Aurelian Resources Was Stolen By Kinross and Management But Will Not Be Forgotten
The company whose shareholders were better than its management
Message: From Otto...
Saturday, June 28
The new mining law was supposed to be published yesterday, according to the announced timetable Minister of Energy and Petroleum, Galo Chiriboga. So the fact that it hasn't been published yet seems to have got a lot of investors up North a bit antsy (judging by my inbox anyway). Best advice is "relax dudes", cos this is South America we're talking, ok?
In the meantime, your diligent Otto has scoured and grilled his finest sources and come up with the following list of ten things that are part of the new mining law story. Most of these are 100% confirmed, and a few bits are "most probables". I have heard other bits and pieces, but I'm not putting suppostions into this list (and they tend to be the minor-ish details, anyway). So here we go:
1) The law is ready. Correa has inspected it. It will be published "any day now" (sorry, can't get better than that).
2) The "three concession maximum" rule has been scrapped. In its place there is a mechanism that will allow a larger concession area in the exploration phase, but when the company begins focussing on particular areas of its concession, the unused areas will lapse. By the time the miner is actually producing, its total concession area will be reduced to 5000 hectares approx. This sounds like a good idea to me...it allows the explorers to do their job correctly, and then it allows the gov't to take back what isn't wanted by the company at a later stage.
3) The concessions that have been taken back by the gov't in the last few months will be submitted to tender again. The companies that lost the concessions can bid for them again, but on equal terms with other bidders. This is different from previous information I received, that said the ex-holders would get first refusal.
4) The concessions will have a 25 to 30 year time limit. They will also be subject to a 10 year "use it or lose it" clause.
5) There will be no forced joint venture with the state. That is 100% confirmed, I'm happy to say.
6) The law will be ratifed and enter into active operation in September 2008, almost certainly before Ecuador votes on its separate draft constitution. The mining law will be passed into law by the interim "Congresillo". In real terms, this means miners can get back to work in two months' time. Not the best situation, but by no means the worst either.
7) The environmental controls will be strict by world standards. This will be a main promotion point of the national gov't to its people. The gov't will be making very strong noises about the severity of environmental controls that miners will have to abide by, and the penalties/immediate closures they would suffer by breaking these laws. However for responsible modern, medium and large scale mining, these regulations will not be too difficult to comply with successfully.
8) The state mining company will be set up from scratch before the mining law becomes active. It will concentrate on non-metallic mining only (e.g. cement, clay, brickworks etc).
9) Royalties will be due on gross product. The limit on royalties is either 5% or 6% (I cannot confirm that, but 6% is the most probable). There is no windfall tax in the new law.
10) There will be mandatory minimum investments to be made on all concessions. If those minimums are not met, the concession is lost.
So the bottom line here is: VERY GOOD. This framework is better than my "worst case" scenario postulated last week, and if we remember that even under the worst case miners such as my favourite Aurelian (ARU.to) would still make it as going concerns, this means the new law will be greeted with relatively open arms by a sector in serious need of reassurance. Things are looking good, dudes.
But before you start high-fiving your dog and shouting "to da moon Alice", let's be clear that the law has to get through the legislative process first. No fat ladies singing yet. But there's little doubt that the publication of the new law will be viewed as a positive for the industry and for those companies with Exposure to Ecuador. The usual caveats apply to all the above, yeah? We're all big girls and boys.
In the meantime, your diligent Otto has scoured and grilled his finest sources and come up with the following list of ten things that are part of the new mining law story. Most of these are 100% confirmed, and a few bits are "most probables". I have heard other bits and pieces, but I'm not putting suppostions into this list (and they tend to be the minor-ish details, anyway). So here we go:
1) The law is ready. Correa has inspected it. It will be published "any day now" (sorry, can't get better than that).
2) The "three concession maximum" rule has been scrapped. In its place there is a mechanism that will allow a larger concession area in the exploration phase, but when the company begins focussing on particular areas of its concession, the unused areas will lapse. By the time the miner is actually producing, its total concession area will be reduced to 5000 hectares approx. This sounds like a good idea to me...it allows the explorers to do their job correctly, and then it allows the gov't to take back what isn't wanted by the company at a later stage.
3) The concessions that have been taken back by the gov't in the last few months will be submitted to tender again. The companies that lost the concessions can bid for them again, but on equal terms with other bidders. This is different from previous information I received, that said the ex-holders would get first refusal.
4) The concessions will have a 25 to 30 year time limit. They will also be subject to a 10 year "use it or lose it" clause.
5) There will be no forced joint venture with the state. That is 100% confirmed, I'm happy to say.
6) The law will be ratifed and enter into active operation in September 2008, almost certainly before Ecuador votes on its separate draft constitution. The mining law will be passed into law by the interim "Congresillo". In real terms, this means miners can get back to work in two months' time. Not the best situation, but by no means the worst either.
7) The environmental controls will be strict by world standards. This will be a main promotion point of the national gov't to its people. The gov't will be making very strong noises about the severity of environmental controls that miners will have to abide by, and the penalties/immediate closures they would suffer by breaking these laws. However for responsible modern, medium and large scale mining, these regulations will not be too difficult to comply with successfully.
8) The state mining company will be set up from scratch before the mining law becomes active. It will concentrate on non-metallic mining only (e.g. cement, clay, brickworks etc).
9) Royalties will be due on gross product. The limit on royalties is either 5% or 6% (I cannot confirm that, but 6% is the most probable). There is no windfall tax in the new law.
10) There will be mandatory minimum investments to be made on all concessions. If those minimums are not met, the concession is lost.
So the bottom line here is: VERY GOOD. This framework is better than my "worst case" scenario postulated last week, and if we remember that even under the worst case miners such as my favourite Aurelian (ARU.to) would still make it as going concerns, this means the new law will be greeted with relatively open arms by a sector in serious need of reassurance. Things are looking good, dudes.
But before you start high-fiving your dog and shouting "to da moon Alice", let's be clear that the law has to get through the legislative process first. No fat ladies singing yet. But there's little doubt that the publication of the new law will be viewed as a positive for the industry and for those companies with Exposure to Ecuador. The usual caveats apply to all the above, yeah? We're all big girls and boys.
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