Why gold miners see Nicaragua as a ‘safe haven’

Gold mining firms operating in Nicaragua are advancing growth projects in a forecast production boom – with the country seen as offering a safe haven for the industry amid a global resource nationalism surge.

Juniors and producers are hitting milestones at a string of projects which could deliver more than 300,000oz of annual gold production, roughly doubling output.

Investment is underpinned by a positive relationship between industry players and government, with the Central American nation seen offering a good environment for mining.

“We have got a strong, transparent mining-friendly jurisdiction [in Nicaragua],” says Darren Hall, CEO of Canadian company Calibre Mining, whose Nicaraguan assets include the Limón and Libertad operations.

“It’s got a proud history. It understands the value that mining can bring. Gold is the largest export.”

Other companies operating in the country agree.

In June presentations, Mako Mining, with the San Albino mine, and Condor Gold, which is advancing the La India gold project, both hailed a pro-mining administration as a positive factor of doing business in Nicaragua.

Skilled labor and good infrastructure were also advantages mentioned by the companies, along with relative safety.

“I have spent a lot of time in country and I’ve never felt threatened, or been hit up for a bribe,” Hall tells BNamericas.

The tax regime is also viewed as relatively benign, with miners paying a 30% corporate tax and 3% net smelter returns royalty, according to Condor.

PROJECT MILESTONES

A number of Nicaraguan growth projects have reached key development milestones in recent months.

Mako Mining announced commercial operations at San Albino in July, while Calibre is ramping up production from the Pavon Norte deposit, from where ore is being trucked for processing at the Libertad property.

Calibre is also advancing exploration at its Eastern Borosi project, which is also within trucking distance of Libertad.

Condor is advancing a feasibility study for a processing plant at La India based on its recently acquired mill, with the study due for completion in the coming months.

The company expects initial production of 80,000-100,000oz/y from La India, before expanding operations.

POLITICAL SHAKE-UP

The political landscape could be about to change.

Nicaraguans will go to the polls in a general election on November 7, with President Daniel Ortega of the leftist nationalist Sandista liberation front (FSLN) leading in the polls.

Ortega’s latest term – following a third consecutive election victory in 2016 - has been marred by violent anti-government protests, which began in 2018, and which were repressed by authorities.

More recently, international agencies have expressed concern over Ortega’s authoritarian approach, including recent arrests of a number of opposition leaders.

For mining companies, the polls could spell temporary disruption.

“The upcoming election is going to provide challenges,” Hall said.

“The government is going to be distracted during an election process, so things may not happen as quickly as they would normally.”

But the overall outlook remains positive, whoever wins.

Ortega has indicated he does not favor the resource nationalistic approach being discussed or advanced in many Latin American countries, including Chile, Peru, Mexico and Argentina.

“I have met with President Ortega on a number of occasions and he has made it very clear that they tried the nationalization of mines route in the 1970s and it didn’t work,” said Hall. “They don’t have the capacity and the expertise to do that.”

Meanwhile, the main opposition party is “overtly pro-business,” he said. “I’m not particularly concerned in that space.”

PERCEPTION PROBLEM

The main concern for Hall is external perceptions of Nicaragua as a mining jurisdiction, with some investors and companies unconvinced by the country’s credentials.

Nicaragua ranked 67th out of 76 jurisdictions globally in the investment attractiveness index of the Fraser Institute’s Annual Survey of Mining Companies 2019.

The country was not ranked in the latest 2020 survey due to insufficient responses.

“The external perception of Nicaragua, and the lack of awareness of the strong mining legislation, is not a problem, but an opportunity for us,” Hall said.

“The better we can get the message out that Nicaragua is a good place to operate, the better it’s going to be for us.”