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Pediment (PEZ.to) news: This morning’s Flash update

This went out to subscribers just before midday EST today. at that time PEZ.to was trading at $1.94.

“News out of Mexico today suggests that the situation faced by Pediment Gold (PEZ.to) and its environmental permitting problem that is currently affecting the proposed buyout by Argonaut Gold (AR.to) is not as bad as first appeared earlier this week and this may present a buying opportunity in the stock. As reported on the blog this week the deal between PEZ.to and AR.to has been put on hold due to a law passed by the Baja California parliament that, if made into active law by the executive, would ban all open pit mining in the Baja California State. This is the link to the PEZ NR:

This morning, the President of the Congressional committee in charge of sending the law to the State government, Graciela Treviño, said that the law would not be published in the State’s Official Gazette (the move that makes any law active) until results from meetings with members of communities that would be adversely affected by the ban (due to lost jobs, lack of economic growth etc) had been conducted and their results collated. Treviño said there had been strong protests against the mining ban from several communities in the region, including the San Antonio area where PEZ has its project. This is a link to a report covering the matter (Spanish language) from a local media source that seems to be covering the developments without prejudice either side. 

The situation reminds us of the enviro-versus-employment spat faced by New Gold late last year that finished well for the mining side. There is still risk that the law is put into effect, of that we must be clear, but the law has now been stopped from becoming active straight away and this has removed the immediate danger. From here, we can expect the argument to be taken to a national rather than provincial level, and that Mexican republic laws will be able to take precedence (such as those that say this type of ban runs against the national constitution…there’s a strong argument against the environmental ban due to this). We remind readers that Mexico as a country is keen to converse its Miner-Friendly image , which would take a severe blow if the Baja California laws is put into effect, as six mining projects would reportedly be affected (not just PEZ)

All in all the risk, though still present, has diminished considerably for the PEZ/AR deal today. This price chart…..


…shows the potential rebound PEZ may enjoy if the deal eventually goes through. By simple eye, there’s a 20% upside here.

This Flash update will appear on the open blog in a couple of hours’ time. At that point (and if a bargain price is still available), your author will take a small long position in PEZ. Although we’re conscient about the risk of this law still happening and understand this is not a slam dunk opportunity, in our opinion that risk is significantly diminshed and the balance has clearly shifted in favour of the pro-mine argument.

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