reutersAurelian shares tumble on Ecuador policy report
Fri May 25, 2007 1:06 PM EDT
TORONTO (Reuters) - The shares of Aurelian Resources Inc. (ARU.TO: Quote) tumbled more than 20 percent on Friday, before recouping some of the losses, on a report that Ecuador is considering changes to its foreign investment policy that could hurt the junior mining company.
Shares of Aurelian, known for a major gold discovery at its Condor project in southeast Ecuador, were down C$4.46, or 13.5 percent, at C$28.64 on Friday afternoon on heavy volume of 3.2 million shares. Earlier in the session the stock fell as low as C$26.40.
The turbulence followed an Internet news report that said the country was considering changes to its foreign investment law.
The brief article, which appeared on the Web site Stratfor.com, said: "Ecuador will create a Constituent Assembly to reform the constitutional law regarding foreign investment in the country so the state will be able to assume 70 percent to 80 percent of the earnings from the oil and mining sectors, Government Minister Gustavo Larrea said May 24."
"Private companies holding majority stakes in oil or mining operations will then be left with 20 percent to 30 percent of the earnings. Despite this announcement, Larrea said Ecuador does not have any plans to nationalize the two sectors."
Aurelian downplayed the report.
"Aurelian is doing everything within its power to get clarification from the government since this single news story is totally contrary to the government's earlier statements that confirmed its desire to build a mining industry in Ecuador and create a stable environment for foreign investment," the company said in a release.
Aurelian was not available for further comment.
Michael Gray, a mining analyst at Pacific International Securities in Vancouver, British Columbia, also downplayed the report, noting that it contradicts the signals coming from the Ecuador government and mining associations "lobbying for a positive mining industry in Ecuador."
"This is a little bit out of left field. It does not add up, so therefore I am advising clients accordingly," Gray said.
Gray maintains a "buy" rating on the stock with a target price of C$75.00.
($1=$1.08 Canadian)
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