Mining

Update on Pacific Rim Mining Company

It has been over three years since Pacific Rim closed down its operations in El Salvador and filed a notice of intent to seek arbitration against the Salvadoran Government for denial of mining permits.

Pacific Rim, a Canadian company that bills itself as “an environmentally and socially responsible exploration company,” reports that in the first half of fiscal 2012, their “cash and cash equivalents increased $1.4 million from $0.3 million at April 30, 2011 to $1.7 million at October 31, 2011. The company’s short-term investments increased from $0.8 million to $1.1 million over the same period, resulting in a $1.8 million total increase in assets.

The increase in assets does not indicate that they are all of a sudden profitable. According to a Pacific Rim’s press release announcing their quarterly report, the increase “reflects the cash proceeds of a private placement equity financing undertaken by the Company.” This means that Pacific Rim found new private investors to finance their operations. In fact, the press release states clearly that they have “no source of revenue, and will require additional cash to continue fund legal, exploration and administrative expenses.”

While Pacific Rim’s El Dorado project in San Isidro, Cabañas is their most advanced, the company recently acquired an option to earn 65% interest in the Hog Ranch gold property in Nevada and has begun field exploration. Pacific Rim also has the opportunity to acquire a 100% interest in the Remance property in Panama – an interest they secured in 2010. While they have begun “phase 1 drilling” at Hog Ranch, Pacific Rim reports that the Remance project is “in doubt” and they have no plans for exploring the property.

The biggest question mark for Pacific Rim remains their ICSID claim against El Salvador, which is potentially worth $100 million dollars and the rights to mine gold in Cabañas. In their press release, Pacific Rim says,

“Expenditures related to Pacific Rim’s CAFTA/ILES arbitration claim are expected to continue at present or modestly higher levels during the coming months, and are directly related to the level of arbitration activity. The Company has currently accumulated a liability of approximately $1.4 million related to the CAFTA/ILES arbitration action and is currently discussing vendor-specific alternative financing opportunities that will reduce this accounts payable position.”

The ICSID Tribunal will likely hand down a ruling any day on the last round of preliminary objections filed by El Salvador. If the Tribunal finds in favor of El Salvador, part or all of Pacific Rim’s claim could be dismissed. If the Tribunal finds for Pacific Rim, the case moves a little closer to a full hearing.

In anticipation of the decision, a group of labor, union, environmental and other civil society leaders will hold a rally outside the World Bank tomorrow (Thursday, December 15) protesting Pacific Rim’s claim. Those attending the rally will present a letter to World Bank and ICSID officials calling on them to respect El Salvador’s decision to prohibit mining in order to protect their local communities and water resources from environmental damage.

Though Pacific Rim continues to engage in minor exploration activities, their primary activity and asset is this lawsuit. A favorable outcome of the ICSID arbitration would be a windfall for Pacific Rim’s investors, possibly allowing them to recoup their $77 million investment and perhaps damages and lost profits.

Cabanas, Mining

Pacific Rim heads to Panama

This morning Pacific Rim announced that they are starting the process of acquiring Clifton Mining company’s Remance project in Panama. This announcement comes less than 24 hours after Pacific Rim announced they are delisting from the NYSE AMEX.  While Pacific Rim tried to put a positive spin on the delisting announcement, its a fairly serious development in the company’s ability to raise the capital necessary to continue its operations in El Salvador, including their expensive CAFTA claims. The timing of the announcement is surely a signal from Tom Shrake and Catherine McLeod-Seltzer that they aren’t throwing in the towel quite yet.

The terms of the deal seem pretty good for Pacific Rim – it’s a formal option agreement that allows Pacific Rim to explore and apply for permits before committing to purchase. Upfront they will pay Clifton $200,000 and give them 5 million shares of Pacific Rim stock, which is selling for around $0.20/share. If at the end of an “Option Period,” during which Pacific Rim will explore, complete its environmental analysis, and apply for permits from the Panamanian Govnerment, Pacific Rim wants to take 100% ownership of the mine, they will pay Clifton $5,000,000 in cash or common stock.

Even with such good terms, Pacific Rim will still need to come up with the capital for their new exploration activities. Their delisting from the NYSE AMEX makes them pretty unattractive for most investors.  Unless Pacific Rim or Clifton already has a financer lined up, its hard to see how they will be able to do much with their new property.

In the company’s press release they stress that the Remance site is geologically similar to the El Dorado site in Cabanas – meaning that there is a lot of gold that could make them rich. They also point out that unlike El Dorado, the Remance site is in a remote location with few inhabitants and no agriculture. I suppose after tangling with civil society organizations in Cabañas and the complexities of Salvadoran politics, Tom Shrake and Catherine McLeod-Seltzer need a more remote location – somewhere quiet where they can go lick their wounds.