Ecuador
Q&A
Ecuador can become 'one of the most significant mining players in South America'
Bnamericas
Published: Monday, November 11, 2024
Copper
Prospecting, exploration and extraction of mineral resources
Gold
Exploration / Drilling
Mining Companies
Ecuador can become 'one of the most significant mining players in South America'
The announcement of the start of early work at the US$250mn Curipamba copper-gold mine in the latter part of year and the beginning of construction of the operation in 2025 has revived hope about the future of the industry in Ecuador.
Curipamba is a medium-sized mining project being developed by Canadian companies Silvercorp and Salazar Resources and is located in Bolvar province in central Ecuador.
It will be the third industrial-scale mine in the country after the Mirador copper operation and the Fruta del Norte gold mine, and it is expected to pave the way for other projects such as La Plata and Loma Larga in the next two years, and later for other large initiatives such as Cascabel, Warintza and Cangrejos.
BNamericas speaks with Carolina Orozco, chair of the Ecuadoran chamber of mines, about the current situation, as well as the expectations for the mining sector next year and the challenges it will face.
BNamericas: What is the main strength of the mining industry in the country at the moment?
Orozco: The main strength is that we're a fundamental pillar for the national economy and also for local economies.
We continue to increase exports. For example, in 2023 total exports from the mining sector were US$3.32bn and mining generated US$762mn in tax revenue, including general and sectoral taxes, and royalties.
According to current law, 60% of mining royalties must be reinvested in the territory where the ore was extracted to close the social gaps in those communities. By the end of 2023, we had created more than 150,000 direct and indirect jobs.
Mining projects are often located in economically depressed areas, so the impact isn't just numerical, but also affects the quality of life of the communities.
BNamericas: What are the challenges that Ecuadoran mining will face in 2025?
Orozco: We're in a pre-election period, although this entire government is pre-election. [Editor's note: After early elections, President Daniel Noboa took office in November 2023 to complete Guillermo Lasso's term and hopes to be re-elected next February.]
We're about to enter the campaign and there's uncertainty regarding who will take charge of the country and, therefore, what policy will be adopted regarding mining.
Usually, in electoral campaigns, mining is often misused as a political platform, when in reality our sector is a development platform, and development has no ideologies.
A major challenge for the mining industry is to have a state policy, independent of the government, that responds to the national interest and has clear short-, medium- and long-term goals.
Another challenge is to have political stability in the country, which provides certainty to investors, not only in the mining sector but in all industries.
So close to the elections, we believe that it's essential that each candidate's government plan include a chapter on mining, in order to understand what their vision is regarding this sector, which is so important for the local and national economy and development – to understand how they're going to plan mining development, how they're going to confront and combat illegal mining, how they're going to support legal security for all types of investments in the country, and how they're going to overcome the acute electricity crisis that we're going through.
BNamericas: What do you forecast for investment in the mining sector next year, where will it go?
Orozco: Construction of the Curipamba mine should begin next year. EcuaCorriente is in talks with the government for the expansion of Mirador and, if an agreement is reached with the government, resources will begin to flow for this expansion.
The construction of Curipamba is expected to take two years, so there will be a great dynamizing effect on the local economy.
We also hope that construction will begin on La Plata and later on Loma Larga. However, we'll have to see how the projects progress.
BNamericas: What is the current perception of investors regarding mining in Ecuador?
Orozco: I think the perception of investors who are currently in the country is positive. The fact that we're going to have a new government, although full of uncertainty, is also positive because we're going to have stability, which we haven't had in the last three years. Knowing that there will be political stability is a relief for investors.
As a chamber, we've spoken with candidates for the presidency and the national assembly, with those who would be the most likely candidates according to external monitoring companies, and they all agree that mining is no longer just an option, it's the present and the future of the country and a fundamental pillar for the economy and also for security.
It remains to be seen how the next government, through public policy, will address the challenges facing the mining industry.
BNamericas: From a legal perspective, what are the main challenges that could arise for the sector in 2025?
Orozco: The national assembly is still pending compliance with the constitutional court ruling and the issuance of the law on prior, free and informed consultation, and the law on environmental consultation.
However, we must remember that the constitutional court itself said that, without prejudice to the enactment of the law, the government must carry out these two types of consultations because the non-existence of a law cannot violate citizens' rights.
Although both consultations can and should be held, a law will always provide greater legal certainty. This is one of the challenges that the new assembly will have to deal with.
Another challenge from the legal perspective will be the organic law on water resources.
If we talk about the current mining law, there are obviously things that can be improved both in the law and in the different regulations that govern the sector. For example, in terms of environmental permits, we ask that they be more expeditious, more agile, but not more lax or flexible.
We're not asking for less control, but for more agility in issuing permits. According to the law, an environmental license must be issued within six months. In practice, it is issued within five years.
We hope that this regulatory issue can be corrected during the remainder of this government or during the next one.
BNamericas: Could the start of construction of Curipamba attract greater interest in mining in Ecuador?
Orozco: The start of construction will undoubtedly be a very positive development for the mining industry. Investors are very excited about the start and the fact that there's a new industrial mine.
It must be taken into account that the construction of a mine always involves a series of difficulties. When there is the first production, we can really say that we have another mine, but actually starting construction is a big step and Curipamba has already started the early works.
Once this mine, which will be the third industrial mine in the country, is in production, there will be a better scenario for mining, because talking to communities about something that will happen is very different from talking to them about something that's already tangible, that stimulates the economy, that creates and maintains sources of work, that improves the quality of life of the communities.
Ecuadorans' perception of mining is changing positively, but there's still a lot of work to be done.
BNamericas: Taking into account the large projects that will come later, can we expect Ecuador to be a mining jurisdiction in the next decade?
Orozco: Of course. In fact, I think that Ecuador is already an important player in the long-term strategy regarding the global supply of critical minerals, including copper. We have large unexploited copper deposits, still underground.
Copper is one of the minerals with the highest demand and it's seeing one of the biggest deficits for the global strategy of energy transition and decarbonization. Several countries around the world have set decarbonization goals that they won't be able to meet due to a lack of sufficient mineral supply.
Countries like Chile have already exploited deposits, old deposits. We, on the other hand, have new deposits and that's where we can have a role. In the long term we can be one of the most significant players in South America.
BNamericas: What about exploration? Is there no new exploration or discoveries in Ecuador?
Orozco: There's no new exploration because the mining registry is closed and that means not bringing in new investment, not granting new exploration concessions, which is also very serious.
(But now the registry is being opened)
We have projects that are moving towards mine construction, but we also need new projects and fresh capital to be injected into exploration.