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Tuesday, November 18, 2008

FACTBOX-Key details of Ecuador's mining bill

QUITO, Nov 17 (Reuters) - Ecuador's leftist government late last week introduced a new mining law to the legislature that bolsters state control over the nascent sector.

The law's ambiguous language over types of contracts and a new tax scheme could further delay an industry already hit by a global credit crunch and falling metals prices.

A copy of the mining bill can be downloaded from the country's assembly website: (

Following are some key details of the mining bill that is currently under review by the assembly and is expected to be approved in January:


Ecuador is to set "not less" than 5 percent royalty based on sales. The final percentage in the contract has to be negotiated between the company and the state.


Ecuador and companies will negotiate new mining extraction contracts on a case-by-case basis. Companies could also opt for service contracts, in which the state pays a fee for a company to extract the mineral. Under this contract the state keeps all the mineral extracted.


Contract disputes between mining companies and Ecuador will only be resolved by local or Latin American courts.


Ecuador will be able to designate special mining areas where the state mining company will have preferential rights to develop properties. Mining officials have said those areas are mostly for mining of construction minerals such as sand.


Mining companies will have up to eight years to explore for minerals in concessions. Another two years will be granted to evaluate the economic viability of the deposit before requesting a mining permit.


There will be no limits on the number of concessions a company can hold during exploration.


Mining companies will have to issue detailed environmental impact studies to get exploration and extraction permits. Some of the requirements also include water-use permits and periodic on-site examinations.

Concessions can be revoked by the state if companies are deemed to have inflicted grave environmental damage on concessions.


Local communities will not hold veto power to shut down mining projects.

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