Bluestone stock falls after ‘anti-mining’ referendum in Guatemala town

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Shares of Bluestone Resources Inc. fell to their lowest price in a year for two consecutive days this week after a referendum in Guatemala, which the Vancouver-based company said was illegal, voted against any kind of mining activity in the region.

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Bluestone is developing its flagship Cerro Blanco gold project in southeast Guatemala, which is expected to produce about 300,000 ounces of gold annually when completed. But in a referendum on Sunday at Asunción Mita, a town located about seven kilometres away from the project, more than 85 per cent of voters said they were against mining activities.

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The miner said the referendum, in which about 8,500 people, or nearly 30 per cent of the town’s registered voters, took part in, was biased, illegal and one that “unfairly portrayed public opinion,” in a press release on Monday.

“The commission responsible for the vote is fully comprised of individuals with an anti-mining agenda,” the company said. “The referendum is against the recommendations of the central government, no entity other than the relevant federal governmental agencies have the legal jurisdiction over mining licences in Guatemala.”

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Guatemala’s ministry of energy and mines supported Bluestone’s views in a statement on Tuesday and said the municipal council of Asunción Mita isn’t legally allowed to make a decision related to the installation and operation of a mining project.

However, some lawyers and activists in Guatemala have said the vote was legal since it took place as per the municipal code and the question posed to voters was not related to any specific mining installation, but on the licence for “land use and construction.”

Canadian miners have faced trouble in Guatemala in the past. For example, a court in 2017 suspended Tahoe Resources Inc.’s flagship Escobal silver mine after a non-governmental organization alleged the country’s energy ministry had violated an Indigenous group’s consultation rights. Tahoe was acquired by Canadian miner Pan American Silver Corp. in 2019, but operations at the mine have not resumed.

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“I don’t know what will happen in the near future, but it is clear that Asunción Mita does not want mining projects,” Francisco Guardado, the municipal mayor, said in a press briefing on Sunday. “We do not know clearly what the legal implications are for the future … but the results of today cannot be denied.”

Pedro Cabezas, coordinator of the activist group Central American Alliance of Mining, said the issue will likely be taken to court.

“The result of the referendum will either be denied or upheld by the courts, but the process is just beginning,” he said. “A lot of people are making statements, but the truth is, in the end what’s going to prevail are the decisions of the courts.”

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Nicolas Dion, an analyst at Cormark Securities Ltd. who follows Bluestone, noted the referendum, even though “illegitimate,” illustrates the “type of opposition” Bluestone is facing from anti-mining groups in the region.

“We see risk to the permitting timeline; however, believe Cerro Blanco’s merits from an employment and tax perspective will eventually triumph,” he said in a research note to clients on Tuesday. “The open-pit approach … significantly increases the project’s net present value and production profile, while reducing technical risk; however, this comes at the cost of heightened permitting and funding hurdles.”

On Monday, a day after the referendum’s results were released, shares of Bluestone hit an all-time low of 52 cents. On Tuesday, the company’s share price fell to 51 cents before closing at 52 cents, down 11.8 per cent, or seven cents, from Monday’s close. The company has a market cap of $78.6 million.

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