Codelco could take over from Kinross in Ecuador

Chile’s Codelco, the world’s largest copper producer, is the runner up for taking over Kinross Gold’s (TSX:K, NYSE:KGC) Fruta del Norte project, the largest gold deposit in Ecuador, after the Canadian miner abandoned the endeavour last week because it was unable to reach an agreement with local authorities.

According to Ecuador’s official news agency, Andes (in Spanish), the country’s administration is looking forward to August 1, the day Kinross’ concession expires, as it wants to hit the gas pedal on the mine construction.

Although the South American country has several alternatives from which to choose in order to proceed with Fruta del Norte, sources quoted by Andes believe that Chile’s Codelco will be the chosen option, as the copper giant is already involved in the Ecuadorian mining sector.

In November 2011, Codelco and Ecuador’s National Mining Company (ENAMI EP) signed an agreement to explore that country’s copper potential, which could be as high as $200 billion in untapped deposits. Under the agreement, Codelco agreed to invest between $10 million and $30 million in Ecuador before 2015.

By mid-2012 the Chilean copper titan had already invested $3.5 million in basic exploration of 20 prospects. Codelco is also working with ENAMI EP to develop the touted Junin copper deposit, in the northern region.

Failing that, Ecuador might hire a third party to develop and exploit the resource. That company would have very limited rights over the total revenue coming from the mine, as described in the recently approved mining law.

By the end of last year, Fruta del Norte had 6.715 million ounces of proven and probable reserves of gold, as well as 67,000 ounces of measured and indicated gold resources. Silver resources were estimated at 9 million ounces with measured and indicated resources totalling 1.412 million ounces of silver.

Image courtesy of Chile’s Government