POLITICAL ECONOMY

Ecuador vows mining reforms will pave way for major contracts

The country does not have a large-scale mining industry, but it has huge copper, gold and silver deposits, and President Rafael Correa wants to attract investment to reduce the economy's dependence on oil exports.

QUITO (Reuters) - 

Ecuador is preparing mining reforms that should pave the way for the signing of contracts with several investors, including Canada's Kinross, the South American country's top mining official said on Thursday.

Ecuador does not have a large-scale mining industry, but it has big copper, gold and silver deposits, and President Rafael Correa wants to attract investment to reduce the economy's dependence on oil exports.

In March, Correa signed the nation's first large-scale mining contract, under which Chinese-owned Ecuacorriente is due to invest $1.4 billion in the El Mirador copper project.

However, negotiations with Kinross Gold Corp over its $1.3 billion Fruta del Norte gold project are well behind schedule, in part because OPEC-member Ecuador is trying to reap high benefits from the nascent sector.

A Kinross executive said last month that Ecuador's government had vowed to amend its mining law, which makes the signing of a contract more likely.

"The bill will be ready in the next few weeks so that the president can analyze it and send it to Congress if he thinks it's right," the minister for non-renewable natural resources, Wilson Pastor, told reporters.

He said the bill will include two reforms, one that will delay the coming into force of a windfall tax until miners recover their investments and a second that will set a ceiling on mining royalties.

Under existing law, miners have to pay a minimum of 5 percent in royalties, but the law does not state a maximum.

"We'll set a rule in the mining law that will set a range for copper, gold and other minerals ... a minimum and a maximum," Pastor said, adding that the reform would bring more certainty to mining investors.

The ruling Alianza Pais political coalition does not have a majority in Congress, so opposition parties could block the bill in a bid to hurt Correa's government as the country heads to a presidential election scheduled for February next year.

"We're negotiating with Kinross intensively. Our timeline calls for negotiations to end in August, and a contract would be signed in September or October," Pastor said.

The Toronto-listed company signed a tentative agreement with Ecuador in December but later said it wanted to renegotiate the deal in a bid to obtain a more favorable package of taxes and royalties.

The government has said the agreements with Ecuacorriente and Kinross would be a model for future deals, which should allow Ecuador to develop a large mining industry.

Ecuador also plans to negotiate contracts with International Minerals over its Rio Blanco gold-silver project, with Ecuacorriente over its Panantza-San Carlos copper deposit, and with IAMGold, which plans to develop the Quimsacocha gold-copper-silver mine.

IAMGold has agreed to sell Quimsacocha to INV Metals Inc in exchange for a stake in the company.

Those three are in relatively advanced stages of exploration, but junior miners have about 15 other exploration projects under way.

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