4th February 2022
Well, it looks like I missed the mark on Chilean political sentiment last week. Last Friday’s Round-up featured my tentative hopes that the Chilean Congress and associated committees were feeling their way towards a compromise between socially progressive and business-friendly policies in the drafting of the new constitution, but you can pretty well throw that out the window. I should have seen the proposed annulment of mining concessions on Indigenous lands as more of a hallmark of what was to come.
Before we look at this week’s developments, it bears remembering that Chile is the world’s top copper producer and second-largest lithium producer, both of which are crucial metals for the worldwide transition to clean energy that we’re all hoping for, so not only will adjustments to Chile’s mining landscape have effects within the country and for global markets, but disruptions to current supply and future production of these crucial elements could have a measurable cooling effect on the battle against climate change.
Let’s first take a quick look at that Indigenous land rights proposal, before moving on to the even bigger causes for concern for the mining industry that appeared this week. The environmental committee that is contributing to the drafting of Chile’s new constitution, which will replace the Pinochet-era mess it currently has, is the source of much of the consternation for the mining industry in recent times. That committee voted 13-4 last week in favour of annulling concessions granted to the mining and forestry industries on indigenous land if they did not have the prior approval of indigenous communities, which is most of them. Those permits could be re-instated after a consultation period if the communities agreed, but those negotiations could take anywhere from days to decades, based on the experience of other mining companies looking to gain approval for work in Latin America. There is another proposal before the committee as well, which would place time limits on mining concessions. The industry has been lobbying hard against that, saying that it undermines the long-term planning on which they rely for major investments.
So what’s new this week? Even worse news for miners. The big blow was a 13-6 vote by the same environmental committee on Tuesday, which opened up the possibility of copper and lithium miners being nationalised. Reading this bit of news was when I really knew my piece from last week was too optimistic – movements towards nationalisation inevitably reflect a political environment that is extremely hostile to mining interests. This particular motion would seize companies, not just assets, and would end concessions on the basis that strategic resources should serve the interests of all Chileans and as such be incorporated into the “full and exclusive domain of the state”. It’s impossible to overstate how disruptive this would be for mining in the country, on top of which there’s the fact that the government would have to compensate mining companies with hundreds of billions of dollars, which would therefore not be available to fund the ambitious social spending programmes that are a cornerstone of its policies. Without that compensation, Chile would find itself fronting a dizzying array of international tribunals – although it seems possible that that’s a problem this government is willing to face.
On top of that, that thorny environmental committee also gave initial approval to a proposal to annul water rights granted to the private sector, including mining, agribusiness and utilities, and force them to seek temporary permits for their water needs. The aim is to prioritise human consumption, sustainability and indigenous rights over the private sector, and this plan is at least in the same realm as sanity, because a decade of drought and poor regulation of water allocations has left Chile in a desperate situation with regards to water, and something was always going to have to give. However, a bill passed by Congress in January had already taken major steps to address this issue: unlimited water allocations were capped at 30 years, and regulators could now suspend unused rights, or any rights if supplies were at risk. The current free-for-all model has been a major boon to the Chilean economy, with the mining sector as well as agricultural enterprises like avocado and wine production booming, but it wasn’t sustainable in the face of environmental reality. But again, this seems like a jump much too far in the other direction; big, water-hungry operations are a major part of the Chilean economy, and they need to know that water will be available to them now and in the future in order to operate and invest in development.
It’s not panic stations for Chilean miners yet, despite this broadside against the industry, because these proposals have all only been approved by a single committee that is clearly showing off its activist bent. Some of them still need approval from the full committee, and all of them need to attain a 2/3 majority in Congress before they can make it into the proposed text of a new constitution, which will then face a referendum. There is still time and opportunity for these measures to be watered down or killed off completely – the 2/3 majority in Congress will be a particular stumbling block, because there are still business-friendly minority parties working overtime there. But even if – and that’s a big if – none of the these reforms make it into the new constitution in any form, the mere uncertainty that this has created in Chile’s mining industry will cast a chill over investment for a long time to come.
Around the Traps
Fabulous (and quick!) work from Goldplay Mining (TSXv:AUC, OTCQB:AUCCF, FRA:9FY) on their two recent acquisitions of Big Frank and Goldstorm South in British Columbia, with the release of a separate independent technical report for each project. Goldplay is pumping out the news on these two so fast it’s hard to keep up, but Spotlight did a Project of the Week on Big Frank after the last news release that goes over the new discoveries made by the company. Check it out here.
Guanajuato Silver (“GSilver”, TSXv:GSCR, OTCQX:GSVRF) has provided their 2021 production summary, which gives an overview of the stellar accomplishments of this production-focussed junior last year. Their strategy of re-opening productive assets has led to 238,000 AgEq of production in just November and December, since the re-opening of the El Cubo mill and mine and the El Pinguico mine in Mexico.
Stockhouse has a great overview of Kodiak Copper (TSXv:KDK, OTCQB:KDKCF, FRA:5DD1) and why they’re well-positioned in today’s mining environment, and the company itself has a very exciting news release out featuring ground geophysical and geochemical results from its flagship MPD copper-gold porphyry project in British Columbia. They’ve spotted new high-priority drill targets, potential extensions of known mineralised zones, three new kilometre-scale geochemical targets and more!
The northern Lapland gold rush is well and truly on, with very exciting results from Firefox Gold (TSXv:FFOX, OTCQB:FFOXF) at their Mustajärvi project. They’ve extended their previously-identified bonanza-grade zone, significantly stepped out one major target and intercepted the first high-grade results at another.
You can’t mention the Lapland gold rush without mentioning Rupert Resources and their massive Ikkari gold find, and there is some extremely good news from there this week. Infill drilling on the resource hit an incredible 103 m of 8 g/t Au, plus near-surface 2.5 g/t Au over 80m in the same hole. That’s on top of other, almost equally great results in the same news release, including zones of higher grades than assumed in the 2021 maiden resource estimate.
Solgold (TSX&LSE:SOLG) has also filed a technical report this week, this one on their Porvenir project in Ecuador. The technical report lists 1.40 Mt Cu and 1.80 Moz Au indicated and 96.9 Mt Cu and 0.38 Moz Au inferred. Solgold sees a very bright future for copper and copper-gold prophyries in Ecuador, exemplified by its hugely significant Alpala project, but the filing of the Porvenir technical report shows that there’s plenty of upside in the company outside its flagship as well.
Moneta Gold (TSX:ME, OTCQX:MEAUF, XETRA:MOP) has great drilling news too, with the final assay results of 11 drill holes at their flagship Tower Gold project coming in. The holes were part of a mighty 72,500 m drill campaign and tested the resource expansion potential of the Gap Zone, and they certainly achieved expansion. There were more gold intercepts than you can poke a stick at over a 700 x 350 m area that lies between two other targets.
An excellent development for Enduro Metals (TSXv:ENDR, OTCQB:ENDMF, FRA:SOGFF), who have completed the option to acquire 100% of their flagship Newmont Lake project, making them now among the largest landholders in the northwest of the Golden Triangle. Former owner Romios retains a 2% Net Smelter Return over the portion of the property that was optioned.
Mawson Gold (TSX:MAW, PINK:MWSNF, FRA:MXR) announced in November that it would be creating an Australian spinout, Southern Cross Gold, and it has now announced that Southern Cross has raised $2.725 million AUD through the issuance of shares. The funds will be used for, among other things, exploration on its properties and to fund the planned IPO on the ASX.
News for the corporate stocks buffs: Aurion (TSXv:AU, OTCQX:AIRFF) has announced the granting of stock options, at $1.35 per share for a five-year term, to certain directors, officers, employees and consultants.
Best wishes for a lovely weekend to all of you!
- Jane Lockwood