Mining stocks pounded as Ecuador moves to revoke concessions

23 hours ago

Shares of Canadian mining companies with operations in Ecuador were pounded Friday as an assembly that's writing the country's new constitution overwhelmingly approved a decree to revoke most mining concessions there.

The political development cut the market value of Aurelian Resources Inc. (TSX:ARU) by about $314 million on the Toronto Stock Exchange.

Ninety-five members of the 130-member body approved the measure on Friday. The assembly is controlled by the party of leftist President Rafael Correa.

The measure also calls for creation of a state-run mining company.

Correa took office last year, vowing to increase state control of natural resources and the economy.

A large number of Canadian mining companies of various sizes have concessions in the South American country and could be affected.

Shares of Toronto-based Aurelian, which holds the 950-square-kilometre Fruta del Norte discovery, fell $2.32 or 31.5 per cent to $5.04, with more than 10 million traded on the TSX. Before the decline, Aurelian's market value was nearly $997 million.

Shares of Vancouver-based Dynasty Metals & Mining Inc. (TSX:DMM) fell $2.11 or 34 per cent to $4.05, shaving nearly $68 million off its market value.

Meanwhile, shares of Corriente Resources Inc. (TSX:CTQ), a junior also based in Vancouver, were down 50 cents or more than 10 per cent at $4.10 before trading in the shares were halted pending the news from Ecuador. It had been worth $344.7 million on Thursday, so the decline cut about $34.5 million off its market value.

"The company has requested an official version of this mining mandate and will advise further as to the impact of this mandate on the company's operations in Ecuador when the company's analysis is completed," Corriente said in a statement.

Corriente holds the Mirador copper-gold operation.

The decree Friday revokes about 3,100 of the 4,112 active concessions and suspended 1,220 requests for concessions.

Correa, a U.S.-trained economist, took office last year, vowing to increase state control of natural resources and the economy.

The former economy minister is a close ally of Venezuelan President Hugo Chavez, who this month announced that he will nationalize the country's largest steel maker, and that the state will take over three foreign-owned cement businesses.

Ecuador's assembly has legislative powers in addition to writing a new constitution that will be submitted to voters.

Other publicly traded mining companies with projects in Ecuador include:

-Plexmar Resources Inc. (TSXV:PLE), which has optioned up to a 60 per cent interest of the Escondida project to Escondoro Resources Inc. The project is close to lands held by Aurelian and Corriente. Plexmar shares fell two cents to 16 cents.

-International Minerals Corp. (TSX: IMZ), which is drilling at a gold porphyry project in southern Ecuador. The drilling is being done by a subsidiary of Major Drilling Group International. (TSX:MDI). Their shares closed at $5.68, down 17 cents, and at $54.59, up 28 cents, respectively.

-Salazar Resources Ltd. (TSXV:SRL), which has reported evidence of silver and several base metals at the Curipamba projec in Ecuador. Its shares closed at 84 cents, down two cents.

Last year, Crystallex International (TSX:KRY), a Toronto gold developer which is advancing a major mining project in Venezuela, saw its shares swing wildly whenever Chavez or Venezuela's resources minister suggested the country planned to take over the mining sector.

Crystallex says the company and its partner in the Las Cristinas project have been told that all requirements for an environmental permit for the US$356 million project have been fulfilled.

-With files from The Associated Press