Ecuador and Codelco form JV to explore close to $200bn untapped copper reserves

Chile’s Sebastian Piñera and Ecuador’s Rafael Correa in Santiago, Oct. 2012.

Ecuador’s National Mining Company (ENAMI EP) and Chile’s state-own Codelco, the world’s largest copper producer, are fine-tuning details of a joint venture to explore the Llurimagua reserves in the North of Ecuador, a country with no mining industry to speak of.

The deal, reports Reuters, will see Enami holding a 51% stake in the project and the Chilean miner, which has vast experience and the necessary technology, owning the rest.

The project is one of many Codelco is planning to take part in Ecuador, as stipulated in a 2011 agreement between the parties. The Chilean company vowed then to help the fellow South American nation explore its copper potential, which could be as high as $200 billion in untapped deposits.

Under the treaty signed two years ago, the Chilean copper titan agreed to invest between $10 million and $30 million in Ecuador by 2015. By mid-2012 Codelco had already invested $3.5 million in basic exploration of 20 prospects.

The firm is also working with Enami to develop the touted Junín copper deposit, in the northern region and it is said the runner up for taking over Kinross Gold’s (TSX:K, NYSE:KGC) Fruta del Norte project, the largest gold deposit in Ecuador, which the Canadian miner was forced to abandon last June after failing to reach an agreement with the government.

Over the past 15 years, mining in Ecuador’s north has been strongly opposed by the local communities, with several international mining companies failing to establish a foothold in the area.

To solve that, President Rafael Correa rewrote in 2009 the country’s mining laws aiming to give the state greater control over the country’s mineral resources.

Since then, his administration has supported investment in the country’s mining industry. Correa is also trying to boost the country’s oil sector. As Opec’s smallest member, the South American country’s oil production has been stuck at around 500,000 barrels of oil equivalent per day due to a drop in foreign investment to less than $1 billion a year.

But his government expects to attract investments worth around $1 billion in oil exploration for some 16 blocks in the Amazon, most of which will be offered in auction later this year.

Ecuador’s mining chamber of commerce values the country’s total mineral wealth at $220 billion, including about 40 million ounces of gold reserves.