June 29, 2012 / 3:51 AM / 5 years ago

UPDATE 4-Guatemala floats plan to take 40 pct stake in new mines

* New projects, not existing mines, would be hit
    * Government to outline plan to Congress on July 9
    * Canadian mining shares hit, but later recover some losses


    By Mike McDonald
    GUATEMALA CITY, June 28 (Reuters) - Guatemala's president is
planning a constitutional amendment to give the government as
much as a 40 percent stake in new mining projects, a government
spokesman said on Thursday. 
    Initial news of the plan hit Canadian mining companies
working in Guatemala, especially Tahoe Resources Inc 
 which is developing a $500 million Escobal silver
project southeast of Guatemala City. 
    Tahoe later recovered some losses, saying the government had
guaranteed its operations would not be affected by any new law.
    A spokesman for President Otto Perez Molina told Reuters the
changes would only apply to future projects that have not begun
the licensing process.
    "It is an executive proposal for non-renewable resources.
The government would become a partner in 40 percent of the
properties," said government spokesman, Francisco Cuevas. "This
is a result of looking at mining policies in Chile, Bolivia and
other countries who have used a similar model."
    The plan will be formalized early next month and should be
presented to Congress, along with other proposed constitutional
changes, including judicial and legislative reforms, on July 9.
    It takes a two-thirds vote in Congress to pass a
constitutional change and a public referendum to ratify.
    Perez Molina, a conservative retired general, took office in
January promising to boost government revenues from mining
projects in the country.
    Resource nationalization is a growing concern in South
America. Argentina nationalized energy company YPF 
 in April, sending shock waves through the Latin American
investment community.
    While Bolivia took control of a tin and zinc mine owned by
global commodities firm Glencore in June, after already
seizing the country's natural gas and electricity industries.
    
    SHARES TUMBLE  
    Shares of Canada's Tahoe Resources dived 39 percent after
the initial media reports of Guatemala's plans.
    It recovered to be down more than 18 percent at C$13.16 in
Thursday afternoon trading on the Toronto Stock Exchange.
Tahoe's New York-listed shares fell nearly 20 percent to $12.70.
    "The government has no intention of acquiring an interest in
the Escobal project or other mining projects in the country,"
the company said.
    Tahoe said Escobal construction was on track and it expects
to have the project fully permitted in the second half of 2012.
    Tahoe Resources is 40 percent-owned by Canadian gold miner
Goldcorp Inc, which owns the Marlin gold mine in
Guatemala, which produced 382,400 ounces of gold in 2011 and
generated revenue of over $900 million. 
    A spokesman for Goldcorp said the company had also been told
by Guatemalan officials that the proposed mining law changes
would not impact its Marlin mine operations.  
    Shares of Goldcorp dropped 4.2 pct to C$36.78 on the Toronto
Stock Exchange. Radius Gold, which is developing the
Holly-Banderas project in Guatemala, also fell in early trading
before snapping back.

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