Last week, Ecuador's government tried to downplay the passing of the mining mandate that robs companies of most of their concessions and puts a halt on activity. On Tuesday, Aurelian Resources Inc. went ahead and laid off most of its workers.

Looking ahead, Haywood Securities analyst Eric Zaunscherb considers it a positive that the government is still pro-mining, and has reduced his probability of "total expropriation" of projects to 10% from 50%. As a result, he raised his target on Aurelian to $3.60 to $1.40.

However, he still thinks the political risk in Ecuador is extreme, and that any statements by the government should not be taken at face value since the constituent assembly, which passed the mandate, is clearly calling the shots (rather than President Rafael Correa).

"We hope that this risk will diminish as the new mining law is drafted by the ministry, passed by the constituent assembly's resource committee, and passed by the citizens of Ecuador in a referendum. Unfortunately, we still see considerable risk that the fairy-tale ending will not materialize," Mr. Zaunscherb wrote in a note to clients.

Tom Meyer, an analyst at Raymond James, has a more positive outlook. He expects a "reasonable" positive outcome in Ecuador in the next six months or so, and is assuming a 40% income tax rate and a 3% royalty will wind up in the minerals law.

"In our view, this is politics playing out in the press and although we are far from a certain outcome, as a whole we are constructive on the country based on our view that the potential for mining industry investment is too high for the voters and the politicians to ignore," he wrote in a note.

Mr. Meyer, who covers Corriente Resources Inc., has gone way against the grain and actually upgraded the stock to "outperform" from "market perform" and raised his price target to $6.00 a share (from $5.00). He maintained that Corriente is an attractive takeover target despite the uncertainty in Ecuador, and that a deal could occur in months, or potentially take a year or longer.

Peter Koven