. "I hope that El Dorado is really here. That's the dream we are working toward."

The numbers show they may be on the right track, at least in terms of improving the nation's investment image.

In 2002, more than 16% of investors said security was their main barrier to the country, according to a poll conducted by Colombia's main industrial group ANDI.

At the start of this year, less than 1 percent cited security as their top worry.

by Hugh Bronstein; editing by Marguerita Choy.