Ecuador is not a top-of-mind country when it comes to mining, but that could change as the government signals a shift in direction towards the minerals sector, the Globe and Mail is reporting.
The Globe reports that the leftist government of Rafael Correa plans to invest $3 billion in the next two and a half years in order to reduce the country’s dependence on oil exports.
Among the companies that could benefit are Toronto-based Kinross Gold (TSE:K), which plans to develop Ecuador’s largest gold mine, Fruta del Norte, and Ecuacorriente, a Chinese-owned company looking to build the Mirador copper mine.
Other projects up for negotiations are the Rio Blanco gold-silver project owned by Arizona-based International Minerals (TSE:IMZ) and IAMGold’s (TSE:IMG) Quimsacocha gold-copper-silver mine.
However, mining companies would have to hand over about half their income after production costs in taxes and royalties, which is likely to be a disencentive to all but the most cashed up miners, says the story, quoting an analyst:
“Depending how high the rope ends up being, maybe it’s still worth it for Kinross; but for a smaller miner, where is the profit? I think that it’s really going to discourage smaller miners,” said Risa Grais-Targow, an analyst at the Eurasia Group consultancy.
Gaining the confidence of miners in Ecuador could be equally challenging for Correa says the Globe, noting that “Mr. Correa redrafted contracts with oil investors last year, and while talks with miners were in full swing, his party introduced a bill calling for state ownership of mining infrastructure and technology when the contracts expire or if they are rescinded. The bill has not yet been approved.”
Image of Rafael Correa with Russian president Dmitry Medvedev is from Wikimedia Commons (Credit www.kremlin.ru.)
5 Comments
Peru
The issue of mining in South America is much discussed lately not only in Ecuador but also in Peru and Bolivia . There are many important factors involved, such as caring for the environment, labor, and the intervention of multinational corporations. It’s really difficult to take a position
Bolivia
The issue of mining in South America is much discussed lately not only in Ecuador but also in Peru and Bolivia . There are many important factors involved, such as caring for the environment, labor, and the intervention of multinational corporations. It’s really difficult to take a position
Dav1942
This is not a good idea unless you are a chinese national with a work vesa.. Investors be ware, please!!!!!!
Bolivianmsc
Having worked for a Bolivian mining company, I know how much risk is taken by the company investing billions of dollars. The locals went from a stone age existence to many modern conveniences and medical care, thanks to the investment of the foreign mining co. Morales, Correa, and Chavez risk scaring away foreign investors in their attempt to expect an unreasonable share of the return on the investment.
Paul f
No thanks, no interest in enriching a country that does not reward the global risk takers willing to move real $$ and employing 1000’s of workers. We moved our private company to Columbia and Chile and many have followed this same move. Columbia enjoying the benefits of all the money flowing in and their resource sector has taken off. They will model themselves after Chile–arguably the most succesful latin american country in terms of foreign direct investment. Once the money leaves it takes a long time to come back. Too bad Ecquador is rich in resources that will likely not get developed at the speed they should.