The whole thing can best be described as 'benign'; after the upheavals of the last couple of months it's very, but VERY good to see an official document about mining from Ecuador's government that is clear about how the country wishes to tighten up the law, but is basically friendly to the industry.
This really isn't the place to go into fine toothcomb details (either read the document yourself or hire me to translate it in full...I doubt I'd accept though) but after reading through it once quickly and another time in more detail I've picked out the following as some of the more interesting points (though when it comes to draft laws, "interesting" is definitely a relative term).
On page 3: Article 4 makes it clear that environmentally responsible mining is in the public interest (of Ecuador, obviously). This might be a basic point, but it's well worth reflecting on after the calls for a wholesale sector shutdown from the treehuggers. In short, Correa's government is officially saying "we want mining in our country". I like that.
On page 12: The definitions of "prospecting", "exploration" and "extraction" phases of mining are duly defined in article 18. This may well allow companies such as Aurelian (ARU.to), Corriente (CTQ.to) (ETQ) etc to go back to work, as they were stopped from working under article 8 of the constitutional assembly mandate (English version of the mandate is right here). This is because in the mandate the word used was "explotación", and clearly does not apply to ARU, CTQ etc, because the new law defines them as "exploración", and not explotación". Is this semantic nitpicking on my part? Definitely not! This is a clear definition, probably legally applicable right now (as it remains unchanged from the current suspended law), and would allow ARU, CTQ and others to get on with their drill programs.
On pages 17 and 18: This outlines the tribute and royalty payments schedule, and also how the money collected by the state will be spent. The new law envisages that a lot of the duties will stay in the area local to the mine (a very good idea). It also outlines the royalty schedule, which is between 1% and 5% value of gross metal value calculated on quantities mined, with the largest mines paying the most (eg, ARU, CTQ, DMM IAG would all pay 5% of gross). In my opinion this is an acceptable deal for miners. One thing to note; the new law does not make any mention of the feared windfall taxes. However, that tax was proposed by the state revenues ministry and not the mining ministry, therefore although it's good to see no mention of windfall taxes for miners, it's not a done deal yet. All the same, there's every reason to be optimistic on this score as the mining windfall seems to be in the process of being quietly dropped.
On page 24: The law sets out that a single concession cannot be more than 5,000 hectares in total area, and also sets the time limit for concessions to 20 years (it was previously 30 years). On the subject of concessions, there is no mention at all of limiting any miner to just three concessions, as stipulated in the Assembly mandate. If this isn't added to the law later it will be a big boost for all large miners.
On page 26: There is an article that makes it clear locals must be informed of the activities of the mining company in their region. In other parts of the law (page 50), provision is made for locals to have mandatory access to the mine three times per year to inspect proceedings and talk with the company.
On page 30: The law states that all operating miners have one year to obtain ISO 9000 2001, ISO 14001 2000 and ISO 18000 international certifications. Those without the necessary certificates after the year will first be fined, then shut down. A smart move by the gov't, methinks; it means the mining company in question must be whiter than white by world standards.
On page 94: The gov't outlines the tender process that will be used in the future to sell concessions to any company wishing to explore in Ecuador. The days of free concessions are now officially over.
Of course, these are just a few points that have caught my eye, and a full read is highly recommended. However, the law as stands is very good news for Aurelian and the other companies exposed to Ecuador recently hit in the share price. I reiterate my strong buy rating on ARU.to without a moment's hesitation.
*otto.rock1 (AT) gmail (DOT) com