Greystar says Colombia accepts its gold mine appeal

Published by MAC on 2010-06-11
Source: Reuters, Financial Post

Greystar says Colombia accepts its gold mine appeal

Diana Delgado

Reuters

31 May 2010

Shares of Greystar Resources jumped 45 percent on Monday after the company said it won't have to redesign its Angostura gold project in Colombia to conform to new mining regulations in the country.

In a statement, Greystar said Colombia had accepted its appeal against a demand to resubmit an environmental study on the project.

The Andean nation ordered the miner in April to resubmit the study following the approval of a new law forbidding mining in a certain ecosystem -- a decision Greystar said was retroactive implementation.

Frederick Felder, executive vice president of the company, told Reuters by telephone that Bogota had agreed to review its original study submitted in December. The modification of the mining code became effective on Feb. 9, 2010.

Felder said that work on the Angostura gold and silver project -- with construction of a mine expected to begin early next year -- was not affected by the appeal process. "During these days, we continued our feasibility studies ... we were confident the government was going to accept the study," he said. Colombian officials were not immediately available for comment.

Mining companies have returned to Colombia after shunning the country for years due to rebel violence. Security has improved under President Alvaro Uribe, who sent troops out to drive back armed groups.

The environment ministry said earlier it had warned Greystar that part of Angostura's leaching zones were located on so-called paramo ecosystems even before the new mining code was approved.

Paramo occurs in the Andes between upper forest limits and the lower edges of snow line, but in Colombia, paramo systems vary depending on the mountain range.

Felder said that the environment ministry had not evaluated whether Angostura's leaching zones were on paramo systems.

Angostura has 10.2 million troy ounces of measured and indicated gold reserves and 3.4 million of inferred resources with 74 million ounces of silver reserves and resources, according to preliminary feasibility studies.

The company plans to complete a definitive feasibility study in October.

Shares of Greystar, which lost nearly half of their value following the April decision, clawed back much of their lost value on Monday.

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Greystar shares spring back to life

Peter Koven

Financial Post

31 May 2010

After five weeks of panic, Greystar Resources Ltd. is back where it started. Now it has to move to the next stage: build a gold mine in northern Colombia that has been more than 15 years in the making.

Vancouver-based Greystar is trying to develop Angostura, a massive undeveloped deposit expected to produce more than 500,000 ounces of gold a year over 15 years. Given its size and scale, it is a key proof point for mining in Colombia, an emerging gold mining district where few foreign companies have tread.

Greystar appeared to be proceeding well until April 26, when it shocked investors by announcing that it was subject to changes in the government's mining code that appeared to ban mining in Colombia's "Paramo" ecosystem. Angostura infringes on that area.

The stock immediately plunged more than 40% as investors got a harsh reminder of Colombian political risk. But in a rare occurrence for a junior mining company, Greystar got the decision reversed. Quickly.

Yesterday, the company confirmed that its appeal of the decision was successful, and that the government reinstated its environmental impact assessment. That means it can continue with its prior mine plan.

The news pushed Greystar shares up more than 44% on the Toronto Stock Exchange, closing at $5.43.

Steve Kesler, Greystar's new chief executive, said in an interview that the company demonstrated to the government that it can minimize the impact of the mine in the environmentally-sensitive Paramo area.

"Working with the [government], we have proven that side by side, we can develop a mining project," he said.

The shares soared more than 40% yesterday on the news, bringing Greystar most of the way back to where it was before the April 26th setback.

But life is not about to get easier for the company. It now wants to secure US$650-million in financing, complete a feasibility study, and finalize its environmental permits by the end of the year. If that happens, Angostura could be in production in early 2013.

That would be a major triumph for Greystar, which has tried to develop Angostura for more than 15 years. In that time, the company was forced to leave the site for several years because violent guerillas dominated the region. After President Alvaro Uribe improved security in the area, Greystar returned in 2003.

Colombia held presidential elections over the weekend, and former defence minister Juan Manuel Santos emerged with a sizable lead over Antanas Mockus in the first round of voting. Mr. Kesler said that both candidates are in favour of responsible mining by foreign companies.