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Analysts: Coup attempt may toughen miner finance environment in Turkey


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Analysts: Coup attempt may toughen miner finance environment in Turkey

There were no immediate effects on mining operations as aresult of the attempted coup in Turkey over the weekend, companiessaid in market statements July 17-18, but the political chaos in the countrymay cast a long-lasting shadow over fundraising for new projects there,analysts said.

The military takeover attempt sent the national currency 5%lower against the dollar on July 15, and yields on Turkey's benchmark 2-yearsovereign bond moved up slightly.

But even as mining companies moved to reassure theirinvestors that the events had not affected in-country operations, sectorpundits said the increased instability there would make an already tough minefinance environment tougher.

Jonathan Williams, a corporate broker with RFC Ambrian inLondon, said Turkey was already a "difficult" jurisdiction forminers, due to instability on the Iraq border, as well as the string ofbombings and terrorist incidents that have targeted the country in recent months.

"I don't think the state is going to start takingprojects away — it is still open to foreign investment, the government stillneeds it. Good projects will continue to be funded, [but] projects will have tomore and more exceptional for investors to want to get involved," he toldSNL Metals & Mining in a July 18 interview.

While top-quality projects would likely still be funded,including Mariana ResourcesLtd.'s HotMaden gold project, other lower-quality projects might not befunded, he said.

But he also noted that producers may benefit from the slightdepreciation in the Turkish lira.

Another senior investment banker agreed that the degree ofrisk is "always a factor" when assessing a mining project for finance.

S&P Global Ratings said July 18 that it would reassessthe geopolitical risks of the country following the coup attempt, which beganlate in the evening of July 15, but had been quashed by the following morning.

Mining groups with operations in the country were quick toreassure investors that the weekend chaos had not touched operations so far.

StratexInternational Plc, said work was continuing at its gold and silver mineon the Black Sea coast, north east of Ankara, while said its mine — thesecond-most valuable in the country by production — was similarly unaffected.Alacer is also looking to develop the Cevizlidere project, east of Ankara.

"The company is able to confirm that all personnel havebeen accounted for and are safe. All activities at the Çopler mine areoperating as normal and there were no local disruptions," Alacer'sstatement read.

Other companies with operations in the crisis-hit countryinclude Eldorado GoldCorp., which operates Kisladag, Turkey's biggest gold mine, with 281,000ounces of production in 2015.

ZenithMinerals Ltd. and Teck Resources Ltd. control the gold projectwest of the capital.  

Turkey introduced amendments to its mining code at the startof 2015, and the government has been keen to boost investment into the sector,especially in junior exploration.

Gold production has risen sharply over the past 10 years,from 5 tonnes in 2005 to 31 tonnes in 2014, according to figures from the TurkishGold Miners Association.

SNL Metals &Mining is an offering of S&P Global Market Intelligence.