Ecuador opens the door to new mineral exploration through state company

With a resolution from energy and non-renewable natural resources regulator Arcernnr, the Ecuador government opened the door for new mineral exploration by private companies through contracts with state-owned firm Enami EP.

Since January 2018, Ecuador has kept the mining cadastre – or registry – closed, so no new concessions have been granted to private companies since then.

The Arcernnr resolution, dated July 17, brings the exercise of preferential and first option rights that the state mining company has for new mining concessions in line with constitutional provisions and the current mining law.

The resolution also orders that Enami's areas of interest be mapped and that, subsequently, the concessions granted be registered.

With the resolution, Enami will be able to request new mining areas or access those in which the rights of the owners have expired.

With a budget of just US$3mn, financed through its own resources, the company cannot undertake exploration alone, which is why last year it began signing commercial agreements with private sector companies and has signed three such deals since September.

The agreements were signed with Canada’s Barrick, one of the biggest gold producers in the world; Hanrine, a local unit of Australia’s Hancock; and Canada’s Solaris Resources. Together, they are due to invest around US$170mn in exploration on 110,000ha.

The agreement with Hanrine is the only one that already had the areas mapped, Enami CEO Emmanuel Delaune said in a recent interview with BNamericas.

The Arcernnr resolution consolidates Enami's role in attracting private investment as it will allow both Barrick and Solaris to begin investing in exploration in new areas, generating employment and development, former deputy mines minister Fernando Benalcázar told BNamericas.

"Enami has a vision that is consolidated with the Arcernnr resolution. The big winner is the State. The resolution opens the door for other international companies, which have already knocked on Enami's door in search of exploration contracts, and can continue entering the country, contributing fresh capital," said Benalcázar.

The new areas will remain under the ownership of Enami while the exploration risk will be assumed by the private companies.

In the event that there are significant discoveries, companies can request the assignment and transfer of the area, paying economic compensation to Enami, but as long as there is an evaluation of the asset and they are in the period of advanced exploration.

Government officials have said the registry will be opened in the last quarter of this year.

Ecuador currently has only two industrial-scale mines in production, the Fruta del Norte gold mine and the Mirador copper operation.

The country aspires to become an important player in the mining sector thanks to its location in the Andean copper belt. It has a portfolio of projects in different stages, which in the coming years could contribute to the energy transition.

However, first a series of obstacles need to be overcome, including fierce opposition to mining from activist groups and some indigenous communities.