Guatemala to ban new mining, exploration licences

Guatemala’s president Otto Perez Molina plans to place a two-year moratorium on issuing new mining and exploration licences, giving the nation time to reform its mining law, says Tahoe Resources (TSX: THO; NYSE: TAHO).

Tahoe, which is advancing its Escobal silver project in Guatemala, assured investors the potential ban would not impact any of its licences or plans to bring Escobal into commercial production early next year.  

“Tahoe holds licences on 158 sq. km, including 20 sq. km of which are held on the Escobal project. None of these licences will be affected by the proposed action,” it says.  

But the Vancouver-based firm now expects to reduce its regional exploration work, as it has several reconnaissance and exploration licences pending.

“It definitely affects our regional exploration, and we will pull back on some of the reconnaissance that we are doing,” says Ira Gostin, the company’s vice-president of investor relations. “We have a fairly large land package of 138 sq. km of exploration area, and we will be able to continue exploration there. And we don’t have any other resources other than Escobal, so whatever we find in that exploration area we’ll evaluate, and see if we want to wait to move forward until the moratorium is lifted.”

And as for the Escobal project, where Tahoe received a 20 sq. km exploitation licence in April, Gostin says business will carry on as usual.

“Anything on Escobal that has been granted an exploitation permit is not affected whatsoever. So we can continue to grow the resource. We can mine — we can do whatever we need to do on the 20 sq. km.” The permit is valid for 25 years and could be extended for another 25-year term.

There aren’t any details yet on when the ban will come into effect, Gostin says, noting it has been proposed to congress. He adds there are four keys points that Guatemala’s president is trying to push forward in the new mining law: increasing the 1% mining royalty to 4%; enhancing mine closure standards; strengthening community consultation; and attracting more foreign dollars to Guatemala’s mining industry.

Earlier this year, Tahoe agreed to a voluntary royalty agreement where it will pay a 5% net smelter return royalty on the concentrates sold from the Escobal mine.

So far, construction at the project is on track and should come within the estimated $326.6-million budget. In a July 10 release, Tahoe notes 85% of the engineering, procurement and construction management was complete. It says that all the underground development has been completed and that mill commissioning started in June.

“We are turning motors and synchronizing the various components of the mill. The underground development is completely ready to go,” Gostin says, adding that an ore stockpile and a few stopes have already been prepared.  

Production is anticipated later this year, after mill commissioning wraps up. Escobal is scheduled to reach commercial production at 3,500 tonnes per day in early 2014.

Elsewhere in Guatemala, Anfield Nickel (TSXV: ANF) recently received one of its three exploitation permits for the Mayaniquel nickel-laterite project. The company’s chairman David Strang told The Northern Miner he anticipates getting the remaining permits after the moratorium, adding that the ban should not affect progress at Mayaniquel.

“From our perspective, all of our exploration has been completed. We are doing a small amount of exploration, and this doesn’t affect our exploration process in any way on the small amount that we are doing. We still have to move forward and complete our feasibility study, and we don’t see it impacting us in terms of development of our project,” Strang says. 

Melior Resources (TSXV: MLR) — which recently announced its intention to buy Guatemala-focused explorer Firestone Ventures (TSXV: FV; US-OTC: FSVEF) — said it was aware of the moratorium and refused to comment further. Firestone has granted Melior three months to complete its due diligence and enter a definitive acquisition agreement.