The race has begun – 5 weeks out a new Constitution in Ecuador

The race has officially begun!  The campaign to support the proposed new Constitution drafted by the Government was kicked off last Saturday.  The Government enlisted the support of about 100K Ecuadorians to launch its campaign for the YES.  Rumor has it that some of the folks in attendance were promised not only a good time, but also some cash incentive to participate.  On the other hand, the NO supporters have also launched their efforts through media campaign designed to highlight the risks of a YES and pinpoint why they feel that their country will be better off with the NO.

Some say that the YES is losing ground, but the road is still ahead and anything can happen between now and September 28th.  This brings about questions about what will be the future of mining if the referendum gets a green light vs if it gets banned?  The Government has announced that the new mining law will be approved shortly after the September 28th election. No matter what, this is a frenzied time for investors in Ecuador and I’m sure time cannot fly fast enough for them to find out what’s really going to happen. How will their investments fair to this crisis and what will happen to the thousands of workers they laid-off last May when the Mining Mandate took effect.

Ecuador’s mining future

The new mining law of Ecuador will significantly change the rules of the game for extractive companies.   According to article 410 of the proposed constitution, if approved, Ecuador’s new constitution will cause mining companies to share a minimum 65 percent of its profit with the state:
“The State’s participation in the profits arising from the utilization of these (non-renewable) natural resources shall not be less than that of the company exploiting them.”

What would be interesting is to see how will this affect previous and future investments in that country.  How will that change the mining scenario for the existent investors who entered the scene under different rules, and how will that cause them to seek greener pastures elsewhere?

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Ecuador reaches out to India for mining investment

According to Ecuador Ambassador to India, Carlos Abad, the Ecuadorian government has engaged in conversations with private companies from India in search for insvestors for the soon-to-bloom mining sector of that country.   That is good news from the investment standpoint.  It’s important for the government of Ecuador to acknowledge the importance of working with experienced investors – I just wonder what does that mean for all Canadian companies that are already in the country.  Is President Correa trying to replace them, or is he just trying to open the doors to foreign investors?  The first scenario would pose a bad precedent for investors, whereas the latter would generate a general sigh of relief for those who already have, or were planning to invest in Ecuador.

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New leap of faith for the Ecuadorian mining industry – Aurelian nets nearly $1 billion

Washington, D.C., July 31, 2008 — Kinross Gold Corporation’s (TSX:K; NYSE:KGC) $1.2 billion takeover bid for Aurelian Resources (TSX:ARU) has elicited mixed reactions among ARU and KGC investors alike. While the junior mining company’s shareholders complain that the offer is too lowball for their mega-rich Fruta del Norte (FDN) project, one of the most important worldwide gold discoveries in the last decade, Kinross stocks fell 10 percent, last July 24th, when the deal was announced. In contrast, ARU shares climbed 42 percent. Read ARU and Kinross Friendly Combination The billion-dollar-plus offer for Aurelian is the most significant private agreement that has ever been announced in the history of this Andean nation, which has a promising nascent mining industry at least with respect to resources. The Kinross bid is the first one ever made by one of the majors. Ecuador has attracted Kinross, the third largest gold producer in North America, in the midst of political turmoil. The offer was made just two days prior to when Constituent Assembly operations are scheduled to end, and one month before Ecuadorians give the red or green light to the new constitution through a referendum next September 28th.

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Latest findings in Tres Chorreras in Ecuador

Calgary, Alberta – July 28, 2008 – Atlas Minerals Inc. (TSXV – AMR) Atlas is pleased to announce the results of a National Instrument 43-101 Resource Estimate for the polymetallic deposit at its Tres Chorreras concession in Ecuador. Results are based on a first phase exploration program and are significant considering the work completed to date. Two deposits have been outlined at Tres Chorreras and both remain open to depth and along strike with numerous additional targets yet to be tested. The company anticipates expanding the resource estimate significantly in future exploration and development programs. The Resource Estimate to date reflects that the Tres Chorreras property comprises significant mineral deposits. To download the complete report click the link below.

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Update on Ecuadorian Mining Law expected this week

Aurelian Resources Inc. (TSX:ARU) provided an update regarding Ecuador’s draft mining law and expected political milestones over the coming months.  These are not official dates, just an estimated timeline

1. On June 27, 2008 the Ministry of Mines and Petroleum (MMP) announced completion of work on a draft law. Preparation of the draft legislation involved an extensive consultation process with stakeholders. The draft law was sent  to President Rafael Correa, who is reviewing the document with his advisors.
2. The new President of the Assembly, Fernando Cordero, stated that the Assembly will complete its work on July 25 and will deliver the proposed constitution to the Supreme Electoral Council. At this time the Assembly is to be dissolved and will probably be replaced by an interim legislative body, although details are still being debated regarding its start date, duration, composition, and legislative powers.
3. Ecuadorean media have reported that the date for the referendum will be announced on August 21, and that this date will most likely be October 5 with final results to be published on October 21.
4. The dates for general elections will be announced on November 6, followed by candidate inscriptions on December 10, elections on February 8, 2009 and results on March 10, 2009.
5. If necessitated by a vote of less than 40% for the leading Presidential candidate, the second round of Presidential elections will occur on March 22, 2009, with final results on April 11, 2009. The newly elected legislative body will take office on April 26, 2009 and the new President will take office on May 3, 2009.

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Light at the end of the tunnel in Ecuador

These are the key points of the Mining Mandate

· “Revocation of exploration and mining concessions where investment has not been made as of December 31, 2007; environmental impact studies are not current; royalties and taxes are unpaid; mining concessions are within protected natural areas, forests and protective buffer zones; of those affecting source of water. All revocations are without any financial compensation.”

 

· Revocation of mining concessions where greater than three have been granted to a single entity or affiliated parties.

 

· Immediately suspend all metallic mining activities on concessions that remain until the adoption of a new legal framework to regulate the activity. Single concession metallic operations are excluded from the moratorium.

 

· “Small-scale, artisanal and subsistence mining activities are not suspended as long as they are not within protected natural areas, forests and protective buffer zones, or those affecting sources of water.”

 

· Commits to complete the new Mining Law within 180 days of the enactment of the proposal or by October 15, 2008.

 

· Creates a national mining company under the auspices of the Ministry of Mines and Petroleum.

 

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Ecuador’s draft of new mining law coming soon

At last, the Minister of Energy and Mines, Galo Chiriboga announced that the draft of the law will be released on June 27th.  This draft will give a better picture of what lies ahead for mining companies already vested in Ecuador.  Interestingly enough, most large-scale mining companies doing business in Ecuador do so thanks to foreign investors, mainly from U.S. and Canada, who put their money down based on Ecuador’s 1991 investor-friendly mining law. 

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Michael Gray talks about Mining in Ecuador

Ecuador’s mining sector is in an important state of flux that over the coming months will determine the future of the industry. In April the country’s constituent assembly approved a mandate that suspends all concessions for six months while a new law is put in place.

 

The mandate also reduces to just three the number of concessions a company can hold – quite a blow for companies like Aurelian Resources, which holds 39 concessions. Mines and oil minister Galo Chiriboga has said a draft of the new law will be ready by the end of May.

 

To shed some light on the situation and what it will mean for mining in Ecuador, BNamericas spoke with Michael Gray, mining analyst with Genuity Capital Markets.

More at: bnamericas.com