Ecuador Eager to Attract Mining Investment to Decrease Reliance on Oil

on May 17, 2013

The government of President Rafael Correa has sent to the National Assembly a draft bill to reform Ecuador’s mining law in a bid to pave the way for the signing of contracts with several private investors.

“Our mining law is very good, but we made some mistakes and it was too strong in some aspects and there were not as many investments as we expected,” Reuters quoted Correa as saying on Thursday, May 16.
Correa added that the bill was “changing some reasonable things asked by investors.”
OPEC member Ecuador, which has untapped gold, silver and copper deposits, hopes to develop a large-scale mining industry and reduce its reliance on oil exports. The proposed mining bill includes a provision that will delay a windfall tax until a company’s investments are recovered. Another provision will set a ceiling on mining royalties. Under existing law, miners have to pay a minimum of five percent in royalties but the law does not set a maximum.

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The bill presented on Thursday was categorised as urgent, meaning lawmakers either vote on it in 30 days or it will take effect automatically. To pass the law, the government needs the support of about 70 of the 137 members of the Assembly. According to Reuters, Correa would not have difficulty in passing the reform bill because Alianza Pais, the ruling party, has 100 seats in the Assembly.

**Mining Projects Under Way**
If the proposed reform bill becomes law, Ecuador would become home to a number of mining projects. The changes could pave the way for the signing of a production contract with Canada-based miner Kinross Gold Corp (TSE:K) for its $1.3 billion Fruta del Norte, the largest gold project in Ecuador, and with some other companies, whose projects are in advanced stages of exploration. Kinross has said the reforms to the mining law would allow it to reap a bigger benefit from the project, which makes the signing of a contract more likely.

!m[Government Proposes Investor-Friendly Bill to Tap Into Metal Resources ](/uploads/story/2352/thumbs/pic1_inline.png)
Last year, Correa signed Ecuador’s first large-scale mining contract, under which Chinese mining company Ecuacorriente is due to invest $1.4 billion in the El Mirador copper project. Ecuador also plans to negotiate contracts with China-owned Ecuacorriente over its Panantza-San Carlos copper deposit, with Canada’s International Minerals Corp over its Rio Blanco gold-silver project, and with another Canadian company — INV Metals Inc — which plans to develop the Quimsacocha gold-copper-silver mine. All these projects are in relatively advanced stages of exploration. In addition, junior miners have about 15 other exploration projects under way, Reuters noted in its coverage of the news on Thursday.
**As of 09:57 EDT on May 17, the Kinross Gold Corp share price in Toronto was 1.45 percent down at A$5.46. The miner’s stock rose on the news of Ecuador’s mining bill, closing Thursday’s trading session 0.92 percent higher at A$5.53.**


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