Rodeo – Round-up of Latin American Mining – Part 2
It seems a good moment to review what has transpired, what has changed and what might happen when financing improves.. This we shall do here on a country by country basis with Part 1 covering Argentina to Colombia. Part 2 covers Ecuador to Venezuela.
Ecuador – Viva la Banana
Unfortunately for miners this quintessential banana republic discovered oil and thus felt it did not need to get “down and dirty” with developing a mining industry. Unfortunately the government also failed to notice that the oil industry hardly makes any jobs and what it does make are frequently taken by highly paid FiFo ex-pats. Moreover oil in Ecuador is largely in the Amazonian jungle where the people who need jobs are not..
Anyway the highpoint of Ecuadorian “mining” was the Aurelian takeover. That was not even mining per se but rather a triumph of mining finance over reality. It all ended in tears. We have an Intierra map dating back to that Golden Age showing a herd of TSX and ASX miners had staked out big swathes of territory in Ecuador and the hopes were running high. The country has since, deservedly, fallen off the radar screen.
Guyana – much ado about very little
When everyone was waving their hands in the air for a piece of the “Guyana Story” we firmly sat on our hands. Once again we don’t feel we have missed much.
Mexico – still the main game
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As we mentioned this was the main sand-pit which the Canadian miners played in. It afforded a degree of comfort on a number of fronts, particularly in the wake of the NAFTA treaty. It certainly helped that silver was riding a rising tide and the cheap seats in Canada loved silver.. now that tide has receded leaving pure silver plays looking less than gleaming in investors’ eyes. Most of the best base metals plays in the country got taken over (e.g. Farallon) while the less worthy (e.g. Baja Mining) passed into advanced purgatory. Many projects did however make it to production, more than a few were taken over by majors as they had hoped, or were consolidated into mid-tier Players (e.g. New Gold).
The range of companies is too broad to review here but some sweeping generalisations can be made. One is that silver is a much harder sell these days. Secondly, the onset of royalty talk from the Mexican government pricked a bubble of illusion that miners were working in that they would get away with the Treasure of the Sierra Madre scot-free forever.
Mexico still remains a strong jurisdiction from the point of view of legal protections and the ejidos have proven to be almost universally realistic and pro-mining. The spectre at this feast though is the rising toll from the crime syndicates in the country. Over and over, miners have said “its nearby but doesn’t effect us”. That assuaged people until recently but has lost its credibility in many areas in recent times.
Paraguay – Deathly Hush
This country has long been Sleepy Hollow and remains as such. Latin American Minerals has a few properties there (with a gold/diamonds focus and a REE & niobium sub-focus) and there was a uranium explorer called Cue Resources that managed to capture the attention of Cameco as a JV partner. It was eventually taken over by UEC in 2012.
Peru – base metal wonderland
This country’s geological blessings have long attracted fortune hunters, but pre-2000 the country was roiled by the Sendero Luminoso guerilla movement that claimed 25,000 lives in a very short period of years. The interest of foreign miners in LatAm coincided with the demise of the movement which had long ruled the roost in the altiplano scaring off investment with deadly efficiency. The rest is history with a flood of investment that continues to this day with the heavyweight money going more towards base metals than the silver and gold that gave cheap thrills to the retail investing hordes.
Recent times have been a mixed bag. Miners with a credible story are doing well and having minimal problems. A few though have fallen afoul of NGO-inspired local blockades and trouble-causing. Most of the victims of this though have tended to deserve it through riding rough-shod over local sentiments and giving mere lip-service to community relations. Peru remains though one of the true happy hunting grounds for foreign miners and definitely the go-to place for lead-zinc in LatAm with Zinc having a fire lit underneath its demand and price at the current time. If only the cheap seats “got it” that the precious era is over and it’s time to move on to real metals.
Suriname – only majors need apply?
The main game in town here is IAMgold’s Rosebel mine picked up through the Cambior takeover in the middle of last decade. This seems to be a playing field for only the very largest who have the tolerance for min-numbing bureaucracy as the only other player of note we can find is Newmont with its Merian gold project.
Uruguay – the one that got away from Crystallex
This country, to our knowledge has only one mining asset of much note. This is the San Gregorio mine of Orosur (formerly Uruguay Mining. This mine has been chugging away for a decade now pouring forth gold. It has long been surrounded by (about to run out) stories and has defied the critics. To add to the irony, this mine was owned by Crystallex who sold it off to concentrate on Venezuela!
Venezuela – No man’s land
This country is now a no-go zone for Canadian miners for various reasons, not least of which is the Crystallex Affair. Try as we might to blame Chavez and his coterie for the woes of Crystallex there was a big element of “own goal” to that company’s fate. However it’s not just Crystallex getting sand kicked in its face here as Anglo American also had its important nickel operations seized in 2012.
Latin America became, for a few brief years, almost the exclusive preserve of Canadian miners. Many are still there but their verve and energy is somewhat battered by circumstances and experience. While the good times rolled quite a number of companies got themselves bid for and the managements went on to try to wash and repeat, with varying success. In this age when production is king, there is no specific reason why some of the more oven-ready projects should not be resized, and reconfigured for some type of production more fitting for the tenor of the times.
Governments in the region are not so ready with the Come Hither looks as they used to be, and if they are then miners should be rightly wary on the entreaties to throw multimillions towards economies where guarantees of future progress are not rock-solid.
Coming out the other side of the financing vale of darkness there will still be more opportunities in LatAm than virtually anywhere else.. Investors should also not be surprised to see countries that were once pariahs, e.g. Bolivia, becoming more amenable while past darlings look a bit more tarnished.
Christopher Ecclestone is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten & Company in New York in 2003 ... <Read more about Christopher Ecclestone>