Mining Law Ecuador

GENERAL RULES FOR ALL MINING CONCESSIONS IN ECUADOR

Ecuador’s mining law was ratified in 2009 and amended in 2013, 2015 and 2018.

Pursuant to the Ecuadorian Constitution all mineral and non-renewable resources are owned by the Ecuadorian State, which has the constitutional right to delegate exploration for, and extraction of, non-renewable resources, to third parties through the granting of mineral concessions.

The granting of a mineral concession confers to the concession holder the exclusive right to explore, exploit, process and sell any metallic mineral that lies within the concession. The law allows for transfer of ownership of mineral concessions with the authorization of the Ministry of Energy and Non-renewable Natural Resources (“MENRNR”).

Mineral concessions are administered by the Agency for the Regulation and Control of Energy and Non-Renewable Natural Resources (“ARCERNNR”). The ARCERNN has the competence to supervise and adopt administrative actions that contribute to the rational and technical exploitation of the mining resource, and to the fair perception of the benefits accruing to the State as a result of its exploitation, as well as to the fulfilment of social and environmental responsibility obligations assumed by the holders of mining rights.

The ARCERNNR has the following attributions, among others:

• to keep a register and cadastre of mining concessions and publish it by computer and electronic means;

• to inspect the mining activities carried out by the holders of mining rights and titles; and

• to grant licences for the commercialisation of mineral substances determined in the present law.

ARCERNN also regulates the assignment and transfer of mining rights as well as other industry issues, as it is the regulating entity.

Applicable Ecuadorean mining laws recognizes four categories (or regimes) of mining concession rights: artisanal, small-scale, medium-scale and large-scale mining.

Small-scale operations can process up to 300 metric tons per day (“tpd”), medium-scale up to 1,000 tpd underground, or 2,000 tpd from an open pit, or 3,000 tpd from an alluvial operation, and large-scale mining operations. Small scale operations are subject to a 3% NSR payable to the State, while medium-scale operations attract an NSR of 4%. The royalty for a large-scale producer is negotiated between 3% and 8%. The Constitution stipulates that, of the NSR payable to the State, an amount equal to a 60% of the NSR due to the State will be paid to the communities within the area of interest of an operating mine.

A mining concession is granted for up to 25 years and may be renewed for an equal period. Once the mining concession has been granted, in medium-scale mining and large-scale mining the concessionaire shall comply with the following phases and terms:

(a)    up to four years of initial exploration, i.e., surface exploration including geological mapping, geophysical surveys, and geochemical sampling (stream sediments, soils & rocks) and trenching (“Initial Exploration Phase”);

(b)    up to four years of advanced exploration, including drilling (“Advanced Exploration Phase”); and

(c)    two years of economic evaluation of the deposit (pre-feasibility and feasibility studies), which can be extended for an additional two-year period, and during which periods drilling activities may continue (“Economic Evaluation Phase”).

During the Economic Evaluation Phase, the concessionaire must apply for the commencement of the exploitation (i.e., construction, operations, closure & remediation) phase of the project (“Exploitation Phase”). Negotiations regarding the mining exploitation contract may begin during the economic evaluation phase. The exploitation contract stipulates the financial terms governing production, the NSR payable and various tax-related matters.

Mineral exploration also requires various permits. Prior to engaging in mineral exploration or mining activities in the initial exploration phase (surface exploration): (a) the Ecuadorean Ministry of Environment (the "MOE") must issue an environmental registration; (b) the Water Authority (the "SENAGUA") must issue a report on the possible effects on surface and/or ground water bodies and confirmation of compliance with the order of priority relating to the right of access to the water; and (c) the concessionaire must submit a sworn statement declaring that the proposed exploration or mining activities will not adversely affect public infrastructure, ports, beaches and sea-beds, telecommunication networks, military installations, oil industry infrastructure, aeronautical installations, electrical networks and infrastructure, or archaeological, natural or cultural remains.

Prior to engaging in the Advanced Exploration Phase: (a) the MOE must issue an environmental license which includes a public consultation process; and (b) SENAGUA must issue a water permit for industrial use of water.

Drilling can also be undertaken under the scout drilling provisions for early-stage exploration drilling programs subject to environmental registration and water use permits.