Coro Mining shares plunge after environmental permit rejection

The provincial government of Mendoza has failed to ratify the environmental impact declaration for Coro Mining‘s (COP-T) San Jorge copper-gold porphyry project in Argentina, voting against allowing the company to build an open-pit mine there.

Trading in the company’s stock was halted before market open pending the announcement. When trading resumed with just 45 minutes left before market close, shares of Coro plunged 54% or 31¢ before closing at 26¢ on 289,000 shares traded. Concern the project would be rejected and a general pullback in the market had brought Coro’s shares down to 60¢ in August from a 52-week high of $1.62 in February 2011.

The rejection possibly marks the final chapter in Coro’s long quest for environmental approval of the project. Argentina’s Mendoza province first passed legislation in mid-2007 banning the use of “toxic chemicals” in mining, including sulphuric acid. This meant Coro could not heap leach the oxidized cap of the San Jorge deposit, and led the company to challenge the law in court reasoning it was unconstitutional.

Coro nevertheless pushed ahead to develop a sulphide-only mine as an alternative, filing its environmental permitting application in late 2008 after completing a revamped preliminary economic assessment. (The chemicals used to recover copper and gold from sulphide ore are allowed in Mendoza.) Several pleasing stamps of approval later, including ones from the National Technological University of Mendoza and the Interdisciplinary Commission for the Environmental Evaluation of Mining Projects, brought the company to the edge of environmental approval after nearly three exhausting years of work, only to be defeated on Aug. 24 by the Lower House of the provincial government.

Mine permitting in Mendoza is a delicate process even for the best of projects, mainly because of worries mining could affect the province’s flourishing cattle ranching and winery industries. Protecting the quality of water and soils in the area is of utmost importance, and last year the government made Coro conduct additional hydrological work to confirm any hazardous contaminants from the mine would not spill over into the Mendoza river system.

Coro has argued the project is located within the Yalguaraz hydrological basin, which it states is not connected to the adjacent Uspallata basin, which in turn flows into the Mendoza river system. A local environmental group, Oikos, later filed legal claims requesting the environmental approval process be suspended on grounds of “deliberate misinterpretation of documents,” which Coro called “frivolous” and a “last-ditch legal effort” to stall the project’s development.

A preliminary economic assessment for San Jorge completed in 2008 calculated the sulphide-only operation could produce 39,500 tonnes of copper and 39,000 oz. gold each year for 16 years. Initial capital costs totalled US$277 million, though based on a copper price of US$2 per lb. and a gold price of US$600 per oz., the project carried an after-tax net present value of just US$220 million.

The company says it will soon try to seek legal redress and compensation through the Argentinean and international courts as a result of the rejection. In particular, it will continue to challenge the 2007 law barring the use of sulphuric acid in mining operations. According to Coro, “the company anticipates that this lawsuit may be resolved by mid-2012 and in the event that the courts find that the law is indeed unconstitutional, the denial of legislative ratification of the company’s valid and approved EID [environmental impact declaration] may be deemed to be null and void.”

In the meantime, Coro is left to work on its four other base-metals projects in Chile, mostly in the early stages of exploration.