ANDY HOFFMAN

March 4, 2009

TORONTO -- MINING REPORTER

Ten months after halting all mining development, exploration and construction, Ecuador is allowing foreign miners to get back to work. But the country's new mining law includes provisions that will entitle the state to more than half of a project's profits, a senior government official says.

Jose Serrano Salgado, Ecuador's vice-minister of mines, says Canadian mining companies including Kinross Gold Corp. and Iamgold Corp. can now resume developing their gold projects. Once they begin production, however, at least half the mines' profit must go to Ecuador.

"The state can not receive a smaller benefit than the benefit of the company," Mr. Serrano said in an interview.

Ecuador will derive its profit interest from a combination of taxes and levies. They will include a 5 per cent net smelter royalty, corporate income tax as well as a windfall profit tax.

"There are four main issues for the development of the projects in Ecuador. The technical aspects, the social aspects, the environmental aspects and the economic aspects," Mr. Serrano said.

Ecuador holds some of the world's largest untapped gold deposits including the Fruta del Norte deposit controlled by Toronto-based Kinross. Fruta del Norte is believed to contain more than 13 million ounces of gold.

Kinross chief executive officer Tye Burt said Ecuador's demands for at least 50 per cent of his gold project's profit was not unexpected.

"When we look at other jurisdictions in South America it is not out of line," Mr. Burt said in an interview.

In Chile, for example, Kinross pays approximately 52 per cent of the profits from its operations to the state. In Peru, taxes on gold miners are about 48 per cent, while in Brazil, they are roughly 49 per cent.

Despite the vast mineral wealth found there, Ecuador has been widely regarded as a risky place for foreign mining firms. There have been concerns that Ecuador and its president, Rafael Correa, could adopt similar policies to those enacted by president Hugo Chavez in Venezuela, where mining projects have been held up for years in bureaucratic stalling.

Ecuador's surprise decision to halt all foreign exploration and development work last April did little to calm investor anxieties. The country banned all mining activity while it developed its new mining law and expropriated scores of concessions from foreign mining firms.

With its new constitution and new mining law now passed Ecuador wants to let the industry know it is open for business. The Ministry of Mines and Petroleum believes that the largest mining projects will generate combined profits of more $150-million annually once they are in production. Not immune to the effects of the global economic crisis, Ecuador wants the mines to begin generating profit for the government's coffers.

KINROSS GOLD CORP.

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IAMGOLD CORP.

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