Greystar shares plunge as Colombia requests mine review
Greystar Resources of Canada have been told by the Colombian government to file a new environmental impact assessment (EIA) for its gold-and-silver mine at Angostura.
The industry is claiming the new rules are essentially a ban on mining in Colombia's "Paramo" ecosystem. The Angostura Project is 55 km from Bucaramanga, the capital city of Santander department.
Greystar's largest shareholder is the World Bank's IFC at 10.76%.
Greystar's Colombia project hits govt roadblock
26 April 2010
Greystar Resources said the Colombian government has told it to file new environmental impact assessment (EIA) for its gold-and-silver mine at Angostura, which will severely hit the project schedule and may have a material effect on its economic viability.
Shares of the company nearly halved in value to C$3.45 Monday morning on the Toronto Stock Exchange.
The ministry of Environment, Housing and Territorial Development has requested that the new Angostura EIA adjust the occupied area to an elevation below 3,200 meters, the company said in a statement.
The request requires that mining and exploration activity must be excluded from the Paramo ecosystem, which mostly consists of glacier-formed valleys and plains with lakes.
Greystar, which restarted its operations in Colombia in 2003 after a halt in 1999 following the kidnapping of a contractor, said the request would require the Angostura project to be completely redesigned.
The company said it had started to secure $650 million in project finance from international sources, and was completing a definitive feasibility study on the Angostura project.
Greystar had also begun the process of filing an appeal of the notification, it said. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Unnikrishnan Nair)
Greystar appeals over new Angostura EIA
Business Financial Newswire
26 April 2010
Greystar Resources is appealing against a Colombian government request for a new environmental impact assessment for the Angostura project.
The ministry of the environment, housing and territorial development wants the EIA to conform with new regulations that mining and exploration activity must be excluded from the 'Paramo' ecosystem.
Paramo is an ecosystem that consists of mostly glacier formed valleys and plains with lakes, peat bogs and, wet and dry grasslands intermingled with shrub lands and forest patches.
The definition to determine the area of Paramo is that established by the Alexander Von Humboldt Biological Resources Research Institute in Colombia.
While the definition of Paramo is determined by fauna, flora and other ecological categories, it is also defined by elevation.
MAVDT has requested that the new Angostura EIA adjust the occupied area to an elevation below 3,200 metres.
The original Angostura EIA was filed with MAVDT in December - before the mining code modification on 9 February.
Greystar says that at the time of the filing, it was led to believe that the modified code would not apply to the Angostura project.
The request by MAVDT for a redesign of the project and a new EIA was not expected or anticipated by the Company.
Greystar has begun the process of filing an appeal of the notification from MADVT which must respond to the appeal within 15 working days.
Greystar says it has worked diligently and to the highest environmental standards for more than 15 years to develop the Angostura project.
Political risk hampers junior miners
27 April 2010
Investors received three reminders yesterday of just how sensitive junior mining companies are to political risk, and how one strange ruling or proclamation can incite panic.
Greystar Resources Ltd. (in Colombia), General Moly Ltd. (in Nevada) and several gold companies in Venezuela were all harmed by surprising government actions that few people saw coming.
The most serious was Greystar, which wants to develop the Angostura gold-silver project, one of the world's biggest undeveloped precious-metal deposits.
The company was making good progress until late last week, when it learned that it would be subject to changes in the government's mining code. The new rules essentially ban mining in Colombia's "Paramo" ecosystem. Greystar infringes on that area.
In the case of Angostura, the rules forbid mining activity at elevations higher than 3,200 metres. Almost all of Greystar's infrastructure is above 3,200 metres in the current project design, along with half of the proposed open pit.
If this law is upheld, it would instantly undo much of the work that Greystar has done at Angostura over more than 15 years at the site. The stock plummeted yesterday on the news, closing in Toronto at $3.60, down $2.90, or 46%.
Steve Kesler, Greystar's incoming chief executive, said the company thought Angostura would be "grandfathered" by the government and would not be subject to the changes in the mining code. But for now, that does not appear to be the case.
John Tumazos, an independent analyst, pointed out that much of the mining in Latin America is at very high elevations, which raises questions about what the government wants.
"Regulating mining by altitude is, in my opinion, just a way to outlaw mining," he said.
At a large mining conference in Toronto last month, a delegation of Colombian politicians called for more mining investment in their country, but this decision will make some companies think twice about it.
General Moly, meanwhile, announced yesterday that a Nevada district court overturned a decision that gave the company water rights for its Mount Hope project.
While the announcement does not threaten the viability of the project, analysts said yesterday it likely increases the time line to production.
And in the case of Venezuela, President Hugo Chavez caused panic after he threatened to nationalize the country's gold industry. He accused "capitalist mafias" in the industry of destroying the environment and exploiting workers.
Venezuela has blocked two Canadian mining companies, Crystallex International Corp. and Gold Reserve Inc., from developing projects in the country. But the government appears to have good relations with Vancouver-based Rusoro Mining Ltd., which has emerged as its partner of choice for gold projects.
Shares of all three companies fell yesterday. Like many junior miners, all of their mineral assets are in one country, leaving them vulnerable to political risk.
Colombia requests new review of Greystar mine
By Naomi Mapstone
27 April 2010
Lima - Greystar Resources is appealing a Colombian government request for a new environmental impact assessment that could jeopardise its flagship Angostura gold and silver project.
The open-cut mine in Colombia's northern Santander department was forecast to yield an average of 511,000 oz of gold and 2.3m oz of silver over 15 years from 2012, a prospect that saw the company's shares rise 91 per cent over the past year.
The company tried to assuage investor fears in a conference call on Monday, but the stock closed 44.62 per cent down on the Toronto Stock Exchange after trading at three times normal volume.
A new EIA under mining code changes enacted in February would require the company to move its Angostura project to below 3,200 metres, the company said in a statement.
"As currently designed, almost all the project facilities and infrastructure are at a higher elevation than 3,200 metres. In addition, half of the proposed open pit resides above 3,200 metres. [The ministry's] request would require the Angostura project to be completely redesigned," the company said.
The new code seeks to protect Colombia's high-altitude wetlands, or paramos, which are crucial to water supply in many areas, from contamination.
The company has been developing the project for more than a decade, and said it had filed its EIA months before the code modifications took effect. It had been "led to believe that the Modified Mining Code would not apply to the Angostura project", it said. The request for a new EIA was not expected.
"The question is whether that project is even viable if they fail in the appeal," said Rupert Stebbings, a Medellin-based analyst at Interbolsa. "This is what they've sold themselves on; I really hope they've got documentation to back up the fact that the minister said they'd be exempt."
The code modifications were aimed at protecting a very specific ecology and did not signal that the government opposed extractive industries, he said.
"While the mining code is not the best in the world, it's definitely workable," he said.
Greystar's biggest shareholder is the World Bank's International Finance Corporation.