Wednesday, March 23, 2011

Case Of Costa Rica Highlight Political Risk

Political risk is the monster under the bed for exploration companies. Unfortunately, unlike the typcial bed monster, this one does exist.

There's no better example than Costa Rica. Jumping on the environmentalist bandwagon, the Costa Rican government has banned open-pit mining outright and voided a contract with Infinito gold. That voiding stops development of the Los Crucitas property, containing a deposit with a now-inaccessible 1.2 million ounces of gold.
Since mineral exploration began there in 1995, progress has been halting, as opponents repeatedly challenged the project in the courts.

In October, protesters held a hunger strike to press President Laura Chinchilla to prohibit mining at the site. But she said it was a matter for the courts.

Yaneth Rojas, a 51-year-old campesina, camped out in front of the Casa Presidencial and fasted for seven days. Some of the protesters lasted three-and-a-half weeks without food.

“We’ve gone into this struggle against mining ‘head, feet and hands,’ as we Costa Ricans say,” said Rojas, a member of the Northern Front anti-mining group.
The government is turning away a lot of revenue, but its decision to forego is buttressed - likely caused - by open-pit mining becoming unpopular in the country. As of last May, 77% opposed open-pit mining in general. 86% opposed Los Crucitas.

The ban formally doesn't affect that property, but the contract voiding may amount to the same thing. The Costa Rican President expressed regrets.

So may the Costa Rican government's budget, which is showing a substantial deficit right now. However, the people ruled.

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