By Soto - 1 hour ago

By Alonso Soto

QUITO, May 6 (Reuters) - Ecuador's freeze on mining exploration and seizure of concessions has taken a heavy toll on the nascent sector but is unlikely to kill an industry that could be worth billions of dollars to the poor nation.

Ecuador plans to allow the biggest foreign projects to go ahead, even after President Rafael Correa shocked investors and hurt companies stock by revoking concessions and halting exploration until a new mining law is approved in six months.

Some companies lost nearly half of their market capital in only a few days, hurting their chances of raising investment needed to explore for cooper and gold, industry analysts say.

Still, despite moving against the companies as he seeks to increase state control over the economy, Correa says he backs an industry that should benefit his leftist government with hefty revenues stemming from record-high commodities prices.

"We will try to have a new legal framework ready as soon as possible ... We welcome foreign investment," said Correa during a radio show last month after the mining freeze was approved by his allies in an assembly rewriting the constitution.

Correa, a former economy minister and ally of socialist Venezuelan President Hugo Chavez, has pushed oil and cell phone companies to give up more revenue to the state from deals he says were unfair to the OPEC member.

"This (decree) is definitely a delay to get Ecuador in the leagues of Peru and Chile," some of the world's largest metal producers, said a senior mining official in Ecuador who asked not to be named according to his company's policy.