Ecuador addresses mining governance

Ecuador must overcome the governance challenges of its mining sector in order to reap all the benefits of its geological potential, according to experts gathered in Quito.

A recent study by the World Bank cited governance, along with environmental and social issues, as the main roadblocks to making the mining industry a springboard for Ecuador's development.

The multilateral organization considers that Ecuador would benefit from the application of reforms to guarantee that tax revenues from mining are used to strengthen local communities, along with establishing a functional consultation process and improving project licensing, while placing safeguarding mechanisms and strengthening institutions to oversee the sector.

With just two large mines inaugurated in 2019 and in commercial production since 2020, Ecuador achieved mining exports of more than US$3.2 billion last year, which includes the production of these two assets, the Fruta del Norte gold mine and the Mirador copper mine, as well as the production of small mining companies.

A series of large-scale projects, which in the coming years should mean the construction of several mines, are indicative of a growing industry. However, experts maintain that consensus must first be reached, which seems complicated given the growing opposition to extractive operations from environmental activists and indigenous communities.

To reduce conflicts, sector stakeholders gathered at the "Governance in the mining sector: toward a mining agenda for 2030" panel hosted by the Universidad Tecnológica Equinoccial (UTE) called for information transparency and regulatory reforms that not only guarantee legal certainty for investors but also that project benefits reach local communities.  

Ricardo Obando, country manager at LoweLl, the local subsidiary of Canada's Solaris Resources, said a particular challenge is understanding that for resources to become reserves you don't just need the geology but also that the project is based on legitimacy, transparency and governance. 

Solaris has the Warintza copper and molybdenum project in Ecuador, which the Canadian company considers an example of community relations.

"After six years of exploration we have important results, the product of work based on participatory mining. We do not understand mining developed from the geographic centers and political control of the country. Large-scale mining must be understood from the development of the territories since the projects are not in Quito or Guayaquil; they are in the parishes, in the indigenous communities," said Obando.

REFORMS TO STRENGTHEN ACTIVITY

Mines deputy minister Diego Ocampo said he is working on a series of activities to strengthen operational capabilities and achieve more efficient management. These include regulatory reforms to ensure that mining royalties are allotted to local governments to invest in infrastructure and services.

President Daniel Noboa took the first step to strengthen the mining sector last May through an executive decree that ordered the separation within 90 days of the energy and non-renewable resources regulatory agency, Arcernnr, into three entities: the mining regulatory agency Arcom, the electricity regulatory agency Arconel, and the hydrocarbon regulatory agency Arch.

In terms of transparency, Ocampo cited as an example the exploitation contract recently signed with Australian company SolGold for the US$4.2 billion Cascabel mine, which includes a clause establishing that the concessionaire authorizes the internal revenue service and other State agencies to share information on the concessionaire and the project to comply with the requirements of the Extractive Industry Transparency Initiative (EITI), of which Ecuador has been a part since 2020.

"I am the main defender of mining in this country, but also the main defender of the highest standards of environmental care and social responsibility," Ocampo said at the event.

According to Esteban Manteca, the EITI director for Latin America and the Caribbean, Ecuador will have to make a significant investment in information to comply with transparency standards, disclose all contracts, and facilitate access to environmental, social, and gender impact studies.

“It is crucial to continually provide information on the EITI implementation mechanisms. If there is a single veil of opacity, confidence in the activity will continue to be weakened,” Manteca said.

During the event, the Ministry of Energy and Mines and the UTE signed an agreement to enable academic support to improve mining sector governance and create a roadmap for the country's mining agenda through 2030, which will allow joint research and innovation projects.