Ecuador Mining Law: Less Harsh Than Expected

Ecuador's new mining law won't be as harsh as the critics say, according to Mark Turner, analyst at Hallgarten & Co.

In a report on Friday, Mr. Turner said that comments from Ecuadorean mining and energy minister Galo Chiriboga last Monday gave the impression that the new mining law to be published on June 27, while tougher on environmental controls, will nonetheless provide a stable environment to foreign mining companies in the country.

Mr. Turner told clients that Mr. Chiriboga was very clear about the role of environmental and social matters in the new law and was quoted saying the wealth created from mining activity must benefit the development of the regions in which the mines operate.

Of particular note to foreign miners, were Mr. Chiriboga's comments on the "three concession limit." Having consulted with experts over the past few weeks, Mr. Chiriboga said a higher number of concessions may be allowed, but still "there will be a limit."

Mr. Turner also viewed positively a statement on Wednesday from vice-minister Jose Serrano that regional politicians as opposed to local communities – which in Mr. Turner's words are "under the influence of radical tree huggers" – will be the body directly consulted by national governments regarding issues like mining royalties, water rights and clean water rules and regulations.

And while a lot of royalties will stay with local communities not a word of any windfall tax was mentioned, Mr. Turner wrote.

Mr. Turner said:

All this is a long, long way from the death, doom and gloom stories fed to hapless investors by the panic-merchants masquerading as responsible analysts just a few weeks ago. So the mining community looks on course to be given a draft mining law that will be tough on the environmental regulations, but fair to the companies that wish to mine in the country.

His favorite stock in Ecuador is Aurelian Resources Inc. (AUREF.PK). The stock has been hammered in recent weeks, but with political and regulatory stability looking more likely, Mr. Turner said "the time has come to load the boat with Aurelian."

The analyst also said investors should consider Dynasty Metals and Mining Inc. (DMMIF.PK), Corriente Resources Inc. (ETQ) and IAMGOLD Corp. (IAG).