Extorre Gold Mines (TSE:XG) (AMEX:XG) Thursday commented on the proposed acquisition by the Argentine Federal Government of 51 percent of the Argentina oil company, Yacimientos Petroliferos Fiscales (NYSE:YPF), from Spanish oil company Repsol, and said the deal is completely separate from the mining sector in the country.
According to recent reports, Argentine President Cristina Fernandez is proposing a bill to nationalize the YPF oil company that is controlled by Spain's Repsol.
Spain's Prime Minister Mariano Rajoy has said that he opposes the takeover, adding that Argentina's nationalization of its Spanish-controlled leading energy company is unjustifiable and that he will seek to stop it.
YPF is Argentina's largest company and has been under intense pressure from Fernandez' government to raise output. The YPF nationalization has made for an uncertain business climate in Argentina.
Extorre is an emerging gold and silver producer in Argentina, with its Cerro Moro, Puntudo and Don Sixto projects all in the discovery stage.
Cerro Moro is the company's flagship gold-silver property, located in the mining-friendly Santa Cruz Province.
The company said it is important to note that there are significant differences in regulations, tradition, public importance and internal use of products between the oil and gas sector and the mining industry in Argentina. Public policy in one sector is not connected with the other.
Furthermore, Extorre said the Argentinean government initiative currently under discussion before Congress has been enacted only in connection with YPF, which has a long Argentinean history.
The company noted that YPF was state-owned from its inception in the early 1920s until the late 1990s, when it was privatized and a majority stake was sold to Repsol.
The current re-nationalization process of YPF has not been extended to other oil and gas companies operating in Argentina.
Extorre said there is no reported agenda in the popular press or, to its knowledge, to extend the nationalization process to any other company in the oil and gas sector in Argentina or to any other sector of the economy.
Additionally, the company said that several mining provinces have joined an alliance in support of mining with the acknowledgment of the Argentinean government, and none of the objectives of that alliance relate to any action or policy similar to the one taken in connection with YPF.
Extorre said the mining sector has also received explicit public support from the provinces and the Federal Government.
The company further said several other mining companies operating in Argentina have publicly commented on this situation in terms similar to Extorre's view.
Very recent discussions with potential financiers to provide capital for the potential development of Cerro Moro, it added, have indicated that the YPF action has not materially affected the finance ability of the project.
On April 2, Extorre announced the results of a Preliminary Economic Assessment (PEA-3) for a its potential mine development at Cerro Moro. The study was based on the November 2011, NI 43-101 mineral resource estimate.
That study modelled a nine year mine to produce 850,000 ounces gold and 47 million ounces silver. Extorre said the proposed mine would produce an average of 248,000 ounces gold equivalent per year for the first five years at a cash cost of US $303 per ounce gold equivalent.
Exploration with four drills continues at Cerro Moro, a program designed to increase the total resources on the property and to in-fill drill certain areas for mine planning purposes.
The company said results from current drilling will be released when available.