Globe & Mail today
Humala win dims outlook for Canada's Bear Creek Mining
Tuesday, June 07, 2011
Darcy Keith
The election of a left-wing nationalist as Peru’s next president is a big worry for mining companies with operations in the resource-rich nation, given prospects of higher taxes and royalty rates.
Shares in many companies tumbled Monday in response to the weekend poll results that gave Ollanta Humala a narrow win. Among them was Bear Creek Mining Corp. , which was down a further 8 per cent in afternoon trading today. It is particularly vulnerable to investor concerns, as its two main projects, Corani and Santa Ana, are both located in the country.
Canaccord Genuity analyst Nicholas Campbell is now considerably less optimistic about the outlook for the company’s share price. The new government “significantly increases the uncertainty” over Bear Creek’s Santa Ana silver project in Peru’s Puno province, he noted in a research note today.
He not only slashed his valuation of Santa Ana, but also pushed back his expectations for the start up of production to2015, “given the strong likelihood for increased taxes and royalties in Peru and the overall uncertainty associated with the Humala victory.”
Mr. Humala has previously hinted at establishing a windfall profits tax, as well as increasing corporate taxes and hiking royalties on mining operations, which currently range between 1 to 3 per cent.
Downside: Mr. Campbell cut his target price to $9.50 from $13.75, but maintained a “speculative buy” recommendation.