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Canadian mining stocks rise after Ecuador OKs new law

13/01/09

By Cameron French

TORONTO (Reuters) - Shares of Canadian miners with properties in Ecuador jumped on Tuesday after approval by Ecuador's assembly of a new mining law that could open the mineral-rich country wider to foreign investment.

While the law still needs to be ratified by Ecuador President Rafael Correa, mining companies said they were preparing to rehire workers and resume exploration work.

"It's a huge move forward. This allows the company to get back to its exploration and development," said Dan Carriere, vice-president of Vancouver, British Columbia-based Corriente Resources .

The company holds deposits in the Corriente copper belt in southern Ecuador, and said in December it was in talks to sell itself to a third party, a signal that foreign players were eager to get into the largely unmined country, said one analyst.

"They don't have a metal mining industry in the country, so they're looking for outsiders to come in and help with that," said Catherine Gignac, an analyst at Wellington West Capital Markets in Toronto.

"They're happy to give the resources as long as they get a fair shake for employment, taxes, royalties etc."

Ecuador's Assembly approved the new law late on Monday. It will bolster government control over the country's nascent mining sector and slap royalties on companies drilling its world-class gold, copper, and silver deposits.

Canadian miners have flocked to Latin America for its rich gold and base metals deposits, but with mixed results.

While Ecuador's socialist government seems set to embrace foreign developers, shareholders of miners Crystallex International and Gold Reserve -- which operate in Venezuela -- have seen their investments dwindle on worries Venezuelan President Hugo Chavez's government could revoke their gold concessions.

EXPLORATION BAN LIFTED

Ecuador's new mining law will also lift a nine-month government ban on exploration that hammered shares of miners when it was imposed last April.

Since then, the broader financial crisis and resource sector meltdown has reduced valuations further, but shares of companies active in Ecuador rebounded on Tuesday on optimism over the new law.

Shares of Dynasty Metals & Mining , which employed about 350 people in Ecuador before the exploration freeze, jumped 17.5 percent to C$3.90, while Toronto-based Iamgold , which owns the 3.3 million-ounce Quimsacocha gold deposit, climbed 7.8 percent to C$7.08.

Kinross Gold , the largest player in the region, rose 3.8 percent to C$21.19.

The company gambled on Ecuador last year, when it paid C$870 million for Aurelian Resources for its Fruta del Norte gold deposit, one of the world's best undeveloped finds with an inferred resource of 13.7 million ounces of gold and 22 million ounces of silver.

Kinross spokesman Steve Mitchell said the company will begin advanced exploration of the property once the law is finalized.

($1=$1.22 Canadian)

(Reporting by Cameron French; editing by Peter Galloway)

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