Ecuador to Finalize Mining Law This Week, Correa Says

By Stephan Kueffner

Jan. 19 (Bloomberg) -- Ecuador’s new mining law will probably be finalized this week, President Rafael Correa said.

The bill will be submitted to the legislature today with a request for a minor change before final approval, Correa said in a speech from the presidential palace in Quito. Correa said he plans to ask the National Assembly to change the wording in the law to make sure that control of some deposits that were explored and studied by the government is returned to the state.

Correa is hoping the new law, which reorganizes the industry after the Assembly banned mining in April, will lure more foreign investment to develop deposits in the South American country.

“We don’t have another single day to lose,” Correa said.

Ecuador estimated in the first quarter of last year that it has some $220 billion in reserves of metals such as gold, copper and molybdenum. Companies will be able to partially restart operations as soon as the law goes into effect, with full activities resuming as soon as regulations to govern the implementation of the measures are ready, Deputy Mining Minister Jose Serrano said.

“They’ll be able to start work immediately,” Serrano said in a telephone interview.

Miners Cheer

Several hundred miners cheered as they heard Correa’s speech in Quito’s Independence Square today. Indigenous groups and protesters concerned that the increase in mining may lead to more environmental damage will hold demonstrations tomorrow against the plans to develop gold and copper deposits.

According to the draft law, the government will have the right to declare a deposit a “special mining area,” giving a new state-owned company preferential access to mineral deposits there for up to four years. The new law will also include a 5 percent royalty on sales and ensure that more than 50 percent of revenue from mining operations goes to the state.

The law gives foreign mining companies investing in Ecuador the same rights as domestic producers and allows individuals and companies to freely prospect for minerals. It also toughens social and environmental standards.

Companies will be allowed to hold concessions as large as 5,000 hectares (12,355 acres), for which they will have to pay annual fees of $5 to $20 per hectare, in addition to royalties and taxes. Companies with current, suspended concessions will have 120 days to renegotiate their contracts with the government, and contracts will be based on reference prices as measured by the London Metal Exchange.

A new government mining regulator will oversee the industry. If a local community opposes a project, the Mines and Oil Ministry will have the right to turn it down.