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Resource Investor)

Ecuador Land Grab? Not Quite
By Louis James
14 Nov 2007 at 01:30 PM GMT-05:00

STOWE, Vt. (Casey Research Advertorial) -- At a summit in Santiago, Chile on November 10, Ecuadorean President Rafael Correa said he would cancel mineral concessions for companies not in production: "There are five or six companies that are producing, and we'll negotiate with them, but we will revoke the concessions from the rest of them."

Correa’s statement was perceived as a threat by the international community of mining stock investors, many of whom feared that it meant all exploration companies in Ecuador were about to be expropriated - maybe with the specific intention of an outright land grab of the properties of mining company Aurelian Resources [TSX:ARU].

Aurelian owns the 95,000-hectare Condor Project in south-eastern Ecuador. Its flagship epithermal gold-silver deposit, Fruta del Norte, has a NI 43- 101-compliant initial inferred resource of 13.7 million ounces of gold (58.9 million tonnes grading 7.23 g/t gold).

To evaluate the validity of those fears, Casey Research, a leading research organization focusing on the natural resource sector, reached out to its network of contacts within that country, including an Ecuadorean ministry official, who agreed to speak with a Casey Research analyst on the condition that he would not be named.

The official said that Correa was not expounding a new policy, but was simply making a statement relating to proposals already in place, which are aimed at land speculators who have been sitting on mineral concessions for a long time without doing any work. A review is underway, he asserted, and the Ecuadorean government has said all along that parties not working their concessions are at risk of losing them.

However, he specifically said that this would not apply to active exploration companies that are complying with the law. He went on to say that the assembly would have to pass a mining law reform before any concessions could be revoked in any case, which will take time.

In short, unless President Correa has gone off the deep end without telling his officials - which seems highly unlikely - and is willing to choke off foreign investment in Ecuador, this should not adversely affect the better Ecuador plays.

The scare, however, may present a buying opportunity for shares in Aurelian, one of the few major gold discoveries of the last decade, as well as in other companies doing good work in Ecuador.

© Casey Research LLC. 2007