Miners Forced to Play Politics

Metals miners might have bigger concerns on their minds than the recent slump in commodity prices.

In 10 days, the second round of presidential elections in Peru pits centre-left candidate Alan Garcia against nationalist Ollanta Humala, who says he is for the nationalization of Peru's assets, including mines.

The latest poll showed Garcia clearly in the lead at 56% compared with Humala's 44%, Reuters reported on Wednesday. Then again, Garcia, although he is not for nationalizations, backs higher taxes on oil and mining profits.

Mining companies are already nervous about losing their assets in South America since Bolivia's new President Evo Morales announced the nationalization of his country's oil and gas interests on May 1. Mining assets, Morales said, would be next.

Shares of Newmont Mining (NEM Quote), which operates a 125,000-ounce gold mine in Bolivia, dropped more than 2% after Morales' announcement. But the Bolivian hit had taken place amid a bull run; they've since dropped nearly 15% amid a broad selloff in commodities that resumed Wednesday. (Early Thursday, July crude was up 25 cents to $70.11 a barrel, while gold added $5 to $642.50 and copper gained 10 cents to $3.74 a pound.)

Shares of Denver-based Apex Silver Mines (SIL Quote), which is developing a 100%-owned San Cristobal silver-zinc-lead project in southwestern Bolivia, have plunged 17% since May 1.

Shares of Idaho-based miner Coeur D'Alene (CDE Quote), which owns a silver mine in Bolivia, have fallen 8.3%.

Yet Bolivia is not a major mining country, accounting for 7.1 tons of gold in 2005, or only 0.3% of global production, and only fractional amounts of copper, according to Citigroup.

"The greater concern is potential spillover to Peru, which is a major producer of gold," writes Citigroup analyst John Hill.