Mining industry sees a way to navigate narco crisis in Ecuador

Mines owned by Lundin Gold Inc. and China’s Tongling Nonferrous Metals Group Co. continue to churn out gold and copper at normal rates even as residents hunker down at home in a war on drug gangs declared by President Daniel Noboa, said mining chamber boss Maria Eulalia Silva. Projects being developed by Adventus Mining Corp. and Dundee Precious Metals Inc. are set to receive $1 billion as they near production.

“There’s an increase in the cost of production due to security issues, but those millions have been raised on the stock market and they’re waiting to be invested in the next projects, which need to go ahead soon — we hope this year,” Silva said in an interview late Wednesday.

Images of prison riots, police taken hostage and masked gunmen taking over a live TV broadcast pose yet another obstacle to Ecuador finally taking its place as a major mining nation. But not an insurmountable one, Silva said. No company has decided to exit due to the security crisis, and the industry is working closely and smoothly with authorities, she added.

Still, widespread illegal mining has put the industry under pressure, tarnishing its reputation along with imposing a significant environmental and human toll.

Noboa’s emergency measures, which allow police and soldiers to use lethal force against gangs, “is the way to stop and unmask those groups intimidating the formal, responsible industry,” Silva said. “They’re narco-miners, not illegal miners.”

Regulatory boost
Aside from the violence, the country’s regulatory environment has seen some recent improvements. The Constitutional Court helped to clarify rules governing prior consent for mining projects, and permitting has accelerated at the environment ministry, she said.

Noboa has included two market-friendly reforms in a list of questions for a national referendum, asking voters to approve temporary labor contracts and international arbitration, likely to be decided in March.

The government’s wording of a question on illegal mining, allowing concessions to be revoked in areas deemed of “national interest” however is risky and misguided, Silva said. “To revoke duly awarded concessions won’t stop illegal mining,” while Ecuador’s constitution doesn’t include the national interest as a legal concept, she added.

Approval of the questions from the Constitutional Court is required for Noboa’s referendum to go ahead.