Ecuador’s Mining Boom

Major Deposits Promise Riches

Ecuador is stepping into the big leagues of the global mining industry.

Earlier this month, the Canadian company Lundin Gold sent off its first gold exports from a port in Guayaquil, Ecuador.

These were the first industrial-scale exports of gold to ever leave Ecuadorian shores.

The mining enterprise sent 180 tons of gold concentrate to Finland to be processed, and soon after a second shipment was sent to a gold refinery in Switzerland.

The gold is coming from a mining project named Fruta del Norte, located in the Ecuadorian Amazon region.

Fruta del Norte has reserves estimated to be around 5.02 million ounces of gold grading at 8.74 grams per tonne.

Daily production is expected to reach 3,500 tonnes, averaging 310,000 ounces of gold per year. At over USD580 per ounce, that is a lot of money, and as the Ecuadorian state holds 51% of the license, at least part of that money will go directly into funding the national budget.

This has the potential to have a profound impact on Ecuador’s oil-dependent economy, which has struggled with low oil prices in recent years.

But Fruta del Norte is not alone.

The mining boom in Ecuador will have other main characters, namely the Mirador mining project. Developed by a subsidiary of the Chinese consortium CRCC-Tongguan, Mirador has estimated reserves of 3.2 million tons of copper, 3.4 million ounces of gold and 27.1 million ounces of silver.

Industrial-scale production of copper has already begun and the first exports of this metal left the country back in July.

Mirador is no small play. It is one of the world’s 20 largest copper mines, and has already received an investment of up to USD1.3 billion from the Chinese operator.

At peak production, the consortium expects to produce 1,200 tons of copper per day, which will result in 3.6 tons of this metal in its purest form.

The whole project is expected to bring the Ecuadorian state up to USD2.25 billion over the course of its lifecycle. The minerals will all be exported directly to China for processing.

The presence of CRCC-Tongguan in Ecuador is no coincidence. Throughout his 10-year mandate, leftist former-president Rafael Correa sought investment from China as he distanced the country politically from Western politics.

His efforts were successful in attracting Chinese direct investment, particularly for the extractive industries, but also in securing large loans to finance infrastructural development.

Current President Lenin Moreno, once considered a political descendant of Correa, has shown more interest in aligning with the West, opening the market to more business-friendly regulations in order to attract foreign capital.

And one of his flagship sales points is Ecuador’s considerable untapped mineral reserves.

According to government officials, by 2021, the mining industry could represent up to 4% of the country’s GDP, up from 1.6% in 2018.

In order to make that possible, the Moreno government has had to attract development partners in the Western world. The Australian SolGold, in particular, has a mighty job on its hands. It is tasked with developing Cascabel, located to the North of the capital Quito.

At 20.3 million ounces of gold, 84.5 million ounces of silver and more than 9.5 million tons of copper, Cascabel, which should start operating by 2021, will be the biggest silver mine, the third biggest gold mine and the sixth biggest copper mine in the world, which speaks loads for the country’s potential and a mineral exporter.

However, not everyone is happy with this upcoming mining wealth boom. Environmental organizations have underlined the risks involved in mining developments in sensitive environmental areas. On their side, indigenous communities, already wary of the effects the oil industry has had on their ecosystem, stress the dangers these industries represent for the local water sources.

Already, there are reports of some water reservoirs being contaminated by mining activities, despite government assurances that strict “responsible mining” policies are in place to guarantee the sustainability of these developments.

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