(AMM) Miners cautiously optimistic about Ecuador mining law


New York 22 July 2008 17:40

Mining exploration companies with holdings in Ecuador are cautiously optimistic that a new mining law will be passed by the end of a 180-day mining suspension.

The draft of the new law was completed June 27, but it will be reviewed amid a very full political calendar-including a constitutional referendum that will be announced Aug. 21 and likely take place Oct. 21-that may not progress according to schedule.

General elections also will be held, with results to be announced March 10, 2009. Newly elected lawmakers are scheduled to begin work April 26 and the new president will take office May 3 next year.

Ecuador's constitutional assembly said April 18 that it was suspending all mining activities in the country for 180 days, until mid-October, while a new mining law was being written and mining concessions were being reviewed.

The country's president, Rafael Correa, said the move was necessary to end the abuse of the country's mining system, alleging that many companies were obtaining concessions for speculative purposes rather than for actual development.

Companies have not been compensated for losses tied to the revocation of 4,605 licenses by the constitutional assembly and the suspension of work since the April 18 announcement. Some companies were not required to suspend all of their activities because they were not located in environmentally sensitive zones and their projects were pre-approved by local communities. Many of the projects suspended were close to the production phase, sources said.

"The president is committed to responsible mining. They do have an intention of passing the law as soon as possible and we believe that that's completely sincere," said a spokeswoman for Toronto-based Aurelian Resources Inc. "In the meantime, we acknowledge that there's a lot going on over the next six months to a year and there's many potential times or steps along the way where things could get derailed or delayed, and it has nothing to do with the intention of the government. They've expressed their intention to pass the law as soon as possible and we believe them."

What remains most unclear to companies like Aurelian is whether an interim legislative body will be installed by mid-October in time to vote on the mining law before the 180-day suspension expires. If not, "there would be no way for the government to pass the mining law," Aurelian said. "When they begin work is really critical."

It still hasn't been determined how many people will be in the interim body, how they will be appointed and when they will begin work.

"The timeline? We just don't have one. Probably by the end of August is what we're hearing," said a spokesman for Dynasty Metals & Mining Inc., Vancouver, British Columbia. The company has been able to keep its senior staff employed, including geologists. "We're three months away from going to production (at the Zaruma gold project)," he added.

What happens if no mining law is in place by mid-October remains unclear. "There's no clarity as far as what happens next," said a spokesman for Salazar Resources Ltd., Vancouver, British Columbia.

The various companies that met with Correa about a week after the announcement of the intention to create a new mining mandate have not met with him since. They have been meeting with his advisors, however, to give their input on the new mining law.

One source said that Ecuador is setting out new mining regulations and policies in order for its economy to benefit from the enormous potential of its wealth of mineral resources.