Shares in Ecuador-focused SolGold (LON, TSX:SOLG) jumped on Friday, after it announced that the country’s Constitutional Court had rejected calls for a referendum on mining in Imbabura, the province in which the company’s flagship Cascabel copper-gold project is located.
The Australian miner, which holds 72 mineral concessions in Ecuador through four subsidiaries, said the court had unanimously and “definitively” rejected the petition on the basis of technicalities.
Under Ecuadorian law, individuals can put forward petitions to include questions in a future vote. They must gather signatures from 10% of the voting population in the province concerned.
The court then gathers arguments from those who put forward the referendum, as well as those that opposed it.
SolGold said that representatives of government bodies, regional communities, pro-mining group and members of the Cascabel community came forward to demonstrate their opposition to the petition.
While the court’s verdict rejected the request for a referendum, it did not discuss or rule on the merits of the case. The formal resolution of the court with further detail into the rejection is yet to be published.
SolGold already had the Ecuadorian government’s backing. Earlier this month, energy minister Carlos Pérez stated that Cascabel had the potential to become the world’s largest underground silver mine, third-largest gold mine, and sixth-largest copper operation.
“SolGold is committed to building an integrated explorer, appraiser and miner in the copper industry in Ecuador, and enjoys the support of its major shareholders, including Newcrest and BHP,” it said.
SolGold’s share price had nearly halved since May, from a high of 40.20 pence to a low of 26.1 pence earlier this week. Following the news of the court’s resolution, the stock climbed more than 23% in London, reaching 36.25 pence in early morning trading.
This means that SolGold’s shares are now back up to its historical average for the last six months, leaving its market capitalization at £528 million (about $745m).
While Ecuador has gained ground as a mining investment destination in the past two years, existing and future projects risk delays and potential halts due to growing local opposition to the extraction of the country’s resources, a report by Fitch Solutions Macro Research shows.
As mining projects face headwinds from rising tensions, investors’ courage will be tested, the study concluded, which could thwart Ecuador’s plan to attract $3.7 billion in mining investments in the next two years, up from $270 million in 2018.