Mining companies exploring and operating in Ecuador had some good news yesterday as President Rafael Correa said on state-owned radio station, Radio Publica, he might need to make it easier for miners from now on.
“We have to make it more reasonable,” Correa said on live radio according to Prensa Latina, adding that he is aware Ecuador has the most demanding contracts in the world, but he said it is so because the opportunities are immense.
Correa also defended environmentally responsible mining practices against illegal and “devastating in nature” operations, which his government is trying to eliminate.
He added Ecuador is an example for neighbouring countries, such as Colombia and Peru, when it comes to mining regulations, announcing that his goal is to propose a regional strategy against illegal mining to be followed by the Union of South American Nations (UNASUR).
Currently, there is an additional tax 70% above a pre-negotiated base price for mining companies, which has players such as Canadian Kinross Gold putting on hold its development plans.
The company is pondering the pros and cons of a mining contract with the government to develop its Fruta del Norte gold and silver deposit in southern Ecuador.
In addition to Kinross’s project, three more contracts are in the pipeline to be signed this year: International Minerals’ gold and silver property, Rio Blanco; IAMGOLD’s Quimsacocha gold mine; and a second deal with the Chinese company Ecuacorriente around the major copper project Panantza-San Carlos.
In April, Ecuador signed a contract with Ecuacorriente to develop Mirador, the country’s fist copper mining megaproject. This is the only deal the Ecuadorian government has been able to finalize.
More than taxes
Not only taxes are making companies second-guess their plans to mine in Ecuador. Since last Friday, firms operating in the country are not allowed to transfer their shares to other companies or change partners without official consent from the government.
The new regulation, known as the 740 decree, came out only a few days after IAMGOLD Corp. (NYSE:IAG, TSX:IMG) announced an agreement with announced an agreement with INV Metals for the sale of the gold, copper and silver Quimsacocha project, also in the south of the country.
Staffing is another challenge miners face in Ecuador, as the country needs at least 300 mining engineers and geologists by 2014 to be able to deliver on its recent and pending mining contracts, but only about 40 such professionals graduate annually from six universities that offer those programs.