Chile’s Codelco to ink copper deal with Ecuador-controlled miner

The Llurimagua copper project is located about 80 km northeast of Ecuador’s capital of Quito. (Image courtesy of Enami EP.)

Chile’s Codelco, the world’s No. 1 copper producer, is set to ink a long-awaited deal with Ecuador-controlled miner Enami EP to develop a jointly-owned copper project in the Andean country.

The 982-million-tonne Llurimagua copper project, located in the Imbabura Province, about 80 km northeast of Ecuador’s capital, Quito, is in the advanced exploration stage and could become the first mine Codelco operates abroad. The Chilean miner is also exploring in Brazil and Mexico.

“We are in the final stages and we hope that with the visit of the Ecuadorian president to Chile, he will be part of the signing of the agreements,” Chilean mining minister Baldo Prokurica said, according to local paper La Tercera.

The 982-million-tonne Llurimagua copper project is located in the Imbabura Province, about 80 km northeast of Ecuador’s capital, Quito.

Codelco and Enami began working on the project in 2015 and have faced intermittent resistance from nearby communities over environmental concerns.

Ecuador, the new darling of copper prospectors, aims to more than double the value of mining to its economy by 2021. To reach that goal, it  has been seeking more joint venture partners for its state-owned mining company.

At the same time, private companies have flocked to the country, either entering into joint ventures or investing in juniors to gain exposure to the nation’s pipeline.

An example of such a trend is the Cascabel copper-gold project, owned by junior SolGold. Both BHP and Newcrest Mining have increased their share positions in the miner to gain exposure to the potentially world class project.

Increased risk

Existing and future projects, however, risk delays and potential halts due to growing local opposition to the extraction of the country’s resources.

According to the latest report by Fitch Solutions Macro Research, the ongoing expansion of mining exploration in the South American country is raising the risk of tensions between companies and the local population.

In two landmark cases last year, Ecuadorian courts sided with rural and indigenous communities who argued the national government had failed to inform them it was setting aside parts of their territories for mineral exploitation. That, Fitch notes, is a right protected by the 2008 Constitution.

As mining projects face headwinds from rising tensions, investors’ courage will be tested, the analysts conclude, which could thwart Ecuador’s plan to attract $3.7 billion in mining investments in the next two years, up from $270 million in 2018.

The government is in the final days of completing a new policy that will mirror that of countries with greater mining experience, such as Chile and Peru, in order to streamline procedures and increase Ecuador’s competitiveness.