A provincial government in Argentina has rejected Coro Mining Corporation’s flagship project, dealing the company a huge blow and highlighting the political risk hampering Canadian miners in parts of South America.

Coro shares plunged 54% after the legislature in Mendoza province voted against an environmental approval the Vancouver based company needed to develop its San Jorge copper and gold project. The rejection was made even though Coro’s Environmental Impact Statement was ratified by the government at several different stages.

Provincial elections in Mendoza are scheduled for October and San Jorge emerged as a controversial issue, especially among young voters who are opposed to mining. The head of the Lower House in Mendoza recommended that the legislature put off a decision on the project until after the election, so that it would not be decided in the heat of a campaign and its merits could be properly judged. Instead, the political parties fought back and forth on the issue and a decision was made to quickly vote on it. Then came the rejection.

Alan Stephens CEO of Coro said that “Both parties decided it was to their advantage to paint the other as being more pro mining and decided the best bet was to kill the project right there and then. Unfortunately, the heat of the political campaign superimposed itself on what you would consider a rational response to the problem.”

He traveled to Mendoza this week to try to negotiate a deal that would give the province a carried interest in the project. He thought that would provide some assurance that the mine would meet international standards. Instead, he found out that the legislature voted it down. He blamed anti mining environmentalists for poisoning public opinion against the project.

He said that “A small number of very motivated and noisy people have convinced the general population in Mendoza that mining is evil and you can’t have mining without contamination and all foreign companies are thieves. The government didn’t make an effort themselves to educate their population about it.”

(Sourced from business.financialpost.com)