Ecuador lifts ban on miners, sees them as priority

By Alonso Soto

QUITO, March 10 (Reuters) - Ecuador will immediately lift a mining ban on Kinross and Corriente, two companies that are part of a handful of projects considered "priority" by the Andean nation, a top mining official told Reuters on Tuesday.

Deputy Mining Minister Jose Serrano said the government planned to start individual negotiations with miners to ink new deals and set the base price for a windfall tax he says will be fair for both sides. A new mining law allows the state to opt for service contracts, but Serrano said Ecuador wants extraction deals.

"The rules of the game are clear for everyone now," Serrano said. "The mining decree has been fulfilled... it can't be revived."

Still, analysts worry the cash-strapped government could seek much better contractual terms in tough negotiations with miners. The global crisis has hit key oil exports and severely curtailed the OPEC nation's income.

Serrano said the government "wants companies to keep a reasonable profit when prices climb, but share it with the state." The windfall tax has worried investors seeking capital in an industry hit hard by the global crisis.

Mining companies and investors have grown wary of the leftist government of President Rafael Correa, which set a tax on extra revenues from high metal prices and banned mining to end what he called speculation and tame mounting protests from environmental groups.

"We are in a show-me period were investor have to see if Ecuador is serious about restarting mineral exploration," said Michael Gray, an analyst with Genuity Capital Markets in Vancouver. "Its a wait-and-see approach for the industry."

"INVESTMENT PRIORITIES"

Serrano said the government considers Kinross, Corriente, IamGold and International Minerals as investment priorities for the country.

Correa, a U.S.-educated economist, is seeking investment ranging from Canada to China and Iran, to compensate for dwindling oil revenue that had been financing multibillion-dollar infrastructure projects.

Still, the president, who faces reelection on April 26, has hardened his rhetoric against foreign companies that many Ecuadoreans regard as pillagers.

In January, Ecuador approved a new mining law that boosted governmental control over an industry that in recent years had attracted dozens of companies exploring for precious metals.

Ecuador has no large-scale mining. Some companies have found big deposits of copper, gold and silver in its southern and Amazon regions.

Environmental and Indian groups have threatened to resume street protests to demand communities have veto powers over local large-scale mining. Violent demonstrations could pose a risk to the nascent industry.

Serrano said the government had no plans to auction the Junin copper project, which was taken over by the government from Ascendant Copper on charges the Canadian miner illegally acquired the concession. The project was marred by sometimes violent clashes between anti-and-pro mining communities and private security guards.