Corriente Resources Inc., a mining company active in Ecuador, fell on concern Chinese companies may pull a takeover bid after talks between China and the South American country broke down on funding a separate power project.
Corriente dropped C$1.07, or 13 percent, to C$7.46 at 4:16 p.m. in Toronto Stock Exchange trading. That was the Vancouver- based company’s biggest daily decline since October 2008.
Ecuador broke off negotiations with the Export-Import Bank of China for the financing of a $2 billion hydroelectric plant, known as Coco Coda Sinclair, because of “mistreatment” and demands for financial guarantees Ecuador couldn’t meet, President Rafael Correa said on March 20. Correa also said in his speech that he asked his ministers to present resignations as part of “normal annual evaluation,” adding concern among investors.
“Some of the commentary from Correa is obviously negative towards doing business with China, and with two very large Chinese entities looking to acquire Corriente, that has brought into question whether or not that deal will proceed,” Wendell Zerb, a Canaccord Financial Inc. analyst, said today in a telephone interview. Correa “is looking at a total reshuffling, which always brings up question marks with regard to the government.”
Takeover Agreement
China Railway Construction Corp. and Tongling Nonferrous Metals Group Holdings Co. offered Corriente C$679 million （$665.9 million） to gain copper resources in South America, China Railway Construction said in a statement dated Dec. 29 to the Hong Kong stock exchange.
The fallout from the hydropower-dam project shouldn’t affect Corriente’s deal with the Chinese because the two issues are separate and the government has said it’s trying to boost foreign investment in mining, said Paul Glazer, president of New York-based hedge fund Glazer Capital LLC.
“We view this as a project-specific financing issue as opposed to a breakdown in Ecuador-China relations,” Glazer, whose fund includes shares of Corriente, said today in a telephone interview. “We don’t see how this would affect a 30- year relationship, specifically a transaction in the mining sector which President Correa has been very supportive of vocally.”
Correa may make minor changes to his cabinet, and no major political adjustments are expected, Michel Levi, the coordinator of the Andean Center of International Studies at the Universidad Andina in Quito, said today in an interview.
Corriente officials weren’t immediately available for comment. Ecuador’s Non-Renewable Natural Resources Ministry declined to comment on whether Correa’s comments may affect the Corriente sale to Chinese investors, a press officer, who isn’t authorized to speak publicly, said today by telephone.
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