Ecuador court to decide on fee that mining industry says imperils drilling

Ecuador’s government and its fledgling mining industry are heading into a legal battle over a controversial fee announced last month.

The industry sees the measure as a tax that will stymie exploration, with the mining chamber filing a cancellation request through the Constitutional Court. The government says the measure will benefit the industry by raising funds for efforts to counter informal mining.

“I’m looking forward to the hearing to tell my side,” Minister of Energy and Mines Ines Manzano told reporters.

The South American nation is facing a growing threat from illegal mining that can be linked to narcotics traffickers. A gang massacred 11 soldiers in May as they attempted to dismantle an illegal gold mining camp in the Amazon region. The government says the new fee will generate $229 million annually for regulator ARCOM.

The industry counters that some junior exploration firms would have to pay more in fees than their market value, limiting the scope to tap more of the nation’s sizable gold and copper deposits. It “would simply remove Ecuador from the investment destination map in the region,” chamber boss María Eulalia Silva said.

The legal dispute could take two years, although the chamber hopes it can get a ban placed on the fee’s collection within several weeks.

(By Stephan Kueffner)