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Ecuador's new mining legislation will give impetus to the "enormous potential" for developing new projects, the country's finance minister Carlos Julio Emanuel told the Inter-American Development Bank (IDB) conference in Fortaleza, Brazil.
The new law establishes a one-tier system where companies purchase full exploration and development rights under a single contract.
Previously, companies had to secure an exploration license and would then have to go back to get a development license, a process that proved to be mired in red tape and vulnerable to corruption. A number of mining companies, including Denver-based Newmont Mining (NYSE: NEM), left the country because of legal instability and uncertainty, finance ministry advisor Bruno Faidutti told BNamericas.
Ecuador currently produces around 20t/y of gold, a large part of which is mined illegally. The most active regions are Zaruma and Portovello, but new prospecting is taking place in Nambija, Azuay, Esmeraldas and Zamora Chimpipe provinces, Faidutti said. Some of these areas have never been explored, he said, as oil has always been the priority.
The new law aims to establish undisputed property rights and has sparked renewed interest by junior miners, primarily Canadian, including companies such as IAM Gold (TSE: IMG), he said. Other Canadian companies with interests in Ecuador include Anglo Swiss, Vista Gold and its affiliate Zamora Gold, and Hampton Court Resources.
The new legislation also scraps a 3% royalty payable to the state in favor of fixed annual concession fees, starting at US$1/ha.
"The big thing was to get rid of this royalty, as it was huge," Stephen Kay, president and CEO of International Minerals (TSE: INZ), told BNamericas. The Arizona-based company is exploring the Beroen gold-silver project in Ecuador.
Faidutti said larger mining corporations were using juniors to do the initial exploration work, so as to maintain a low profile and negotiate better surface rights. These include BHP Billiton (ASX: BHP, LSE: BLT) through its joint venture with Vancouver-based Corriente Resources (TSE: CTQ).
A group of Ecuadorian investors is currently seeking financing to explore and develop the Las Lojas prospect that was abandoned by Newmont in the 1990s after an accident. The polymetallic deposit contains gold, iron and some platinum, and could turn out to be Ecuador's equivalent of Yanacocha, Faidutti said, referring to Peru's 2Moz/y gold mine operated by Newmont.
There is still much work to be done at the project, as Newmont took all available information when it left the country and there is no clear investment figure, he said. But international companies are needed because Ecuadorians do not have the money to fund operations, Faidutti added.