Global Peddlers Trade with Venezuelan Coltan

It is one of the so-called "rare earth elements" and a strategic material for high-tech industry. It abounds in the south of Venezuela, next to the border with Colombia. And although the Venezuelan government announced in 2009 measures for the military control of the deposits, since then, international smuggling routes have flourished, in which drug trafficking and informal traders participate. In a climate of mystery, now the Venezuelan coltan also threatens to become a source of geopolitical conflicts.

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Hidden among so many ads posted on the web, the first links of a smuggling chain that starts in deposits in the Venezuelan states of Amazonas and Bolívar appear on the Internet, it sustains a submerged economy -with actors of drug trafficking in the distribution- in bordering countries like Colombia and Brazil, and after laundering it through traders in antipodes like South Korea, it ends in the electronic brains of videogame consoles, cell phones and guided missiles.

What merchandise has given rise to this convoluted semi-covered trade route? It is the coltan, the blue gold of the 21st century, required for various strategic industries due to the conductivity and heat resistance properties of its components, columbite and tantalite.

For Venezuelans, coltan went from being an unknown famous or a science fiction denomination, to a nearby reality thanks to an announcement by President Hugo Chávez. "Now a strategic mineral called coltan has appeared and we have taken the area militarily because they were smuggling it to Colombia," the president said on October 15, 2009. His order reached all the media but it seems that it did not have a determining effect, based on the following journalistic investigation jointly developed throughout a year by reporters of El Universal newspaper of Caracas, the site Armando.info, also of Venezuela, Noticias Uno of Bogotá, with the support of the International Consortium of Investigative Journalists (ICIJ) of Washington DC.

Exposed on the web, on sites such as Tradeboss.com, is the offer of the Venezuelan mineral —coltan mostly, but also gold and aluminum, among others— by Korea TPC Development of Venezuela. It guarantees dispatches to any part of the world and confidentiality. "Through our fully automated trade platform, customers can directly interact per each shipment while maintaining control of their order in an anonymous and conflict-free environment."

Korea TPC Development of Venezuela was registered in the First Mercantile Register of the city of Valencia, state of Carabobo, on July 29, 2010, nine months after President Chávez ordered the military control of coltan deposits in the Orinoquia. According to the register, the company, with a capital of 23 million dollars, would be engaged in the "construction of bioenergy and gas plants, as well as the manufacture of diesel-based facilities".

Today, however, its principal offices with declared address in hotels like Gran Meliá Caracas and Caracas Palace, simply do not exist. Its trail is also lost in other addresses in the areas of Altamira and Los Cortijos, in Caracas.

However, from Seoul, capital of South Korea, Yang Ha Young recognizes that his name and his company correspond to the same company in Valencia that offers minerals on the Internet. After several attempts to contact him, he declared that he was scammed by Venezuelan partner Moisés González in a series of businesses that, he assumes, now involves him with the purchase and sale of coltan.

"The warning has nothing to do with me," he says. "I was the victim of my partner and I have not been able to communicate with him since he deceived me." Although an attempt was made to contact González, he never answered the telephone calls to the number he published on the Internet adds; not even the neighbors of the addresses he declared under his name know anything about him.

In the opinion of the Korean businessman, everything is part of a misunderstanding. On the other side of the world, from an office in the Garak-Dong neighborhood, he admits that he spent a season in Venezuela waiting for contracts that PDVSA and other state companies never awarded to him. The misunderstanding, if any, anyway illustrates the dark side of a barely known trade with origins in the foothills of the Guayana Shield, in the north of the state of Amazonas and southeast of the state of Bolívar, where the improvised gold and diamond mines begin to share the land with a new mineral in the neighborhood, the black stones, the so-called blue gold or coltan, as it is best known.

The Other El Dorado

Coltan is a combination of columbite and tantalite. Columbite contains Niobium, and tantalite contains Tantalum, numbers 41 and 73 of Mendeleev’s Periodic Table. Although both elements belong to the so-called rare-earth minerals, their use has become increasingly common and indispensable for the miniaturization of electronic equipment ranging from cell phones to missiles.

Despite their rarity, already in the late 70s, the Ministry of Energy and Mines of Venezuela (the then Ministry of Mines and Hydrocarbons) financed research regarding these and other minerals of the Guiana massif, the peculiar geological formation containing inside elements as valuable as they are scarce. But more than 30 years later, when those pioneering experiments were just references filed in the libraries of Corporación Venezolana de Guayana (CVG), a new wave of miners appeared in search of raw material for new technologies. And they arrive with voracity.

Right in Parguaza, in the state of Bolívar, at the foothills of the Guiana massif, the first signs of coltan fever are evident.

In the area of Los Gallitos, from one of the deposits made out in the middle of the savannas, the miners confirm that foreigners are the ones looking for the booty as if it were a home service. " Colombians are the ones who move this stone here," Flandes says plainly, without a last name or formal name, suggesting that it is a nickname.

"They come by motorcycle and travel again to the port of El Burro, then, they take a boat that leaves them in less than 15 minutes in Puerto Carreño, the capital of the department of Vichada," adds Flandes, who is the son of another miner who accompanies him in the search for the so-called black stones. They have learned to distinguish the difference between these mineral from other rocks that are also found in the lands of the area; it is almost black and weighs more than a traditional stone.

Father and son have history extracting gold and diamonds in the region. Now, leaning over a pile of reddish earth, they are seen with a pick and a shovel extracting coltan around Parguaza, a corner of the state of Bolívar that begins to appear on the radar of large companies in the technology sector. In that area, and at least in other four points more known by the locals, when the military lower their guard, they go in waves of up to 30 miners to find the blue gold.

There, where the stone mountains rise above the until-recently virgin jungle, a new activity sprang up. "People are in this because they are in need and there is no work," explains Camilo, another of the many miners in the area.

Everyone remembers well that a group of foreign businessmen appeared more than a year ago in the place with offers of growth. They spoke of new times, of benefits for those who backed with their signatures a request to the government to legalize the extraction of coltan. Everything was in words to the wind. They did not even give printed business cards. "They told the people that there were going to be houses and work sources, but they did not come back," says Flanders.

Several of the landowners in the area add that Colombians, Australians and even Koreans came knocking at their doors with a coltan project under their arms. They offered millions in cash in exchange for their property deeds. In Venezuela, anyway, extracting coltan is a crime.

Any mining activity has been banned in Amazonas since 1989. Only in Bolívar the mining development company of the Amazon (Demina) obtained a concession in 2001 to explore and exploit coltan, among other minerals, but now faces the case in courts, after the Government rescinded in 2010 the only license that the State had granted

Extracting, storing or transporting black stones became a crime thereafter. The judicial records reveal that the National Guard seized almost two tons (1800 kilos) of coltan between 2009 and 2011 to seven people, including women and men, indigenous people, Colombian citizens and minors.

Although several of the accused have been released, most of the cases remain open. The National Guard has confiscated the ore inside wrappings, bags of fique and white stockings, along with picks, surucas (screen), shovels, machetes and some pairs of boots.

A local organization, the Foundation for the Development of Science and Technology in the state of Amazonas (Fundacite Amazonas) revealed in a 2009 report that the National Guard had 46,800 kilograms of columbite-tantalite confiscated from a Colombian citizen and that in the checkpoint of Pozón de Babilla were machines seized by the military near the area where the illegal extraction occurred. Fundacite, attached to the Ministry of Science, Technology and Innovation, found evidence that the miners had the advice of specialists with knowledge on methods of studying soils.

Black Route to Blue Gold

The confidentiality assurance that Korea TPC Development of Venezuela offers on the web is neither excessive nor rare in this business. In fact, coltan is handled outside the law, without invoices or customs records, and virtually in the anonymity of shell companies, e.g. Global Impact USA and Hawk Enterprises. Only the first one has legal registration in the state of Florida, USA, but both refer to the same telephone numbers of a contact in Venezuela, in this case it is Aribel Ojeda, who prefers not to mention the ore business.

That shadow marketing is also transnational. If the ore is extracted in Venezuela, it soon crosses the borders that in this area usually correspond to geographical features. Between Venezuela and Colombia that feature is the course of the Orinoco River. In its basin, in the middle of the jungle, there are more streams than roads. Coltan peddlers only need 15 minutes by boat to take the goods to a safe harbor. Through El Burro and Puerto Páez, merchants cross the Orinoco to reach Puerto Carreño, in Colombia. Further south, but in the same state of Amazonas, another favorite route connects San Fernando de Atabapo in Venezuela with Puerto Inírida in Colombia.

Coltan is an open secret in the south of the country. But like everything informal that develops in secrecy, it is open to scams and business control by de facto powers that already handle other illicit traffics. There are many cases of intermediaries who have received cassiterite for coltan. There are also versions that, under the protection of discretion, grant a share in the business to anonymous military officials. Meanwhile, the local church of Puerto Ayacucho,  has not been inhibited from pointing out in the September-December 2010 edition of its magazine La Iglesia en Amazonas that "the Armed Forces do not exercise proper control and the miners evade those controls in various ways, being accomplices in multiple cases of the damage caused to the environment, which is mostly irreparable."

However, on the other side of the border, in Colombia, there is evidence that a black market of valuable metals and rare-earth minerals is growing in areas where historically the Government has exercised weak control. Since 2010, its security entities have seized over 83 tons (166 thousand pounds) of tantalum and tungsten in an area of the department of Guainía.

 The scenario is favorable to the intervention of drug cartels in the business. An illegal mining operation was developed by the Villa Cifuentes brothers, linked to drug trafficking. The Colombian government suspended their concession to exploit niobium, tantalum, vanadium and zirconium in Puinawai National Park, while the United States of America accused one of them, Jorge Milton Cifuentes Villa, as one of the main suppliers of cocaine for the Mexican Joaquín Guzmán Loera, better known as 'El Chapo Guzmán' and his Sinaloa Cartel.

"What we have found are sophisticated drug trafficking organizations that are increasingly involved with the trafficking of minerals from Puinawai Park and Venezuela," says the military commander of the area in Colombia, Marine Colonel Alfredo de Videro

Further south, the temptation of coltan also permeates the Brazilian border. Not in vain, most mineral refiners in the hemisphere are in that country. They have to go through there almost by obligation to become an input fit for industrial use.

"I would say that Colombia and Brazil have a great deal of business," concludes the governor of the state of Amazonas, Liborio Guarulla, who believes that the national government is an accomplice of the black market for not establishing mechanisms to legalize the exploitation of the mineral. "In those countries, this activity is formalized or at least it is not illegal.”

In Brazil, experts in mining laws, like lawyer Sergio Rocha Brito Marques, have urged politicians and manufacturing companies in the country to strengthen controls on mining. To them, inadequate and obsolete laws have allowed the growth of a black market north of the country's Amazonian provinces. They warn that the result is a chaos in the mining of their country in the border area with Colombia and Venezuela, where there are no clues about the global prices of the mineral and the buyers do not ask for coltan certificates of origin (a practice that a good part of the international industry has been adopting as a standard, under strong pressure from NGOs and multilateral organizations).

The Alarms Triggered

There is good reason for it. "Venezuela could emerge as a big problem because it represents another source of conflicting coltan, coming from an area where there is no regulation, no transparency and no security for the people working in the mines," warns Aaron Hall from Washington, on behalf of the NGO Enough Project.

The ghosts of Africa haunt any analysis on the subject. Although the conflicts already existed, coltan propped up the tribal struggles of Congo, Uganda and Rwanda. Blood-stained coltan (like diamonds) became a phrase made from humanitarian campaigns and film scripts. But in the Venezuelan case, that trailer and the flirtations of the national government with China and, above all, Iran, announce a horror film of geopolitical dimensions.

"We have decided to work with the Iranian brothers in the exploration of mines," the then Minister of Basic Industries and Mining, José Salamat Khan, said in 2011. Apart from the announcement, since 2009, Iran has been cooperating with Venezuela in conducting studies of mineral soils to prepare the Venezuelan mining map, according to the page of the National Geoscience Database of Iran.

The matter is not indifferent to the US authorities. Venezuelan officials, like former Minister Khan, in 2010, maintained relationships with Iranian shipping company Sadra Shipping, which claims on its website to have a branch in Caracas. Sadra is a subsidiary of company Khatam al-Anbiya, subject to sanctions by the US Department of the Treasury for its participation in the Iranian nuclear program.

The Venezuelan case, however, is far from the examples of Central Africa, a vein from which a fifth of the global supply of coltan is extracted, and a region plagued by endemic political instability.

Another Venezuelan advantage that experts celebrate is that although reaching one of the most intricate mines in the south of the country can take up to a week by boat and on foot, many of the black stones are loose in the form of nuggets.

As in a large part of the commodities world trade, extractors have a small part of the business. The most fortunate Venezuelan miners have found rocks of 15 kilos. On average, up to 200 bolivars (around 46 dollars at the official rate) are paid per kilo; this, after a negotiation process to fix the price. In the formal market, the payment is higher. The price went from 45 dollars per kilo in 1990 to a record high of 700 dollars in 2000, when the multinational Sony had to postpone the launch of the second version of PlayStation because of the scarce offer of coltan back then in the market.

There is not yet a public index of prices. The secret that involves the purchase and sale of the mineral generates price variations that produce spikes and drops in supplies. Everything depends on a negotiation process. "Niobium and tantalum materials are not openly traded," warns the US Geological Institute (USGS). "Purchase contracts are confidential between buyer and seller."

The cloudiness in the Venezuelan coltan market is a symptom of a problem that —according to researcher Raimund Bleischwitz of the Institute for Climate, Environment and Energy of Wuppertal in Germany— Chávez’s government must face. The black market will grow and increase its danger as the government delays the generation of mining laws and transparency.

"Manufacturers do not want to deal with bandits," says Bleischwitz. "Central Africa is a problem because there are no strong governments with which to negotiate a stable market and transparency. That is where Venezuela's strong central government has the potential to do it right and establish order in the coltan market, instead of a black market."

With reports from Ricardo Sandoval Palos in the United States of America, Ignacio Gómez in Colombia, Marcelo Soares in Brazil, and Nari Kim in South Korea


Related contents

Also read on the website of the International Consortium of Investigative Journalists (ICIJ):

"Venezuela emerges as a new source of 'conflict' minerals"

"Colombia's black-market coltan tied to drug traffickers, paramilitaries"

Also read on the website of El Espectador:
"Amenaza en el Puinawai" (Threat in Puinawai)

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