Return of Ortega in Nicaragua Chills Miners

Vancouver — The return to power of former Marxist guerilla leader Daniel Ortega in Nicaragua has sent a chill through a small community of Canadian mining companies with operations in the Central American country.

Despite reassurances from Nicaragua’s newly elected president that he is not planning radical changes to the economy, at least one Canadian company is scaling back its gold exploration plans until it gets a better sense of what Ortega’s policies are going to be.

“It will be a little bit of a wait-and-see attitude,” says Ron Hochstein, president of Fortress Minerals (FST-V, FTMNF-O).

Hochstein says the company had been hoping to start drilling on a 1,000-sq.-km Nicaraguan property as early as next year, but has put those plans on hold for now.

Fortress, like other Canadian firms, including Radius Gold (RDU-V, RDUFF-O), Meridian Gold (MNG-T, MDG-N), and Glencairn Gold (GGG-T, GLE-X), are attracted by Nicaragua’s rich mining tradition and the fact that it remained relatively unexplored during the 1980s and 1990s.

Glencairn’s Limon gold mine in northwestern Nicaragua has been in almost continuous production since 1941, producing about 3 million oz. so far.

However, industry officials fear Ortega’s reputation as a high-profile left-wing politician, whose Sandinista government confiscated many businesses and lands in the 1980s.

Combined with the fierce Contra rebellion and a U.S. economic blockade, the policies plunged coffee producer Nicaragua into chaos and wrecked ambitious anti-poverty plans.

Since his election victory, Ortega has tried to reassure the United States and business leaders who may be concerned about his Marxist past.

“I am not contemplating dramatic, radical changes in the economy, which has stabilized in recent years,” he told reporters.

Some Canadian mining officials are prepared to take Ortega at his word.

“I don’t think he can go back to the days of old,” says Olav Svela, a spokesman for Glencairn in Toronto. “They need investment like ours,” he says, adding that Glencairn employs roughly 1,000 Nicaraguan residents at its Limon and La Libertad gold mines.

Ralph Rushton, a spokesman for Radius Gold says the company has become used to dealing with Sandinista-controlled municipalities since it first entered the country four years ago to take part in a joint venture with a local businessman.

The company is exploring low-sulphidation epithermal vein systems and has optioned its flagship Natividad property — a 5-hour drive from Managua — to Meridian Gold.

As a result, Rushton says, the political climate that has existed at the municipal level for many years will likely be reflected federally under Ortega’s presidency.

During the election campaign, The U.S. government urged Nicaraguans to defeat Ortega.

U.S. officials worry that he will join a bloc of radical leaders in Latin America headed by Venezuelan President Hugo Chavez, and some in Nicaragua fear he could spark a new confrontation with the United States.

But the Bush administration may have little to fear. Like other high-profile leftist political leaders, Rushton says Ortega has recently drifted towards the political centre.

“I think you will find that he is quite a practical politician.”