ACTUALIZA1 interview-Ecuador-looking investment, mine exploration

26/6/2008 - 19:36 (GMT)

By Enrique Andres Pretel

QUITO (Reuters) - Ecuador will boost mining activity with a new law to lift the existing restrictions on exploration, although increased state control in the sector with demands for investment and environmental protection, said the undersecretary of Mines, Jose Serrano.

The leftist president Rafael Correa in April suspended activity on the nascent mining industry to adopt new legislation in September with a mandate that aroused fears among businesses because limited to three exploration concessions, threatening their chances of profitability.

However, despite the fact that the agent seeks to increase public control over natural resources of the Andean country in key areas such as oil and mining, also needs to attract private investment to develop these activities that provide vital resources to the State.

"What is being established is a mechanism in which not limit the number of concessions for the exploration phase, but also a procedure to reduce the concession areas as and when it is done (that work)," said Serrano in an interview with Reuters.

The Executive with this measure seeks to end speculation that the delays had been assured place in the exploration phase under previous governments, when companies seeking large areas of prospecting and then resell them without making investments or production projects.

"The idea is that when finished the stage of exploration not have more than 50 percent of the area originally requested, and when you go to start the operational phase do not have more than 5,000 hectares," the official specified.

These terms are sufficient, according to industry experts, who noted that a mine tends to occupy 500 hectares and that reducing the areas of exploration is a common practice in other mining countries.

In addition, the Government will harden the conditions for the award and maintenance of the areas granted, forcing companies to invest minimum per hectare per year in its concessions, whose duration will be between 25 and 30 years renewable as compliance with the plan presented.

Serrano said that the point remains to be defined in the law is to royalties, which could be based on operating profit but that companies expect to be applied on net sales.

Industry sources noted that the general terms of the law seem reasonable and that could boost alicaída investment by mining firms in the Andean country, including Canadian companies as Iamgold, Aurelian Resources and Corrientes.

(Por Enrique Andrés Pretel, editado por Patricia Vélez) (By Enrique Andres Pretel, edited by