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The Mining Law
The Mining Law
Op-ed in El Comercio, Quito Ecuador
January 03, 2009
Originally published in El Comercio, Quito Ecuador
Translated from Spanish to English by Ecuador Mining News and can be read here.
The United States president-elect, Barack Obama, dismissed his
proposal to impose a 20 percent windfall profits tax (WFT) on oil
companies in a move to adjust his campaign promises to the global
economic recession. His decision was made despite firms such as Exxon
Mobil having recorded historic profits in Q3 2008. Ecuador, however, applies not only a WFT to the oil industry in a much higher percentage 70 percent
but will extend it to mining companies if the law that the National
Assembly is currently analyzing is approved without amendments.
creation was drafted at a time of largesse, nearly a year ago, when
international gold prices continued climbing until reaching a record
U.S. $1,000 per ounce in March 2008. However, the boom ended and prices
have fallen in recent months. Gold is now sold for USD 800
an ounce, at last Friday’s close; silver, fell from $17 to less than
$10 an ounce; and copper, from $4 a pound, to $1.40, in the same period.
this context, Ecuadorian legislators have two choices: adjust the
Mining Law to the economic reality and relieve this nascent industry
from Art. 166 of the Reformed Tax Law, which creates the WFT, or force Ecuador to join Mongolia to become the only two countries in the world to apply such a tax on the mining industry.
should also keep in mind that mining companies operating in Ecuador are
paralyzed since April 18, as a result of the Constituent Assembly’s
mining mandate. Although the idea was to put the house in order,
revoking concessions from land speculators, many lawful companies are
paying for sinners.
Atlas Moly, for instance, is selling its
copper Tres Chorreras project in Pucará, Cuenca; AndeanGold Resources
expanded its operations to Peru and Colombia; Channel Resources, is now
focusing its efforts on its gold project in Burkina Faso, in Africa,
which surprisingly offers a better mining environment. And most
recently, Corriente Resources announced that it is in negotiations to
sell its copper projects.
If the Congresillo members decide
to follow President Rafael Correa’s pro-mining leadership, they will
make history as the authors of the creation of hundreds of thousands of
jobs, economic growth, and more fiscal revenue.
If they do
not do it, the communities surrounding the projects, such as Pucará,
will remain mired in extreme poverty, exporting their populations with
coyotes (people smugglers), while extreme green NGOs from developed
countries celebrate having prevented Ecuador from large-scale mining,
and its golden opportunity to emerge from underdevelopment.