I've just been reading up on Chilean mining law, and while it's too much to post at one go, anyone who wants to can read up on it by googling "chilean mining law" (duh) and going to Coldelco's website: http://www.codelco.cl/english/ to read up on the history of the company.

Considering what I've learned, and taking Sr. Acosta at his word (always a good idea) together with other hints and indications we've received up to this point, I'd venture a guess that what is meant by...

"We have to regain the state's role in those sectors," said Acosta, a close Correa ally. "We would like joint ventures ...with a state majority stake, but there could be exceptions."

...is that the new Ecuadorean National Mining Co. (ENMINCO?) will operate on the Codelco Model, which has proven successful in Chile.

The basic difference between Chile and Ecuador is that Chile has a long history of mining, including the nationalization of copper mining in 1971 which lead to the formation of Codelco in 1976. Fast forward to 1992 where we read that: "The so-called Codelco Law of April 1992 authorized Codelco for the first time to form joint ventures with the private sector to work unexploited deposits. Thus, in a major step for Codelco, in 1992 it invited domestic and foreign mining firms to participate in four joint explorations in northern Chile."

The take away is that, having had the experience of doing it themselves, Chile later opted for a model which includes private investment. Without going into the details, Chilean mining and investment law contains strong language that protects foreign investors from arbitrary expropriation. The proof is in the pudding. Post 92, private companies have been operating in Chile with no major problems. This goes for explorers as well as producers, according to what I've heard first hand.

What does this mean for Ecuador, assuming they adopt the Chilean model? First off, it suggests that nationalization of existing mines isn't in the cards. Now, if you look at the recent mining draft as it relates to property rights, the law creates a more limited form of property right. Put that together with the reversion to the state of unworked mineral claims, and you have a post 1992 Chilean situation starting to take shape.

What this means is that resources under state control will be available for joint venture on a commercial basis, including a proportional share of profits. So, ultimately the success of ENMINCO depends on its willingness to operate on an equitable basis with potential future partners. From an exploration point of view, this takes out some of the risk, as you have a ready buyer for any discoveries made, contingent on a fair market price of course. From a producer's point of view, you get the financial participation and expertise of a strong partner with good access to government, similar to the Crown Corporation model we have in Canada.

All of this depends on ENMINCO following best practices from a corporate perspective, and on developing the expertise needed to be a credible JV partner - an ongoing proccess of learning from your partners and adopting their skills. A kind of technology transfer on the Japanese model, if you will. Existing operations that need financing to proceed to production can probably obtain that from ENMINCO, which may, or may not, include some form of equity participation. I'm not convinced this will be forced on anyone though. "There could be exceptions" pretty much tells me there will be.

If I've understood these people correctly, they do want a mining industry. They just don't want a Serra Pelada/Deadwood scenario playing out on their turf. From their perspective, the Chilean model is probably the best way forward. It keeps control in state hands, without overly-limiting participation by the private sector. In other words, a national mining agenda that supports private investment. If it works in Chile, there's no reason it can't work in Ecuador.

Anyway, that's the best spin I can put on it, although it's not really spin. It's what I would do in their shoes, given their history and politics.

ebear