UPDATE 4-Ecuador freezes mining exploration, boosts control
Fri Apr 18, 2008 6:33pm EDT
(Adds mining ministry's statement in paragraph 6th)
By Alonso Soto
QUITO, April 18 (Reuters) - Ecuador froze all mining exploration in the
country on Friday and revoked hundreds of concessions, in a move that
will increase the leftist government's control over natural resources.
The decision by the government-controlled assembly suspends exploration
until a new mining law is approved aimed at boosting the state's share
of revenue. It says the law must be approved within six months.
Ecuadorean President Rafael Correa wants to rework mining, oil and
other deals to direct billions of dollars of revenue into state coffers
to pay for increased social spending.
The government estimates the country holds $130 billion worth of metal
deposits. Mining companies invest about $100 million per year in
Ecuadorean exploration, industry officials say.
The wide-ranging decree could hamper the country's growing mining
industry by delaying production plans and scaring away much-needed
investment, analysts and company executives said. Share prices of
Canadian miners operating in Ecuador plummeted sharply on Friday on
news of the decree.
The mining ministry said in a statement that it would deliver the first
draft of the mining law and project to build the state-run company on
Monday. However, it said a final version of the law could be ready by
late May.
Ecuador has no significant output of precious metals, but dozens of
firms are exploring for copper and gold, including Canada's Aurelian
Resources (ARU.TO: Quote, Profile, Research), Corriente Resources
(CTQ.TO: Quote, Profile, Research) and IamGold Corp (IMG.TO: Quote,
Profile, Research).
The three companies will be forced to halt operations in their
concessions.
Assembly head Alberto Acosta said the decree was "a historic victory"
and later told Reuters he will push a referendum to ban open-pit mining
for metals.
Friday's decree also limits mining holdings to three concessions per
company, and calls for revoking all their remaining concessions without
compensation.
A top mining ministry official said the ministry will call affected
companies for talks next week, and plan the suspension and revoking of
concessions.
"We have flexibility to apply the decree and interpret it in some
issues, but the suspension and holdings reduction is something we can't
undo," said the official, who asked not to be named because he was not
allowed to speak publicly.
Eric Zaunscherb, a mining analyst with Haywood Securities in Vancouver,
said the decree "was an ambush... and fraught with negative actions
that make Ecuador inhospitable to mining investment."
The 130-member assembly, which is rewriting the constitution and also
acting as the legislature, has the power to issue decrees that cannot
be vetoed by Correa. The assembly also ordered the creation of a state
mining company.
Correa said on Friday he supports mining, but wants better terms for
the state in future deals.
"It is absurd to say 'no' to mining," Correa told hundreds mine workers
from his balcony in the presidential palace. "This is about mining with
social, environmental and economic responsibility."
Workers worried about losing their jobs booed Correa during his speech.
(Editing by Christian Wiessner)
