Ecuador Mining – 2023 Country Update
Ecuador is considered relatively untapped in terms of exploration. With only 10% of the country explored, Ecuador has incredible potential due to its location at the northern end of the Andes Mountain range. Ecuador is estimated to have sizeable reserves in numerous minerals but it is gaining a reputation for its world-class copper and gold deposits.
The Ecuadorian Mines and Energy Ministry recently said that the government expects to generate over $4 billion in annual mining exports by 2025 with 4 new operations coming into operation before the end of President Guillermo Lasso’s term in 2025, including the Cascabel project, held by Australia’s SolGold.
Although there is a lot of excitement, the road to becoming a full-fledged mining jurisdiction is still not guaranteed. The country is facing challenges from environmentalist, lack of clear environmental regulations, permitting, and illegal mining. Below is an overview of the most recent updates on the development of Ecuador’s mining sector.
Current Situation – Projects
The country already has two large-scale mines in production – Fruta del Norte owned by Lundin and Mirador by a Chinese consortium. Both mines are the main sources of Ecuador’s mineral exports for copper and gold. This will change over the next two year though with projects advancing to the construction phrase.
|Fruta del Norte||
In February, the Energy and Mines Minister, Fernando Santos, stated that he expects pre-construction works to begin at the Cascabel and Curipamba mining projects by the end of the year, and construction to kick off in 2024.
There is excitement about Ecuador but the country is facing challenges. Whether Ecuador is able to move the mining sector to the next stage of maturity will largely depend on how the government manages specfic pressures that the industry is currently facing. Currently, the mining industry is the 4th largest export but it could easily become the largest if projects can advance to production. This will make the sector one of the largest tax contributors to the state coffers.
Some of the specific issues the country is dealing with includes –
Environmental groups seeking a referendum to curb metallic mining in Ecuador’s Chocó Andino region, northwest of Quito, expect it to take place no later than the second half of 2023. Chocó Andino is an area rich in biodiversity that in 2018 was declared a biosphere reserve by Unesco. There are some early-stage concessions granted in this area but the only notable projects being affected is the Loma Larga project which sits just outside of the protected area.
Illegal mining has also grown into a national issue. In recent years, legal concessions have suffered attacks and the burning of camps. It is of such magnitude that recently the government declared illegal mining a threat to national security and indicated that it will support legally established mining concessions. The government will contribute resources to reduce illegal mining and protect legal concessionaires.
Lastly, Ecuador is advancing legislation on indigenous consultations. A decree was announced in November of last year that regulates pre-legislative consultation, a step prior to the environmental consultation that is required before proceeding with construction. Mining players expect the pre-legislative consultation to unlock projects and reduce risks of legal action. Several of the pre-legislative consultation will wrap up this year for the projects listed above. We will not need to keep an eye on because it could siginal if there is trouble that will further delay projects.
Ecuador has done a great job of turning around the industry since 2015 and is now starting to see the benefits with 2 projects in production and some world class discoveries that should be built over the next few years. The Ecuadorian government is predicting a total investment of around US$11bn for the construction of seven mines that are expected to go into production in the next few years.
There are 4 project that are currently advanced enough to start operations before 2025/26. La Plata, Curipamba, Cascabel projects are expected to start construction first, with msot prediciting in 2024. Loma Larga could not be far behind if it can overcome judicial procedures and consultations.
There is still significant work that needs to be done by both the government and private industry to overcome some of the challenges around community opposition, indigenous rights, and illegal mining. This could be a pivotal year for the mining sector in Ecuador with projects advancing and companies committing to construction start dates.
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