Ecuador plans flexible mining windfall tax

    By Alonso Soto     QUITO, April 7 (Reuters) - Ecuador could be 

flexible when charging mining companies a new windfall tax that has 

investors worried over the future of the country's nascent sector, a 

top government official said on Monday.  Ecuador recently approved 

a windfall tax to force mining companies to share 70 percent of their 

revenues above a set base price for the mineral extracted. The 

tax could hamper the country's mining industry, which remains 

largely only exploring for metals, experts say.     Deputy Mining 

Minister Jose Serrano said a planned new mining law could set a 

flexible base price that would change depending on global market 

conditions.     "Right now we have a price for the ounce of gold of 

around $1,000 and in the next three months that price could be 

$700 or $3,000," Serrano told reporters. "That's when we have to 

set a price and make periodical revisions to that base price."     

The new mining law, which would set stricter environmental 

controls and royalties on mining firms once they start producing,

 is expected to be introduced in late May, government officials said.   

  "A fixed (base price) level was a danger, but the fact that it could 

be variable to the market is a very positive development... sounds 

like a breakthrough," said Eric Zaunscherb, a mining analyst with 

Haywood Securities Inc in Vancouver.     Ecuador lacks significant 

output of precious metals, but Canadian firms such as Corriente 

Resources <CTQ.TO>, Aurelian Resources <ARU.TO> and Iamgold 

Corp. <IMG.TO> have found large deposits of gold, copper and 

silver in southern Ecuador. More than a dozen other junior firms 

continue to explore for metals.    The stock of many mining 

companies operating in Ecuador have been volatile recently 

due that the leftist government's internal debate over mining 

policy, which could hurt their construction plans.     A popular 

assembly controlled by the government and rewriting the country's 

constitution is working on a special decree to revoke concessions

 held by companies that have not invested on exploration, and 

limit the size of mining properties.     The assembly's head Alberto 

Acosta has said mining could have devastating effects on the 

country's pristine environment, and large projects should be 

banned in naturally protected areas.     While President Rafael 

Correa, a leftist former economy minister and ally of Acosta, has 

said he backs large mining projects if it bring billions of dollars in 

needed revenue for the poor nation.  (Reporting by Alonso Soto; 

editing by Marguerita Choy)  ((alonso.soto@reuters.com; 

Tel: 593-22523560 ext 102)) Keywords: ECUADOR MINING/TAX      

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