The South American country of Ecuador would like South African investment in its mining sector. Known as an oil producer, the country wants to develop its other non renewable natural resources as well.
“Ecuador is a small country with multiple natural resources,” pointed out the country’s Vice Minister of Mining, Federico Auquilla, in Johannesburg on Monday. “We’ve explored less than 5% of our territory.”
He stated that his country envied the scale of the contribution of mining to South Africa’s gross domestic product, and pointed out that mining is one of the bases from which Ecuador could develop, economically, socially and environmentally. “Mining, if done well, will contribute to the sustainability of the country.”
“Ecuador would like to develop large scale mining, as in South Africa,” he highlighted. “Ecuador is a land of opportunity for mining. We have great expectations that South African mining companies will be able to establish themselves in Ecuador. We will welcome you with open arms.”
In 2008 Ecuador adopted a new constitution, following several years of political and economic instability. This, in turn, led to the passing of a new mining law in late 2009.
These events resulted in the cancellation of some 3 000 mining concessions, while about 1 500 others were confirmed. A total of 1 764 concessions are now held in the country.
In Ecuador, all non renewable natural resources belong to the State. Resources, once identified, are auctioned in a public process. (Preliminary prospecting and exploration, not involving any drilling, does not require any authorisation or licensing.)
The concessions on offer are advertised in the national and international media and all foreign embassies in Ecuador are informed. The opening of the next round of bidding, for concessions in 28 areas of the country, will be announced in the next few weeks.
Companies can also enter the Ecuadorean mining sector by establishing partnerships or joint ventures with, or by buying out, companies that have been awarded mining concessions. Under the new mining code, foreign investment is allowed in the small mining sector – previously, this was not allowed.
Within six months of the declaration of the start of the exploitation phase of the project, the mining company must sign a mining contract with the State, which includes such things as the miner’s environmental management obligations. The term of this contract is the same as the term of the mining concession.
In terms of the law, 80% of the workforce on a mine must be Ecuadorean nationals, by implication allowing the importation of key skills. “We are very rich in [natural] resources, but we do not have the [human] resources to develop them,” said Auquilla. “That’s why we’re here [in South Africa].”
The tax burden on miners is a 22% income tax, a 12% profit tax that goes to the communities in the mining area, 12% value added tax, royalties not below 5% and, should commodity prices jump above a base price, a extraordinary income tax.
Even so, a total of five major mining projects – three gold, two copper – are due to be commissioned over the next couple of years, by companies such as Iamgold, Kinross Aurelian and International Minerals.
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