TORONTO — A new mining law in Ecuador has been welcomed as "a solid foundation and framework for the growth of a responsible mining industry" by Kinross Gold Corp. (TSX:K), which plans to spend tens of millions of dollars in the South American country this year.
However, native and environmental groups are reported to be outraged by the law pushed through by President Rafael Correa.
The law ratified Monday by the National Assembly - a temporary legislature in place until a new congress is elected under a new constitution in April - places no limits on the number of mining concessions held by a single company, with concessions limited to 25 years but renewable. It also imposes a government royalty of not less than five per cent on sales.
The provisions "are consistent with the company's expectations," Kinross stated.
Last April, Ecuador revoked about four-fifths of its mining concessions, knocking down the share prices of foreign companies active in the country.
Kinross, which acquired the Fruta del Norte prospect in southeastern Ecuador with its takeover of Aurelian Resources last year, said late Thursday it will spend $25 million "to upgrade mineral resources and support a pre-feasibility study."
Kinross had previously said that, "assuming successful passage of new legislation in support of responsible mining," it planned to spend US$45 million in 2009 on infill drilling, project evaluation, environmental permitting "and implementation of an expanded community relations and corporate responsibility program."
The new law "is a significant milestone for the country and the industry," CEO Tye Burt stated.
"However, we recognize that much work remains to be done in developing the regulations and finalizing terms and conditions of mining operations."
Another Canadian-based miner, Iamgold Corp. (TSX:IMG) noted that companies will need to arrange individual permits from the government, and "this process is expected to be concurrent with the development of mining and environmental regulations."
It added that "upon signing a satisfactory exploitation contract, Iamgold will proceed with the remaining studies and a final feasibility study for Quimsacocha," which is expected to cost US$14 million over one year.
However, Comunicaciones Aliadas, a left-leaning non-profit Latin American information group based in Lima, Peru, reports that indigenous, peasant and environmental organizations, many formerly supportive of Correa, have marched against the law.
It quotes the Confederation of Indigenous Nationalities of Ecuador as saying the law favours transnational mining companies, and says the umbrella native group plans a civil-disobedience campaign to prevent projects in areas where indigenous communities live.
An environmental organization, Accion Ecologica, said mining poses a major threat to the environment while failing to benefit the Ecuadorian people.
Correa has called opponents of the law "fundamentalists" who would leave Ecuador as a country of "beggars sitting on a sack of gold."
Kinross CEO Burt stated that "as we have in the past, we will work co-operatively with the government and local communities to advance development of our Fruta del Norte deposit in a way that benefits all parties."
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