IKN

As we fill in a quiet blog period with another note from last weekend’s edition of The IKN Weekly.

Dundee Precious Metals (DPM.to) lipsticks its Ecuador pig

One of those notes that fall between “Regional Politics” and “Market Watching”, so it gets stuck at the top here as ultimately, there should be little surprise about the ongoing anti-mining stance taken by local communities in Ecuador for regular readers. In this case, we are considering the potential effects on a specific stock price and while Dundee Precious Metals (DPM.to) hasn’t been immune to the recent sectorwide selling (right) there may be another down-leg in its near future when the world works out what last week’s news really means for the company. Two things surprised me about the DPM.to NR regarding the court verdict on its Loma Larga (ex-Quimsacocha) project in Ecuador, as reported by the company last week:

• The utter chutzpah of the company
• The fact the market didn’t see through the thinly veiled subterfuge

This stock deserved to go lower last week on this news (20) and to explain why, we begin with contents of the NR. Once pleasantries were done, paragraph one tells us this about the decision handed down by the courts in the city of Cuenca, the administrative headquarters of the region where Loma Larga is located:

“The decision upheld the validity of the Company’s environmental permits for exploration at Loma Larga, confirmed that the MAATE did not violate certain rights relating to the protection of water and nature in granting the permits, and reaffirmed DPM’s mining concessions for Loma Larga.”

Sounds good, right? No only that, but the opening sentence of the comment from DPM President/CEO David Rae was, “This is a positive step forward for the Loma Larga project”, which was quickly followed by, “As a significant foreign investor in Ecuador, we expect to create substantial economic and social opportunities through the responsible development of the project.” What could possibly go wrong? Quite a lot, in fact, as the company was obliged to mention the real reason for the court case at some point, the matter that had its lawyers and lawyers representing the government in the Cuenca courtroom and trying all they could to stop the judge from ruling against the company, but all to no avail. DPM’s take on the main event was buried in paragraph three in innocuous-sounding language:

The court also found that the Company will be required to include the local indigenous populations in its consultation process prior to proceeding to the exploitation phase, which DPM had already planned as part of its development of the project, reflecting Company’s commitment to the highest standards of stakeholder engagement and in-line with International Finance Corporation practices.

What really happened: The local community has been moving for around four years to get the temporary suspension of the Loma Larga project ratified and in all that time, has faced legal injunctions and all sorts of delaying tactics to stop the case from coming to court. It finally happened last week and the judge in question had to rule on five points of law. He accepted only one, namely that the project did not comply with Ecuador’s prior consultancy laws because the local indigenous population had never been consulted on the project by the company (or previous owners). That four of the five pleas were turned down did not worry the locals because, in the words of the ex-Presidential candidate and leader of the regional movement against mining, Yaku Pérez (21), “…it’s enough that the judge accept just one of the points for the project to be suspended.” He and his supporter group that attended the court hearing on Tuesday went on to call the verdict a “Historic triumph” and a major moment in the locality’s 30 year fight against the installation of a mine at Quimsacocha/Loma Larga (a project that was first in the hands of IAMGOLD (IMG.to) and then small junior and trainwreck INV Metals (INV.to) before being sold to DPM.to). All parties now await the written legal verdict before the next stages, which will probably include an appeal to a higher court by DPM. However and eventually, DPM must now seek permission from a community that is dead set against this project and as they are set to appeal, they surely know the trouble they are in by now. As for Yaku Pérez, he had a lot more to say to the press than the company, for example (22):

“It was worth the more than three decades of struggle. 150 people were criminalized by the Correa government (during the protests), we had four people jailed, we were beaten up”, he said.

He compared the judicial process to a David versus Goliath fight. “The community faced the united forces of the Chamber of Mining, the Cuenca Chamber of Industry, The Chambers of Industry and Commerce from (Ecuador’s capital city) Quito, The National Chamber of Mining, The Ministries of the Environment, of Finances and of Energy and lawyers from the Presidency who acted as third party representatives against the will of the people.”

To be clear and no matter what DPM might say to the wider world, there’s a snowball’s chance in Hell of this project gaining the required social licence from any prior consultancy process and appeals court success notwithstanding, has probably killed Loma Larga as a viable development project, something you’d never have guessed from the tone of the company NR last week.