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1/25/12

The whole of the 'Regional Politics' section of IKN142, out last week

There were three parts to 'Regional Politics' this week (usually there are more) and this time around we covered Ecuador, Argentina and we did a short piece on one of the candidates in this year's Mexico election (as the other two main players have already had a bit of light shone upon them in previous editions). 

Anyway, here it is and it gives an idea of what we do in one of the five main sections of The IKN Weekly every week (the others go by the names "Fundamental Analysis of Mining Stocks", "Stocks to Follow", The Copper Basket" and "Market Watching" and are more directly related to junior mining stock, mostly in LatAm):

Regional politics

Ecuador: Groundhog Day
Let’s keep this short, yes? This came out of Reuters (13) on Friday January 20th, late last week (author’s translation):

Quito (Reuters) – Ecuador expects to sign the definitive contracts for the mining of multimillion dollar gold and copper projects with the mining companies Ecuacorriente and Kinross during January and February, the Minister for Non-Renewable Natural Resources Wilson Pastor told Reuters on Friday.

The minister said that the Andean nation would receive investment of U$2.8Bn from these two projects and said that the country would sign the agreement with Ecuacorriente at the end of January and with Kinross in February.

Meanwhile we quote from IKN134, dated November 27th 2011:

Vice Minister of Mines Fernando Auquilla said that the contracts between The State and both Kinross (Fruta del Norte) and Ecuacorriente (Mirador) (translated by your author), “..are practically negotiated, we’re in the phase of construction of the definitive document”.

The same IKN134 quoted President Rafael Correa: “In the next few days they will be signed. We are negotiating these contracts very hard..we are also negotiating the forward payment of royalties and with those we will do a series of projects.”

And Federico Auquilla again: “The mining companies have accepted the conditions of the Ecuadorian State and we are completely satisfied.”

All that was followed in early December by Wilson Pastor saying that Kinross would officially sign by the end of that month. Oh well.

As for your author’s opinion on developments and the viability of Ecuador as an investment destination, those haven’t changed one single iota from the opinions expressed in IKN134 and a couple of times after that piece, too. Feel free to check back but they can be summed up with one word, AVOID. They also differ from a silly piece out of Canaccord last week that tried its very hardest to pump the country to its readership after being invited to look at the excellent rocks Salazar Resources (SRL.v) has to offer in the country (and they are excellent, just a pity they’re in Ecuador). People, the fact is that strong and viable projects are selling at considerable discounts in many places, in countries with good mining acceptance and traditions too (xxxxxxxxxxxxxxxxxxxxxxxx just one prime example that springs to mind) so there’s no reason at all to tack on extra risk by exposing yourself to Ecuador. Avoid, avoid and avoid once again, because that’s what all exploration companies that aren’t already up to their necks in Ecuador are going to do in the years ahead, signatures with Ecuacorriente and Kinross forthcoming or not. Even if these elusive deals are signed, the situation in Ecuador remains far worse than the brokerages pumping their stories to the ignorant would have you believe.

Argentina: Yamana (AUY) (YRI.to) at Esquel/Suyai, Osisko at Famantina
The last couple of weeks have seen a ramping up of happy feely good news stories out of Argentina about the political risk environment for miners, with the news of the Rio Negro ban on mining (using cyanide, mercury etc) the central one on which much optimism has been hung. However, northern media channels have neglected (it must have simply slipped their minds, oops deary me) to mention anything about the worsening risk profile of the La Rioja province and the Famantina project of Osisko mining, a project slated for open pit mining currently being opposed by roadblocks and getting national headline attention...in Argentina at least. Your author hasn’t mentioned much of it so far, but it’s one to keep an eye upon because the protests seem to be spread a little to other areas and last week the big La Alumbrera mine got attention via selective roadblocks in the normally pro-mining province of Catamarca (14) that barred progress of supply trucks to the mine.

In other Argentina news, we go a little further into Chubut province and its issues. As mentioned last week much speculation is now turning towards this province and its mooted plans to allow mining operations by overturning existing laws. Your author remains sceptical about the “from 2q12” timeline promoted by Argentina’s mining minister Jorge Mayoral regarding Navidad, but at least in the case of the Pan American Silver (PAA.to) (PAAS) Navidad project in the centre of the province, there’s a fighting chance that eventually (best guess 2013) it’ll get the necessary green lights. However, we continue to scoff at the silliness that was and still is being promoted by interested third parties in Canada about Yanama Gold’s (AUY) (YRI.to) chances of a green light at Esquel/Suyai in the West of the province. To give a little background into how the company has been operating its community relations program there, here’s a story you’re unlikely to read about in the Globe & Mail or your morning brokerage update mailer. According to reports out of the small town of Esquel, last week a couple of thousand protesters gathered to reaffirm their opposition to the mining project in question. They also called out the town’s Yamana community rep in the following way (translated) (15):

“On the corner of Rivadavia and 25 de Mayo streets the locals declared Richard Bustos, community relations manager of Yamana Gold, a persona non grata in the town. A long text with extensive proofs was read out to the crowd about the role of Bustos who, as well as being employed by the mining company, is also a reporter with the local FM Del Lago radio station in the city, in clear incompatibility of the two roles. Bustos declared to the press that he had been working as community relations manager for Yamana for two years, a fact he had hidden from the community and from his audience of listeners until the (anti-mining) assembly had unmasked the facts.”

This cute way of going about community relations business looks, to your author at least, like a throwback to the sneaky, back-handed ways of doing things we saw perhaps 20 years ago from the industry. The very style of this creeping-in-the-background Yamana is doing (along with one of the major giveaways of problems in the mining industry, that of the project/company name change) should be enough of a clue here, so don’t get fooled into lumping all Chubut projects into one bag; Navidad might not be on the type of optimum timeline getting mention by bigwigs right now, but it does have a fair crack of eventual approval (I’m guessing 2013, but a later date than that wouldn’t surprise me either). However Esquel/Suyai is a no-way-José project and it matters not how much optimism is thrown its way by those with hidden agenda.

Mexico: A quick profile of PAN candidate Josefina Vázquez Mota as relates to mining
Last week we ran a short piece of current frontrunner for the Mexico Presidential elections, Enrique Peña Nieto, and as we’d earlier run a note on perhaps his main rival AMLO in IKN139 (dated Jan 1st) we said that it was only fair to run a rapid-fire overview of the other current main candidate for the job, the PAN party’s Josefina Vázquez Mota. So here it is.

Vázquez Mota, (51 years old, born and raised in Mexico City, married, three children, career economist and party activist) is the likely candidate for the centre-right PAN party (Partido de Accion Nacional, for which I don’t think you need a translation), the political party that has supplied the country’s last two Presidents in Vicente Fox (until 2006) and the current Felipe Calderón (until now). Therefore it shouldn’t come as much surprise to find out that if elected, we’d fully expect the same type of pro-mining administration from Vásquez Mota as we’ve seen from the previous two PAN governments in the last 12 years. This is reinforced by the fact that Vázquez Mota has been an active servant of the last two administrations with periods as Education Minister and Social Development Minister, carrying out party policy handed down from the Presidents basically to the letter. She deserves her crack at the big job and would represent the continuation of the status quo in Mexico policy towards mining, but the general feeling is that after two terms the PAN party is feeling the fatigue of government, has lost general popularity with its citizenry (particularly on non-mining related issues such as the acceleration of the so-called “drug wars”) and is unlikely to get a third President from its ranks, for this time at least. Some current polls put her in a technical dead heat for second place along with AMLO, but that same street level general feeling is that Vázquez and PAN are lying third and behind the left wing candidate, with Peña Nieto out front at around 40% voter intention at this early stage.