Aurelian Resources Was Stolen By Kinross and Management But Will Not Be Forgotten

The company whose shareholders were better than its management

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From DJ:

posted on Apr 17, 2008 11:58AM
April 17, 2008 2:03pm ET

(Adds comments, background)

By Mercedes Alvaro

Of DOW JONES NEWSWIRES

QUITO (Dow Jones)--Ecuador President Rafael Correa said Thursday the nation's Constituent Assembly will revoke several mining concessions and suspend other concessions.

At a meeting with the foreign press, Correa said the Assembly - controlled by his allies and mandated with re-writing the country's constitution - would end contracts of companies that weren't in compliance with current laws.

He said all companies that were in compliance with laws and that had invested would have their concessions suspended for 180 days once the Andean country has a new Constitution and a new mining sector law.

According a decree before the Assembly, expected to be approved tomorrow, the 180-day period will start once the new constitution has been approved in a referendum. That referendum is expected to take place 45 days after the Assembly approves the constitution.

There are approximately 4,000 mining concessions in the exploration phase in Ecuador, and some 600 in early development stages.

The Assembly's proposed decree will define reasons for ending contracts.

Small mining concessions as well as the concessions for the mining of materials used in construction will be excluded from the decree.

The concessions could be terminated due to the lack of investment or not having environmental impact studies, due to tax issues, problems with local communities, or from having concessions inside national parks, among other reasons.

"There is a perfect consensus between the government and the government's Alianza Pais party. We have worked jointly and when the new Constitution and the new law exist, new contracts will be signed," Correa said.

Ian Harris, general manager of EcuaCorriente SA, a subsidiary of Canada's Corriente Resources (ETQ), told Dow Jones Newswires that the company can wait 180 days.

"For us, it doesn't seem a very big impact, because we have a project for 30 years and not for 180 days. The negative message is for the markets. We will wait for the new constitution and the new law to sit down again with the government to negotiate the contract," Harris said.

The company has invested $70 million since it began operating in Ecuador 10 years ago.

One of the two projects is Mirador in Zamora Chinchipe province, which is ready to begin the construction phase. It will include a processing plant, a hydroelectric plant, bridges, roads and ports.

The other project is the Panantza-San Carlos project.

No Surprises Seen For Oil Sector

At his press conference, Correa also said the new Constitution won't include large scale changes for the oil sector that haven't already been announced.

He also reiterated that all oil participation contracts will be changed into service contracts.

Under the current participation contracts, the state receives a certain percentage from oil production, while in service contracts, companies are paid production fees and reimbursed for investment costs.

Correa said private oil companies have to agree from the start to contract modifications, otherwise the government will analyze taking unspecified legal measures.

Currently, the Italian company Agip is the only company with a service contract in Ecuador.

Correa criticized this contract saying the formula to determine the operating costs includes changes if the price of oil rises. "What class of service contract is that?" Correa asked at the press conference.

The nation's Constituent Assembly is acting as the legislature, as well as writing a new constitution.

-By Mercedes Alvaro, Dow Jones Newswires; 5939-9728-653; mercedes.alvaro@dowjones.com

(END) Dow Jones Newswires

04-17-08 1403ET

Copyright (c) 2008 Dow Jones & Company, Inc.
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