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4/17/08

More on Ecuador, Correa, Mining Laws and Aurelian

Well, I've checked through every scrap of news I can find on Correa's press conference today. It was a wide-ranging question and answer session and touched on a lot of issues, however the one that's got my attention right now is the mining law.

When there are words that move the market, you have to find out what was said. What Correa seems to have said about mining (to quote the part I ripped from this article)

"...Correa indicated that some concessions that are in the extraction phase will be suspended for 180 days until there is a new legal framework and renegotiation of contracts.."

Here's the Spanish from the linked text above. Check my translation for yourself.

"...Correa señaló que algunas concesiones que están en la fase de extracción serán suspendidas por 180 días hasta tener un nuevo marco legal y renegociar los contratos...."

Now you gotta be careful about second guessing what the Asemblea Constituyente is going to decide on via Correa's words (the processing of the proposed mining "mandato", or law, starts tomorrow...it may finish tomorrow or it may go on for a few days) because Correa is not the assembly, nor vice versa. Also, this is not a direct quote but reported...it's as close as I can get right now, and I promise if the direct quote says anything different I'll tell you dudes.

BUT Correa's words indicate that ARU is in exactly the same position as it was before. That's also true for Corriente (CTQ.to) (ETQ), IAMGold (IMG.to) (IAG) and other companies that are only in the exploration phase and NOT the extraction phase. In other words, ARU's projected timeline will not be affected if we take Correa's words at face value. It is more likely to affect the timeline of a company like Dynasty (DMM.to) that is about to start production at its Zaruma mine.

So, taking Aurelian as my example (cos it's the Ecuador miner I like the most), the new law does not seem to stop the company from moving ahead with the exploration phase of the operation. If this is true, today's sell-off was due to nothing but panic, and nothing has changed.