Jan 7, 2008 10:00 ET 'INTERVIEW-Ecuador to hold mining negotiations, boost control'



By Alonso Soto QUITO, Jan 7 (Reuters) - Ecuador will negotiate with two of the largest mining firms exploring for metals in the Andean nation and introduce urgent reforms to tighten its grip over the nascent sector, a top official said. Mining Deputy Minister Jose Serrano said in an interview that the government will meet on Tuesday with Canada's Aurelian Resources and Corriente Resources to set up a schedule and teams to begin individual negotiations. "We are starting a renegotiation process with the big mining projects in the country," Serrano told Reuters. "When we secure a renegotiation that benefits the state these companies would be able continue with those projects." Aurelian has discovered a large gold deposit in southern Ecuador while Corriente is working on a previously rejected environmental impact study amendment to begin construction at its Mirador copper project. Serrano said negotiations will include drafting new contracts, introducing royalties, and setting a base price for a windfall tax that will force companies to share 70 percent of their revenues generated above a contractual price for the metal. "We are optimistic. The only way to proceed is for everyone to sit down and talk," said Dominic Channer, Aurelian's president of operations in Ecuador. Ecuador has no significant precious metals output, but dozens of firms are exploring for gold, copper and silver in the South American nation that the government says holds $130 billion worth of metal deposits. Ecuador has awarded nearly 4,000 concessions, or almost 2.9 million hectares, of which companies pay only an annual ownership fee. URGENT REFORMS, REVIEW Serrano said the government is also working on an urgent mining reform package to boost state control over mining concessions that has generated clashes between communities in favor of and against mining. The reforms will be introduced soon to a popular assembly controlled by President Rafael Correa's party, which in November closed down Congress and took over its powers. He also said the reforms will establish new mechanisms to revoke concessions and increase sanctions on companies that break the law, which is very difficult for the government to do under the current law. "Control is lacking in the current law. We have no sanctions," Serrano said. "We need more control now." He said the reforms will also include tighter environmental monitoring over companies exploring or extracting minerals, government authorization to transfer concessions and international certification of deposits. The government is also reviewing concessions and probing companies over charges of land speculation or delivering false information to international markets, Serrano said. "Concessions that are involved in a speculation process or that broke the rules will be revoked," Serrano said. The government is also drafting a new mining law to be introduced later this year, Serrano said, in which the government will analyze communities' participation in future projects. (Reporting by Alonso Soto; editing by Jim Marshall) ((alonso.soto@reuters.com; Tel: 593-22523560 ext 102)) Keywords: ECUADOR MINING/

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