TORONTO - Ecuador is "sending the wrong message" to international mining companies by cancelling more than 500 mining concessions without starting a dialogue between government leaders and company stakeholders, a Canadian mining consultant says.
If the South American country doesn't "recognize the fact that there's an extended group of stakeholders, then you can never come to any kind of reasonable consideration," said Luke Penseney, CEO of Markets Intelligence in Mississauga, Ont.
"You risk becoming a pariah, which is what Ecuador's in danger of becoming." (which is fine with the people who live on the land)
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Last week, Ecuador's government announced it had cancelled the mining concessions because certain companies neglected to pay a US$1 per hectare environmental conservation fee due at the end of last March.
While the country declined to name which companies were specifically affected, several Canadian miners with properties in Ecuador issued press releases letting investors know they were safe.
Ascendant Copper Corporation (TSX:ACX), Dynasty Metals & Mining Inc. (TSX:DMM), Plexmar Resources Inc. (TSXV:PLE) and Aurelian Resources Inc. (TSX:ARU) all put out statements Friday saying they have paid all necessary fees.
Ascendant's shares regained some of the ground lost on Friday, when they fell 28 per cent. They closed Monday at 17 cents, up two cents from Friday's close but down from 21 cents at Thursday's close.
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Reports suggest that two of Ascendant Copper's concessions have been revoked, a suggestion the company denies..
"Ascendant has received no notification of annulment from the Government of Ecuador or the Ministry of Mines and Petroleum, nor is it aware that any such notification exists," the company said in a release.
Ascendant claims that it has met all payments, though the government had already told the company it must stop operations at the project because it had gone against certain regulations.
"The market is already nervous about Ecuador's ongoing overhaul of mining policy," wrote Eric Zaunscherb, an analyst for Haywood Securities wrote in a note.
Some analysts are speculating that the problem could deepen.
"We're expecting . . . that they're increase concession taxes and maybe even require minimum expenditures to maintain that your property is in good standing," said David Stein, an analyst at Cormark Securities.
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On Monday, Dynasty Metals rose three per cent, or 27 cents to $7.54 and Plexmar was up a penny to 14 cents at the Toronto Stock Exchange while Aurelian's shares closed at $8.10, down 19 cents from Friday's close.
Stein said despite the recent news, miners based in Ecuador still have it good.
"When you compare Equador to Peru or Chile or even North America, it's one of the cheapest places to operate right now. There's really no reason for that to be the case going forward," Stein said.
Ecuadorian government officials have been feeling pressure from environmentalists to tighten controls over its concessions because some said they were handing out too many agreements with foreign-based companies.
Some environmentalists also expressed concerns that the miners were polluting drinking water, which has been denied by the corporations.
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"The government is responding to societal pressure, which is quite reasonable, but what it's not recognizing is that there are a group of stakeholders who include resource developers," Penseney said.
It's "the worst possible scenario other than to kick people out."
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