In the Cordillera de Condor mountain ridge, Canadian mining firm Aurelian Resources found one of the largest gold deposits in the world, Fruta del Norte (FDN), with 13.7 million ounces of gold. With the per-ounce price of gold at US $811, the site’s production has a market value of $11 billion. And FDN is just one of several projects owned by Aurelian.

For its part, Corriente Resources’s Mirador project is located alongside Aurelian’s, and it has copper reserves of 11 billion pounds worth $36.6 billion. Other mining firms too are exploring this notably rich southeastern region.

Discoveries typically follow the following pattern: geologists visit regions previously inadequately explored, they see evidence, and go to the Toronto Stock Exchange searching for investors. When there is a breakthrough, shares rise strongly, and the junior exploration company is acquired by a major mining conglomerate. According to the Financial Times, the giant firm Newmont is interested in Aurelian. See FT article

The rise of mining exploration in southern Ecuador is based on two factors. First, it is high mineral prices. At lower prices, exploration at such a remote site would not have been attractive.

The other factor is Ecuador’s current mining law. Former president Gustavo Noboa appointed as his MEM minister Pablo Teran, an experienced miner, who designed the current law that encourages exploration.

Today, there is a statist and environmentalist government that views mining operations with skepticism. If mining companies can reach an understanding with this government, they would no doubt be shielded from risk if conditions vary in the future. In contrast, oil companies signed contracts with a pro-investment government, and now they are facing negative consequences.

There are three contrary goals but not contradictory ones that have to be addressed in the legislation and the contracts:

1. The highest possible income for the country. It must go until the point which is attractive for the company to make exploitation, and not beyond, otherwise resources would remain underground.

2. The best environmental practice. Any economic activity has an environmental impact. The issue is to lessen it, and ensure it does not cause permanent damage. Be sure to create a trust that survives the legal duration of the company in order to meet unanticipated potential environmental damage in the long run, such as metals leaks that pollute water.

3. The best possible conditions for the communities located in the mining area. The extraction requires a lot of manpower. This means firms will generate many jobs, and any unskilled villager in good physical condition is qualified to do the job.

Mining also offers an opportunity for the government to create a southern mining region. It could link via rail Puerto Morona, by way of the Amazonas river, with Puerto Bolivar, which serves the mining area and Loja.

The president and his assemblymen will call the shots whether Ecuador will enter an era of large-scale mining on a firm footing, or not.



*Walter Spurrier is the president of the Spurrier Group, an economic consulting firm located in Guayaquil, Ecuador. He holds a master degree in the University of Califormia and has been the director of the Economic Weekly Analysis for 30 years.


EMN has translated and made minor edits to the original column published first in El Universo newspaper.