New wrinkle in battle over mining in El Salvador?

El Salvador and Canadian mining firm Pacific Rim are in a high-profile arbitration over permitting. What does the company's sale to an Australian firm mean for the Salvadoran mining sector?

• A version of this post ran on the author's blog. The views expressed are the author's own.

The Canadian gold mining company Pacific Rim announced on Oct. 8 that it had signed an agreement to be acquired by OceanaGold Corp., an Australian mining firm. The acquisition price reflects a premium of approximately 50 percent above where Pacific Rim shares had been trading.
Pacific Rim currently has a high profile international arbitration pending against the government of El Salvador relating to the government's refusal to issue a permit to allow the mining company to begin operations.  Apparently OceanaGold feels that the arbitration case, or the possibility of a negotiated resolution, is strong enough to warrant the investment in Pacific Rim.

 According to the press release announcing the deal:

Mick Wilkes, Managing Director and CEO of OceanaGold commented, "We believe this transaction will provide OceanaGold shareholders with potential exposure to a high grade gold-silver resource located in a very prospective region. This project has the potential to be an economic engine for El Salvador much like how our recently commissioned world-class Didipio Mine has been for northern Luzon in the Philippines. This transaction aligns well with our strategy to create value through investment in high quality, low cost assets and utilising the OceanaGold's experience in building and operating gold mines in an environmentally and socially sustainable manner. El Dorado further complements our high grade gold-copper Didipio Mine in the Philippines and we will look to replicate the successes we've achieved in New Zealand and the Philippines in El Salvador. OceanaGold looks forward to working with our local community and government partners in establishing a roadmap to unlock the opportunity at El Dorado for El Salvador." 

The international arbitration likely won't conclude until the second half of 2014, after a new president takes office.  The current de facto ban on mining began under Tony Saca when he was president and has continued during the presidency of Mauricio Funes. [Mr. Saca is running for president in the February 2014 election with the newly created Unity party].

OceanaGold operates mines in Australia and New Zealand and has one mine in a developing country, its Didipio mine in the Philippines.  That mine has run into protests from groups claiming that OceanaGold has not respected the rights of local indigenous communities. An article titled Destroying Didipio, sets out the conflict between OceanaGold and local people affected by the mine.     

 Tim Muth covers the news and politics of El Salvador on his blog.

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