IMHO the junior resource sector just died. It happened with BRE-X
and now we have another equally damaging incident but which affects dozens of juniors in Ecuador but guess what? It will spin off into all juniors exploring in 3rd world countries and that makes up at least half of the mining stocks on the TSE and TSX.
Those still holding Ecuador mining stocks should look to Las Cristinas for a lesson which is now being repeated. Las Cristinas has almost 12 million ounces of gold but has never been mined. They have not been bought out nor is their share price what it could be.
Another 10 million ounce deposit that shows no sign of activity is Rosario Montana in Romania.
The juniors were already lagging behind anyway and now after this it wouldn't surprise me if they were knocked down even further in the months ahead. Now what people want to hear but I'm pretty good with premonitions.
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Value vaporizes as Ecuador puts mining on hold
Mining
Peter Koven, Financial Post Published: Saturday, April 19, 2008
Ecuador dealt investors a massive blow yesterday as it passed a controversial mandate to suspend mining projects for as long as 180 days, raising concerns about the future of mining in the country.
More than half a billion dollars of shareholder value was vaporized as Aurelian Resources Inc. dropped 32%, Dynasty Metals & Mining Inc. fell 34% and Corriente Resources Inc. fell more than 10% before being halted. They fell sharply on Thursday when reports of the move surfaced.
"The accepted proposal is fraught with negative actions that make Ecuador inhospitable to mining investment," Haywood Securities analyst Eric Zaunscherb wrote in a note to clients.
The mandate, which is full of uncertainty, would revoke concessions and put a halt on most activity until the government formulates a strict mining law. It was voted on by Ecuador's Constitutional Assembly, which is led by a man named Alberto Acosta, who made strong anti-mining statements.
Patrick Anderson, Aurelian chief executive, is not sure why Mr. Acosta took that stance, as he was formerly mining minister and appeared to be in favour of environmentally-responsible mining.
"It's a much more extreme position he's taken with this mandate. I don't know where it's coming from. It's just come out in the past few days," Mr. Anderson said in an interview.
The news also came as a shock to the investment community because Ecuadorian President Rafael Correa has been a strong supporter of the mining industry and has pushed back against anti-mining environmental groups.
Sources said yesterday that the abrupt decision, which goes against virtually everything Mr. Correa has said in recent months, is evidence he is losing some of his political influence. He was reportedly greeted by jeers from the public when he made a speech yesterday after the vote.
"There's a big political power play going on. I think [Mr. Acosta] more or less held a gun to Correa's head and said: 'This is what I want,'" said one source who asked not to be named.
The anti-mining vote in the assembly passed by an astonishing 95 to 1 (with 25 abstaining) despite almost no debate, leading to more speculation that some kind of deal was struck.
A big concern in the man-date is the constitutional assembly's proposal to limit the number of concessions any company can hold to just three. Aurelian, for example, currently has 38.
Mr. Acosta said specifically that he opposes open-pit mining, which would affect Corriente most directly. The company's stock was halted so it was not hurt as badly as some of the other companies yesterday.
"I don't think Corriente is going to have a very good Monday morning," said Michael Gray, an analyst at Genuity Capital Markets.
Aurelian became the darling of the junior mining world in 2006 when it made a massive gold discovery in the southeast corner of the country
that ranks as one of the best in decades. But the stock has had a very bumpy ride as investors fret about political stability in Ecuador.
As shareholders were frantically unloading Aurelian stock yesterday, Mr. Gray suspects that senior mining companies were buying, which would give them an advantage in a possible future takeover. "They've got a ton of cash and they're the longest-term investors out there," he said.
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