The decree was issued June 26 and published in the official Gazette July 6.
Industry representatives say the change will generate uncertainty and may even affect negotiations between the Ecuadorian government and private companies aimed at allowing large scale mines.
“This change generates total uncertainty because it is unexpected and affects juridical security. Companies need legal certainty,” said Santiago Yepez, President of Ecuador’s Mining Chamber.
Mr. Yepez added that there are concerns from mining companies and investors with the new regulations which he called, “an unnecessary bureaucratic procedure.”
Last month INV Metals Inc. (ILNLF, INV.T) announced an agreement with IAMGOLD Corp. (IAG, IMG.T) to acquire the Quimsacocha gold-copper-silver deposit, located in southern Ecuador.
Jorge Barreno, general manager of IAMGOLD in Ecuador, said the company will ask for the authorization to complete the transaction with INV Metals.
“If there is a reform, we must meet the new dispositions,” Mr. Barreno said.
Ecuador expects to start large-scale mining production in 2014, but so far has only signed one production contract for Mirador, a large-scale copper mining project, operated by Chinese-owned Ecuacorriente.
Currently the country is negotiating with Canadian gold mining company Kinross Gold Corp. (KGC, K.T) to allow the company to mine in Fruta del Norte, the largest gold deposit in the country.
The main obstacle to reach an agreement with Kinross seems to be the 70% windfall tax and the mineral base price on which to apply that tax.
“If we can minimize the impact of this tax, we can reach an agreement,” Canada’s ambassador in Ecuador, Andrew Shisko, said in a broadcast interview Thursday.
He said one solution would be for the government to give mining companies a five-year period before starting to collect the tax to allow companies to recover their investments.
Mr. Shisko said he is confident both sides will reach an agreement “within the next six weeks.”
“If we succeed with this contract other Canadian investors [will be] interested in coming to Ecuador. If no agreement is reached it will have important implications for the mining future,” the ambassador said.
Officials from the Ministry of Non Renewable Natural Resources couldn’t be reached for comment.
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