UPDATE 1-Colombia to fine Drummond if it loads coal by crane after Jan. 1

Thu Dec 19, 2013 11:41am EST

BOGOTA Dec 19 (Reuters) - Colombia will fine U.S.-based miner Drummond Co Inc if it continues to load coal by crane instead of using an automated conveyor belt system that will be mandatory from Jan. 1, Environment Minister Luz Helena Sarmiento said on Thursday.

The minister did not specify the amount of the daily fine or indicate whether it was intended as a means for Drummond to continue to load coal while it finishes building its conveyor belt system. That system will likely take a few more months to complete, according to traders.

The issue of whether or not Drummond can load coal from January when a new law takes effect prohibiting loading coal onto ships by crane is of paramount importance to the seaborne coal market as it could slash shipments from the world's No. 4 coal exporter by a third and raise prices.

Mining ministry officials were seeking a work-around to enable Drummond to keep exporting from next year but said that as of Wednesday, none had been found. A shutdown at Drummond would also put a major dent in the Colombian government's income from royalties.

The government is imposing the change in the way coal is loaded to reduce environmental pollution. Lumps of coal and dust drop into the sea when the fuel is picked up by crane, while the new conveyor belt systems that will stretch out to waiting ships off the shore will be fully enclosed.

Separately, Sarmiento announced the government was fining Drummond 7 billion pesos or about $3.6 million over the spillage of coal from a barge into the Caribbean Sea at the company's privately owned port in January this year. She said it was the heaviest fine ever imposed on a company operating in Colombia.

Drummond said at the time that the coal was spilled during a spell of rough weather. Colombia's environmental licensing agency, ANLA, temporarily shut down loading at Drummond's port after the incident while it investigated what happened.

Colombia's coal sector is dominated by big thermal coal producers with their own port and rail facilities which also include Glencore and Cerrejon, a joint-venture owned by BHP Billiton, Anglo American Plc and Xstrata .

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