Argentine Foreign Currency Transfer Regulations

Extorre Responds to New Argentine Foreign Currency Transfer Regulations

VANCOUVER, BRITISH COLUMBIA--(Marketwire -10/26/11)- Extorre Gold Mines Limited (TSX: XG - News) (AMEX: XG - News) (Frankfurt: E1R.F - News) ("Extorre" or the "Company") wishes to inform shareholders of the events in Argentina that led to today's drop in its share price.

Today the Federal Government of Argentina announced that future export revenues derived from mining operations must be repatriated to Argentina and converted to Argentine currency prior to being distributed either locally or back overseas. The distribution of earnings back overseas would require the Argentine currency to be reconverted to foreign currency for repatriation. This overturns the benefits provided in 2002 and 2003-04 to all Argentine oil and mining companies, respectively, that exempted them from the currency repatriation laws that apply to all other primary producers in the country.

A preliminary analysis of the new decree by our legal counsel in Buenos Aires indicates that it does not change the current regulations that allow, subject to the Argentinean central bank rules, the unlimited purchase and transfer of foreign currency to offshore destinations in consideration for debt repayment facilities or approved and budgeted dividend payments.

Extorre will continue to seek advice from our Argentine legal counsel and other advisors for further clarification of the financial and operational implications of the new regulations. The effect of this new regulation will be factored into the revised economic studies to be undertaken utilizing the updated resource, including the Zoe discovery, which is expected to be released during Q4.

In the meantime, we are continuing with the scheduled engineering and economic studies for which the Company is fully funded.

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PMBug said:

It could also be the first step towards nationalizing the industries. It's a troubling development.

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As the press all over the world talks about the political success of the current administration, and mentions the “flourishing”, prosperous Argentina, a clear minority which I’m part of sees things differently. It makes you wonder and ask yourself a few other things as well. Who writes all these praises? What kind of data do they use to make such positive statements? How can a country be booming economically, yet keeps having shantytowns grow at an accelerating rate, poverty, misery and decadence never backing down one inch, and the 3rd greatest inflation in the planet as the icing on the cake? After reading some of the emails people sent me on the “success” of Argentina, I wonder if its just innocent stupidity, lack of professionalism or if there’s more to it than meets the eye and there are other intentions behind it.

Argentina was fatally wounded almost ten years ago and Argentina as I knew it died yesterday, October 23, 2011, when Ms. Kirchner was re-elected with over 50% of the votes, gaining complete control of the country. She now controls the executive of course, but also the congress, unions and even the media through the Kirchner Media Law. The headlines of the world consider this something of a surprise, a small number of Argentines such as myself consider this the culmination of a decade long process that started with the destruction of opposing parties by any means, legal or not, the indoctrination of the generations to come through several channels including the mandatory “Citizen Formation Studies” in schools and even an officially approved version of history. It seems insane, but the “History” I was taught twenty years ago is different from the one my son is taught, much worse, its different from the recent history I SAW with my own eyes.

One can only wonder how can such an authoritarian leader earn so much public support? Wasn’t it bad enough when they controlled the media through an unconstitutional law, or what about our retirement funds begin stolen (nationalized) right in our faces?
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Has Recent Argentinean Capital Repatriation Order Created A Major Buying Opportunity in Mining Shares?

October 28, 2011 |

Beginning Wednesday morning, Oct 26th., mining companies with large overall percentage exposure to projects in Argentina began crashing. The sell-off was ignited by an announced change in Argentine corporate capital control policies aimed at mining companies. In office for a mere 3 days, newly elected Argentine President Cristina Fernandez de Kirchner, “Changed a 2002 decree requiring companies…to keep at least 30 percent of their export revenue in the country,” as reported by Bloomberg.

While there seems to be no official, detailed press statement by the Argentine government, investors have taken it upon themselves to dump mining shares en masse. A contributing factor may be the vague and misleading nature of the Bloomberg article, which seemed to conclude mining exporters were no longer able to move any earnings offshore. The leading and dramatic article, combined with serious nationalization moves by South American governments in recent years, may have triggered a much larger sell-off than would have occurred otherwise. Fear quickly set in Wednesday, no doubt triggering many program sell orders, perpetuating large moves down in mining issues. Those hardest hit(shown below) were explorers & developers.

Total Peak-Trough Down Moves:

Goldcorp(GG) -2.8%(already recovered)
Barrick(ABX) -2.0%(already recovered)
Yamana(AUY) -7.9%(already recovered)
Minera Andes(MNEAF) -10%(recovering)
Patagonia Gold(PGD.L) -13.3%(recovering)
Extorre(XG) -24.7%(recovering)
Argentex(AGXMF) -29.6%(not yet recovering)

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As shown by share price down-moves, some investors saw this move as a “last chance to get out” while others saw this collapse as a “last chance to get in.”

While yesterday’s article issued by Bloomberg seemed to create an emotional knee-jerk reaction on the sell side for many people…a follow up commentary published by the Financial Post today makes much more sense of the issue.

“Argentina announced a decree to repatriate mining revenues that ‘may have been misinterpreted by the market to mean that companies could no longer transfer mining earnings offshore, which we do not believe is the case,’ Daniel Earle, an analyst at TD Securities said in a note to clients….The Argentine government wants export revenues from mining projects to be repatriated and converted to Argentine currency prior to being distributed either locally or overseas.”

It seems from reading a number of online articles on this government order, one of the goals of the new legislation is to bring all mining export funds back home to Argentina—increasing liquidity in their banking system and creating additional streams of revenue in the form of government, professional, & financial fees. In essence…this move which requires money to “come home and visit” before “leaving the nest for good” appears to be another tax of which will be burdensome—but not enough to impair commodities operations in South America’s second largest economy.

The final question remains: Is this a major buying opportunity for miners & other share issues taken down by this announcement? My answer(which seems to be echoed by those buying shares in rapidly recovering companies listed above) is yes. Independent investor and market commentator, Jason Burack also notes, “Investors need to be geographically diversified,” but in times like these, “I would buy the dips.”

Should you ever decide to pick up shares during this of type environment, always take the safe road by calling the company directly, and asking as many questions as needed to determine if changes in legislation will have a material, negative impact on the company. If the overall business remains intact—consider defying the direction of the mob. As Warren Buffett would say, ” “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful!”

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