Ecuador Begins Talks With Mining Companies On New Law
7:15pm ET (Dow Jones Newswires)
QUITO -(Dow Jones)- The Ecuadorian government Monday began meeting with mining sector representatives to define new Mining Law principles and the concession areas in which each company will operate, following the Constituent Assembly's recent revocation of thousands of concessions and suspension of others for 180 days.
On April 18, the Assembly, which is acting as the nation's legislature, passed a decree that froze mining sector activity by revoking around 80% of mining concessions and suspending the other 20% for 180 days.
The Assembly also decided that each private sector mining company will be allowed to have only three concessions. The private companies affected will decide which concessions they will maintain.
When inaugurating the dialogue with the private companies, Oil and Mining Minister Galo Chiriboga said he hopes there will be consensus on the new law, but added that he recognizes there will be some disagreement. He didn't give further details.
Chiriboga hopes to send President Rafael Correa a draft of the new law in May. He and other mining officials met Monday with around 150 representatives of private mining companies.
Dominic Channer, president of Aurelian Ecuador, a unit ofAurelian Resources Inc. (ARU.T), told journalists that mining companies operating in the country will make sacrifices to wait for the new law.
"That is very hard for us because we have to reduce activities, and it will postpone the beginning of our project Fruta del Norte," Channer said of the 180-day period in which mining companies will wait for the new law. The Fruta del Norte project is an important gold-silver deposit in southern Ecuador.
According to Channer, Aurelian had originally planned to invest around $40 million in 2008, but those plans have been put on hold during the drafting of the new law. The company, which has 39 mining concessions in Ecuador, has invested around $50 million in the Andean country between 2001 and 2007.
Local units of Corriente Resources Inc. (ETQ), Aurelian Resources Inc., International Minerals Corp. (IMZ.T) andIamGold Corp. (IAG), among others, have mining concessions in Ecuador.
According to Ecuador's mining chamber, the Andean country will scare away investment that it estimates could be worth some $2.0 billion. According to the chamber, the country will also lose $1.7 billion in projected taxes as a consequence of the Assembly's decree.
Ascendant Copper's general manager in Ecuador, Francisco Ventimilla, said mining companies have lost about $850 million in stock market capitalization brought about by a drop in stock prices after the Assembly's decree.
One of the main aspects of the new law will be royalties for the state and for communities where the mining projects are developed.
-By Mercedes Alvaro, Dow Jones Newswires; 5939-9728-653; mercedes.alvaro@dowjones.com
(END) Dow Jones Newswires
04-28-08 1914ET
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