UPDATE 4-Ecuador freezes mining exploration, boosts control
Fri Apr 18, 2008 6:33pm EDT
reuters.com
(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) |
