GOING UNDERGROUND

After nearly a decade of stagnation, the mining sector in Ecuador is finally ready to show off its economic potentials, while operating in the most responsible way.

IN 2006, LOCAL ECUADORIAN MINING COMPANY Aurelian Resources Inc came across a staggeringly large gold and silver deposit in the southeastern province of Zamora-Chinchipe. The deposit was named Fruta del Norte (FDN) and was recognized as a world-class discovery, containing at least 10 million ounces of gold and still more quantities of silver. Although FDN was expected to be a game changer in the sector, attracting foreign investment and mining giants to the country, only a year after the discovery, new laws came into effect that curbed mining activities. FDN changed hands several times—first to Kinross and then to Lundin Gold—but it would not become properly operational for well over another decade.

Ecuador has a highly diverse terrain for a country of its size and an immense wealth of natural resources. Aside from petroleum, Ecuador has, over the years, been an exporter of gold, silver, and copper, among other minerals. Although the mining industry was effectively comatose between 2007 and 2015 due to a mixture of poor policymaking, unstable markets, and worries about the environmental and social consequences of industrial mining, the sector experienced a rebirth around 2018 with the launch of new mining projects and the awarding of several permits for the first time in nearly a decade.

President Lasso’s administration, which came to power in 2021, has been open about its pro-mining stance from the beginning, assuring investors that sustainable mining activities will be encouraged over the next four years. Ecuador’s mining sector is therefore expected to take off soon. These four years is a window of opportunity for the sector to prove its commitment to sustainability, while raising its contribution to the GDP. The current opportunity for growth is something the sector has never really enjoyed before. In all fairness, mining has never achieved its full potential in Ecuador under any administration. Although geologists had long suspected the presence of large reserves of precious metals (gold and silver) as well as other minerals such as uranium, lead, zinc, and copper, most mines were located in remote, impassable regions, which further complicated matters.

The years of stagnation have undeniably weakened the industry and held it back. If the nation’s mining sector wants to realize its full potential, the infrastructure needs to be upgraded in terms of drilling, tunneling, and extraction equipment. The mining knowhow, too, has developed over the last decade or so. Advancements in geophysics and electronics have given the industry better tools for mineral exploration, terrain modeling, and computer-assisted mine design. The Ecuadorian mining sector simply has too much to catch up on.

Nevertheless, the industry has been moving forward with confidence. Ron Hochstein, president & CEO of Lundin Gold, which has been operating the FDN gold mine since the beginning of the mining renaissance in Ecuador, told TBY that “since 2019, there have been many changes. On November 14, we celebrated our second year of operations. One of the things I am most proud of is our production of over 320,000 ounces of gold in the first three quarters of 2021.” Hochstein believes that the mining industry has been quick to resume its activities while readjusting itself to the realities, standards, and practices of the 2020s. The sector, according to Hochstein, has progressed not only in terms of production quantity and quality but also in its eco-friendliness and responsible treatment of people.

To streamline the development of mining while ensuring the eco-friendliness of mining operations, President Lasso issued an executive decree (no. 151) in August 2021. “This executive decree is unique in Ecuadorian public policy because it has given us, in a transparent form with a lot of potential, the support of the president for the mining sector,” Xavier Vera Grunauer, Minister of Energy and Mines, told TBY, while pointing out that the executive decree emphasizes five points including the “regulatory framework,” “the insurance laws,” “the development of mining projects,” “new investments,” and putting a stop to “illegal exploitation of minerals.”

While the first two pillars keep the social and ecological impacts of mining in check and make mining a responsible enterprise, the latter three principles will pave the way for the growth of mining in Ecuador during this window of opportunity after many years of stagnation. Keith Barron, CEO & Chairman of Aurania Resources, a mining exploration company with a long history of working with communities in Ecuador, endorses the new government’s pro-mining stance, saying “it is fantastic. We are receiving extensive support from the government, not just on a federal basis but right down to the governor and local levels. Permits are being streamlined, so all the red tape and bottlenecks that were happening before have largely gone away.”