April 18 (Bloomberg) -- Aurelian Resources Inc., planning to develop Ecuador's largest gold deposit, and other miners working in the nation fell after the government suspended some mining for six months while it prepares a new minerals law.
Aurelian dropped C$2.40, or 33 percent, to C$4.96 at 3:30 p.m. in Toronto Stock Exchange trading, after falling 14 percent yesterday. A close at the current price would be the shares' biggest two-day decline since December 2002.
Ecuador's Constitutional Assembly, elected to rewrite the constitution, voted 95-to-1 in favor of the moratorium. President Rafael Correa's government, already renegotiating oil companies' contracts, is seeking greater control of Ecuador's mineral reserves as copper and oil prices trade near records.
“The government sees the margin expansion for mining companies because of the prices, and they're saying ‘Let's get our hand in the cookie jar, too,’” Tom Winmill, president of Midas Management Corp., which owns Aurelian shares, said in an interview. “When there's clarity on the law, a major gold producer is going to come in and pay a pretty price for it.”
The bill passed today declares a moratorium on mid- and large-scale mining and cancels many of the more than 5,000 mining concessions in Ecuador, including ones in protected areas or where water sources are threatened. Correa estimates the country's mineral reserves are worth $220 billion.
‘Inhospitable’
“The expected proposal is fraught with negative actions that make Ecuador inhospitable to mining investment,” Haywood Securities Inc. mining analysts Eric Zaunscherb and Amanda He said in a note to clients.
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Aurelian, based in Toronto, discovered a deposit in Ecuador last year holding an estimated 13.7 million ounces of gold and 22.4 million ounces of silver, the biggest such find in 2007.
Aurelian Chief Executive Officer Patrick Anderson and spokeswoman Marla Gale didn't return phone messages seeking comment. The company said yesterday it hadn't determined the impact of the proposed changes.
Iamgold Corp., planning to dig the Quimsacocha mine in the country, fell 24 cents, or 3.3 percent, to C$7.14.
Dynasty Metals & Mining Inc., developing two gold projects in Ecuador, fell C$2.11, or 34 percent, to C$4.05 before trading was halted. The shares dropped 6.4 percent yesterday.
Corriente Resources Inc., planning to develop the Mirador copper mine in the country, slid 50 cents, or 11 percent, to C$4.10, before trade in the stock was halted. The decline follows a 16 percent plunge yesterday.
The changes mirror attempts in other commodity-producing nations to increase their take amid higher prices. Zambia, Africa's largest copper producer, and Argentina have both raised mining taxes this year. The Democratic Republic of Congo is reviewing mining contracts and may change those deemed unfair to the state.
Dynasty CEO Rob Washer and Corriente spokesman Daniel Carriere didn't immediately return calls seeking comment.
To contact the reporter on this story: Stewart Bailey in New York at sbailey7@bloomberg.net.
Last Updated: April 18, 2008 15:49 EDT
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