Ecuador's miners and investors holding their stock can look forward to a happy ending

I hope you've all loaded up on Aurelian (ARU.to) at these low low prices. Word from not one but two reliable sources is that the "three concession maximum" directive included in the mining mandate will work as follows:

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1. The mining company, for examples Aurelian (ARU), Corriente (ETQ), IAMGold (IAG), Dynasty (DMM.to) etc. will have to give up all but three of their mining concessions as per the mining mandate Article 4*.

2. The concessions will then be offered back to the same mining company on a "first refusal" basis, and a price-per-concession settled with the government.

3. If the mining company does not want the concession (or if the two parties cannot agree on a price) the concession will then and only then be offered in public tender to the highest bidder.

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Let's make this clear: this has not been announced, and may turn out to be an informal arrangement between miner and gov't, but I am very, very confident about the veracity of this information. I am also long ARU by way of full disclosure, and I have ARU in the core portfolio and as part of my trading account, so please take that into account.

Anyway, this sounds like a smart solution to me. The government gets a decent price for its mining concessions, the mining company gets its assets back at a cost (but probably not a prohibitive price tag, all things considered) and the market is assured once and for all that Ecuador really does want to play ball with the serious mining companies. However, at the same time the gov't gets to achieve the main objective of the mandate article by taking away concessions that were handed out on the cheap to locals as part of the old boys' favour network in very suspicious circumstances.

It also fits with stories from hardcore environmentalists upset with mining and petroleum minister Galo Chiriboga because he has not provided requested information to the loony treehuggers and, according to them, has been adapting the mandate to favour the nasty horrible foreign miners (you know, the ones who cause 1000 times less damage to the environment than the small unregulated miner). Interesting how calls for Chirboga's head from the hard left have been totally ignored by those with real power (Acosta, Correa etc), but big recent protests from out of work miners get full attention and further assurances of a better future.

Bottom line: It looks like President Correa is being true to his word about his desire to have a responsible mining industry in Ecuador. He's not going to accept any old deal, but this concession deal will go a long way to calm the frayed nerves of investors exposed to Ecuador.

Got ARU?

* Article 4 The extinction is declared with no economic compensation for those mining concessions that in number greater than three have been granted to a single person or their spouse, or to judicial persons and their related companies, be it via the direct participation of the judicial person, or its shareholders and their family members up to the fourth grade of blood and second of affinity.