The Business Year Special Report
Santiago Yépez Dávila, Country Manager, Lucky Minerals
By setting an example of responsible mining in Ecuador, Lucky Minerals is helping the country unlock the true potential of its resources and fix the FDI puzzle.
• Interview
How does Lucky Minerals’ operation in the Fortuna Project fit into Ecuador’s mining awakening?
Lucky Minerals has a 550-sqkm project called Fortuna in Ecuador located in the south of Azuay, Morona Santiago, and Zamora Chinchipe provinces. It is a project of 12 contiguous mining concessions awarded at the end of 2016. Lucky Minerals has a great track record in the mining sector and is listed on the Toronto Stock Exchange. We see huge potential in Ecuador’s mining industry. The geology of the country is attractive, and most of it has yet to be explored. Our Fortuna project was born out of historical information that is being reinterpreted. It is still at an early stage, though we have found areas with certain geological anomalies that indicate huge copper deposits.
What are your thoughts on the government’s efforts to attract foreign investment into the mining sector?
The main attractiveness of the country is its geological potential; only 7.5% of it has been explored for mining purposes; however, this has to be coupled with a favorable administrative and legal environment. The steps the government has taken to attract FDI has been extremely important for the mining industry. However, there is still a great deal to do to turn Ecuador into a dynamic mining market similar to neighboring countries such as Colombia, Peru, or Chile. A fundamental step was the concession of 275 areas between 2016 and 2017 for new companies to enter the market. This led international players in the industry to come to Ecuador to bet on a promising business working with the government. The so-called “Mandato Minero” was a moratorium on mining projects started in 2008, which was waived in 2016. Since then, the mining sector has become one of the main sectors for FDI.
What impact does the mining sector have on the country’s economy and its society?
Thus far, large-scale mining has not truly kicked off in Ecuador, and the small-scale mining sector already accounts for 1.6% of GDP. With two major projects underway, Fruta del Norte and Mirador, this percentage is expected to increase to 4%. Both started in 2019, so we have yet to see the impact on the macroeconomic level. President Lenín Moreno recently stated that Ecuador received the highest FDI in its history in 2018, and the mining sector represented 53% of it, surpassing the oil sector.
As the sector becomes more prominent, what steps are being taken to guarantee responsible practices?
The sector has recently started Alliance for Responsible Mining (AMRE). The purpose of this entity is to promote responsibility in areas like rule of law, respect for the environment and communities, safety for employees, and the overall contribution of the mining sector. It is in the benefit of all to have a business as socially and environmentally minded as possible. However, the lack of knowledge that Ecuadorians have in the mining sector is a challenge that has to be addressed. The country has traditionally had a small mining sector that did not follow international standards, including a certain degree of illegal mining. These factors have resulted in people thinking the mining sector is harmful to the environment. We want to show that it is possible to do responsible mining.
How is the sector addressing the potential cancellation of projects following communities’ votes in local referendums?
Mining operators in Ecuador believe these local referendums are against the constitution and that the process that took place in Girón was flawed. As much as we want communities to be involved in projects, as per the constitution, they cannot make decisions through local referendums in matters that are considered projects of national interest. This would also be the case for large projects in the oil sector or energy generation through hydroelectric plants. ✖