Article 1
The extinction is declared with no economic compensation for those mining concessions in exploration phase that have no made any investment in the development of the projects to 31 December 2007 or have not presented the respective environmental impact study or have not completed the processes of prior consultation, including those that are pending an administrative resolution.

Article 2
The lapse of mining concession is declared that have not paid the conservation patents in the time established by the Mining Law, which is to say by 31st March of every year paid in advance as from 2004.

Article 3
The extinction is declared with no economic compensation mining concessions granted inside protected natural areas, protected forests, buffer zones defined by the competent authorities, and those places that affect sources and provision of water.

Article 4
The extinction is declared with no economic compensation for those mining concessions that in number greater than three have been granted to a single person or their spouse, or to judicial persons and their related companies, be it via the direct participation of the judicial person, or its shareholders and their family members up to the fourth grade of blood and second of affinity.

Article 5
The extinction is declared with no economic compensation for all mining concessions granted to functionaries and ex functionaries of the Ministry of Natural Resources, Ministry of Energy and Mines, Ministry of Mines and Petroleum or their immediate family up to the fourth grade of blood and second of affinity, due to the use of privileged information for their personal interest.

Equally made available is the lapse of concessions currently held by third parties that were the product of transfers originally granted to functionaries and ex functionaries of the Ministry of Natural Resources, Ministry of Energy and Mines, Ministry of Mines and Petroleum or their immediate family up to the fourth grade of blood and second of affinity.

Article 6
The moratorium is declared of the granting of new concessions from the date of approval of this decree (mandate) and until the new legal and constitutional framework becomes law. As a consequence, the National Government, via its Ministry of Mines Petroleum, is required to temporarily halt all pending solicitations for new mining areas. The Ministry of Finance is required to transfer the necessary monies so that the values paid for solicitation fees are returns to the soliciting parties.

Article 7
Non-metallic and construction materials mining concessions that are not covered by the cases described in articles 1, 2, 3, 4 and 5 of the present decree (mandate) may continue their activities, but are obliged to renegotiate their ownership titles according to the new legal framework that regulates their activity.

The state, as owner of mineral resources, has the preferential right of free advantage of construction materials that conform to environmental regulations and others that are of effect according to the Ministry of Mines and Petroleum.

Article 8
Activities are suspended in all metals mining concessions that are not covered by the cases described in articles 1, 2, 3, 4 and 5 of the present decree (mandate), until the approval of the new mining framework that regulates this activity and redefines operational conditions.

Uniquely end exclusively, the metals mining concessions that at this date are in exploitation and are not engaged by the first part of this article will continue their activities, but are obliged to renegotiate their titles under the conditions of the new legal framework.

Article 9
The new legal framework mentioned in this decree (mandate) must be expedited 180 days after the approval of this decree (mandate).

Article 10
Small scale mining concessions, artisan mining, subsistence mining and mining concessions operated by co-operatives, associations and correctly legalize mining condominiums will continue their activities, except those covered by Article 3 of this decree (mandate).

With prejudice to those mentioned in the previous paragraph, no natural or judicial person with titles to mining rights for small scale mining, artisan mining and subsistence mining can hold individual or conjoint titles that exceed 150 hectares of mines in production or have an exploitation volume of more than 150 tonnes per day

Article 11
The National Government via the Ministry of Mines and Petroleum will create the National Mining Company, which will be involved in all stages of activity, working under conditions of environmental preservation and respect of civil rights.

Article 12
The dispositions contained in this constitutional decree (mandate) are obligatory. As such they are not open to complaint, contestation, holding orders, demand, claim, recourse or any other administrative or judicial action. Neither does it give space to any ‘indemnization’.

Note the word “my” in that sentence, and be very clear that this is my translation and not one done by a sworn translator. I am confident about my level of Spanish, I’m personally happy that this English version accurately reflects the original Spanish document and I am confident in its accuracy, but I would strongly suggest you got a second opinion about the translation before making any decisions based upon it. When it comes to interpreting the “mandato”, you need to seek professional legal advice, because what now follows is my own personal interpretation of matters.

So here’s a little rundown of how I believe these articles affect Aurelian.

Article 1: Doesn’t apply. ARU is up to date and clean as a whistle.

Article 2: Doesn’t apply. No worries here.

Article 3: Doesn’t apply, according to all reports and previous documentation concerning Aurelian’s geographical location.

Article 4: This one affects Aurelian. At time of writing, ARU holds 38 concessions that make up the entire “El Condor” location. The law says that ARU must cut this number to just 3 concessions. The negotiations on this are to be with the Ministry of Mines and Petroleum and apparently have to be concluded in the next 30 days.

My personal take on this article 4:

<!--[if !supportLists]-->1) <!--[endif]-->ARU will keep Fruta del Norte (FDN), that one is clear as a bell. If push comes to shove and the stripping of 35 concessions actually takes place (which is debatable at this time) ARU will choose 2 other concessions that show the best promise (there are a couple of concessions that are more promising, according to all sources).

<!--[if !supportLists]-->2) <!--[endif]-->The proposed concession stripping is a rather vague idea, legally speaking. If miners such as ARU decide to play hardball on this they will have a very good case for breach of contract with the state, as long as the concessions were originally granted in a transparent and morally correct way (see article 5).

<!--[if !supportLists]-->3) <!--[endif]-->This article, (along with articles 1, 2 and 5) is obviously directed at the so-called “concession squatters”, i.e. those people who have been given or paid very little for a whole swathe of concessions and have done little to move then forward. The vast majority of these concession squatters are Ecuadorian nationals who are part of the old boys' club of corruption that has plagued the country for decades. Remember that as of last week there were over 4,000 concessions granted in Ecuador that covered over 12% of the country’s surface area. It’s clear that many of these concessions were corrupt agreements between previous governments/authorities and their friends. Companies like ARU are being damaged here (at least in theory, see point 2), but are being hit somewhat on the ricochet.

Article 5: Doesn’t apply to Aurelian (according to all previous documents and reports)

Article 6: Doesn’t apply

Article 7 : Doesn’t apply to Aurelian. This article is specifically about extraction industries that supply the construction trade (e.g. raw materials for cement, bricks, gypsum plaster etc)

Article 8 : Applies to Aurelian. This article comes in two parts, and needs careful analysis. The first paragraph says that ARU has to down tools and do nothing at its project until the new law is framed. The second paragraph talks about exceptions to this, and says that these exceptions can continue working.

My interpretation on Article 8: I have been informed that the exceptions in paragraph two are specifically five private mines currently producing gold etc. These mines are also mentioned at the end of this article in El Comercio today (if you read Spanish, it is a good background article on the process, too). However, I would like to clearly state that the very carefully chosen wording makes it absolutely clear that Aurelian will be allowed to continue working if it chooses to do so, and it matters not what the intention of the Assembly really was here. ARU is clearly exploiting its property, as understood by the word “explotación” in Spanish. This is a clear legal loophole, and the only question I have is whether this door was left open accidentally or deliberately by the assembly members.

However, it does raise the question of whether ARU will decide to take advantage of this loophole. There are many permutations, but three basic scenarios are:

<!--[if !supportLists]-->1) <!--[endif]-->ARU plays hardball, continues work on site, points to article 8 clause as justification. Government accepts this position.

<!--[if !supportLists]-->2) <!--[endif]-->ARU plays hardball, continues work on site, points to article 8 clause as justification. Government cries foul, begins to make life difficult for ARU.

<!--[if !supportLists]-->3) <!--[endif]-->ARU does not want to antagonize things and stops work for next 180 days.

Article 9 : Worth mentioning here that the 180 day period is a maximum period. If nothing happens when the 180 days are up the individual company (e.g. ARU) has the right to directly deal with the Ministry of Mines and Petroleum and come to an agreement.

Article 10 : Doesn’t apply

Article 11 : Doesn’t directly apply

Article 12 : Doesn’t directly apply ; this is basically a bunch of legalese that says “this decree is law as from now”.

So there you go. Finally, here are a few things to consider:

Friday’s approved mandate was primarily aimed at locals who had taken advantage of previous lax laws to fill up on cheap or even free mining concessions to the detriment of the state. This is the group of people who have lost out, and it comes as no surprise to hear the squeals from the chamber of mining commerce. Some of the decree articles included foreign mining companies as targets, but by no means all of them However, the signal it has sent to world mining is very negative. It may or may not understand how much of a negative signal it has sent this week…a moot point. However bad this mandate seems to the world, I continue to believe that the government of Ecuador has the best interest of the state at heart and does not want to kill the nascent industry, an opinion backed up by statements from President Correa.

I’m long ARU, and took advantage of the prices on offer on Friday. This may colour my views. There is a lot of nerves in the market about all this, and even professionals are making drastic calls. I note that Haywood cut ARU to “sector underperform” before the final vote on Friday, and I’ve heard (though haven’t confirmed) that its analyst cut the price target from $13 to $6. This is crazy, a terrible judgement call from a professional analyst, and one that he will certainly regret in the future. Aurelian is not going to lose FDN. It is priced on FDN, and not the other concessions it may (or may not) lose. The government has gone out of its way after the vote to say that Ecuador still welcomes responsible mining. Even head of Assembly Alberto Acosta said that, “the new mining law will favor serious entrepreneurs, not the speculators.”

The worst case scenario for Aurelian right now is that it downs tools for 180 days then gets on with the job at FDN once that period is over. FDN is not an open pit mining operation which may be subject to a national referendum. From the outset Aurelian has had a socially responsible attitude and is a welcome player in its locality. This is light years away from the attitude of other mining companies such as Ascendant Copper (ACX) that are now getting their just desserts. So things really aren't that bad for Aurelian, no matter what the current market hype and political backlash commentary makes it sound like. ARU is an amazingly cheap buy right now. Hope you got some under $6.