Shares in London-listed miner Solgold sank today after local plans to hold a referendum on the company’s presence in Ecuador were submitted to the country’s highest court.
Solgold, an Australian gold and copper mining company, lost another 11 per cent from its share price today after it confirmed submissions for a public hearing had been heard in the Ecuadoran Constitutional Court.
Read more: Solgold future is bright, says CEO
The Ecuadorian government also announced new regulations.
The court is expected to deliver its verdict on 24 June.
Shares fell 12 per cent at 29.6p in afternoon trading.
The company – which is dual-listed in Toronto and London – suffered a 28 per cent drop in its share price on 30 May, when reports of the potential referendum first surfaced.
In May Solgold’s chief executive, Nick Mather, told City A.M. the company’s “future is bright” after a new study estimated the value of its Alpala deposit to be in the region of $4.1bn (£3.23bn) to $4.5bn.
This economic assessment indicated that Ecuador could gain $17bn in taxes, royalties and profit shares from their project in the Cascabel region.
Solgold improved its valuation from £20m in 2015 to about £700m today thanks to the project.
Solgold has completed 189,984 metres of drilling on Alpala. But analysts at Fitch Solutions Macro Research said any further mining exploration in the area risks heightening tensions between Solgold and the local population.
The company said it has the “full and objective support” from the Ecuadorian government.
Members of the Cascabel community attended the hearing to demonstrate their strong opposition to the proposal.
Representatives from Ecuadoran government bodies joined them, as well as pro-mining groups.
Today Otto Sonnenholzner, Ecuador’s vice president, launched a new Public Mining Policy for the country to eradicate illegal mining while backing large-scale projects and investments.
The new policy also states that authorised mining projects must comply with mining safety and environmental sustainability standards.
Solgold said the measures are “designed to strengthen investment and increase production in the mining sector as well as setting out a framework for environmental and social sustainability”.
Government officials believe these new measures will generate some $836m between 2019 and 2021.
By that time the Lenin Moreno administration estimates the mining sector to account for four per cent of the country’s GDP and attract $3.7bn in mining investments in the next years, up from $270m in 2018.