2nd UPDATE: Ecuador's Assembly Revokes Mining Concessions
18:30 EDT Friday, April 18, 2008
(Updates with comments from mining undersecretary and Corriente Resources)
By Mercedes Alvaro
Of DOW JONES NEWSWIRES
QUITO -(Dow Jones)- Ecuador's Constituent Assembly on Friday froze mining activity in the Andean nation by revoking most current mining concessions, and by suspending the remainder.
The Assembly, which is acting as the nation's legislature, passed the mining sector decree with 95 votes of its 130 members.
The move is another step in the government's program to gain more control over natural resources. A majority of the members of the Assembly are allied with left-leaning President Rafael Correa.
The Assembly is also drafting a new constitution for Ecuador.
There are around 4,112 mining concessions in the exploration phase in Ecuador, 590 in early development and 1,500 requests for new concessions.
"We have revoked around 80% of the mining concessions and have suspended the other 20%. We are recovering our natural resources. The concessions revoked will pass into the state's hands and in the future will be administrated by a new State Mining Corporation, which will be created soon," Betty Tola, a member of the government's Alianza Pais party, told Dow Jones Newswires.
Small mining concessions as well as the concessions for the mining of materials used in construction were excluded from the decree.
Assembly President Alberto Acosta called it "a historic day."
The Assembly decided to suspended the concessions for 180 days, starting Friday.
Assembly members said the concessions have been terminated because of a lack of investment, the absence of environmental impact studies, tax issues, problems with local communities, or the location of the concessions inside national parks, among other reasons.
The decree doesn´t specify which concessions were suspended and which revoked. That work will be carried out by the Mining and Oil Ministry.
According to the Assembly's decree, each private company will be allowed to have only three concessions. "We cannot accept that only one of the biggest mining companies has 33 concessions, with 90,000 hectares. We are saving the biodiversity and we are stopping the depredation of our natural resources," said Ana Mosser, an Alianza Pais member of the Assembly.
Ian Harris, general manager of EcuaCorriente SA, a subsidiary of Corriente Resources Inc. (ETQ), said that affected companies or their shareholders could file lawsuits against Ecuador.
"This is a possibility for all companies' boards and for their shareholders," he said.
Harris said that on Thursday and Friday, Aurelian Resources Inc. (ARU.T) and Corriente Resources "lost $400 million in stock market capitalization" brought about by a drop in their stock prices. "These resources could be invested in Ecuador," he said. "The country is losing the opportunity to capture investments."
Mining Undersecretary Jose Serrano told Dow Jones Newswires the ministry will begin work on the definition of the concessions that will be revoked and those that will be suspended for 180 days.
In January, the government revoked 587 mining concessions of local and foreign companies.
Local units of Corriente Resources, Aurelian Resources Inc., International Minerals Corp. (IMZ.T) and IamGold Corp. (IAG), among others, have mining concessions in Ecuador.
Ecuador's mining chamber said in a press release that the Andean country will scare away investment that it estimates could be worth some $2.0 billion. According to the chamber, the country also will lose $1.7 billion in projected taxes.
Correa, who took office last year, is following a model developed by Venezuela's socialist president, Hugo Chavez, to take more state control of resources and to engineer a new constitution for the nation via the a constituent assembly. Correa's actions also have extended to the petroleum sector, where the government is changing participation contracts with private companies into service contracts.
-By Mercedes Alvaro, Dow Jones Newswires; 59-39-9728-653; mercedes.alvaro@ dowjones.com
(END) Dow Jones Newswires
04-18-08 1829ET
Copyright (c) 2008 Dow Jones & Company, Inc.
© Copyright Dow Jones
"these posts are not of a licensed investment advisor or analyst nor does he give out buy, sell or hold advice to anyone"
"A Blind Bat could do a better job at regulation"
