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4/7/08

Breaking: Otto Saves Ecuador Mining Sector

Yes indeed, dudes and dudettes.


If you remember:
1) Ecuador wanted to slap a 70% windfall tax on metals mining. The only thing left to decide was the reference base price for the metals.
2) Otto said "NOOOOOOOOOO!!! DON'T DO IT!!!", and wrote a special little piece* that was presented to the gov't dudes, explaining why it was such a bogus move.

So after getting to explain to the assembled masses of Ecuador government and mining-ment (?) how crappy a windfall tax would be for the sector and how much of a downer it would be for future investment, the Ecuador National Assembly dudes, currently thrashing out the details of the new constitution that includes how mining will be legislated, have today said they're going to be more flexible on the subject. Here's how Reuters reported it today (and sorry, no link yet as this is off the wire service).

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14:25 07Apr2008 RTRS-Ecuador plans flexible mining windfall tax

By Alonso Soto

QUITO, April 7 (Reuters) - Ecuador could be flexible when charging mining companies a new windfall tax that has investors worried over the future of the country's nascent sector, a top government official said on Monday.

Ecuador recently approved a windfall tax to force mining companies to share 70 percent of their revenues above a set base price for the mineral extracted. The tax could hamper the country's mining industry, which remains largely only exploring for metals, experts say.

Deputy Mining Minister Jose Serrano said a planned new mining law could set a flexible base price that would change depending on global market conditions.

"Right now we have a price for the ounce of gold of around $1,000 and in the next three months that price could be $700 or $3,000," Serrano told reporters. "That's when we have to set a price and make periodical revisions to that base price."

The new mining law, which would set stricter environmental controls and royalties on mining firms once they start producing, is expected to be introduced in late May, government officials said.

"A fixed (base price) level was a danger, but the fact that it could be variable to the market is a very positive development... sounds like a breakthrough," said Eric Zaunscherb, a mining analyst with Haywood Securities Inc in Vancouver .

Ecuador lacks significant output of precious metals, but Canadian firms such as Corriente Resources , Aurelian Resources and Iamgold Corp. have found large deposits of gold, copper and silver in southern Ecuador . More than a dozen other junior firms continue to explore for metals.

The stock of many mining companies operating in Ecuador have been volatile recently due that the leftist government's internal debate over mining policy, which could hurt their construction plans.

A popular assembly controlled by the government and rewriting the country's constitution is working on a special decree to revoke concessions held by companies that have not invested on exploration, and limit the size of mining properties.

The assembly's head Alberto Acosta has said mining could have devastating effects on the country's pristine environment, and large projects should be banned in naturally protected areas.

While President Rafael Correa, a leftist former economy minister and ally of Acosta, has said he backs large mining projects if it bring billions of dollars in needed revenue for the poor nation.

(Reporting by Alonso Soto; editing by Marguerita Choy)

((alonso.soto@reuters.com; Tel: 593-22523560 ext 102)) Keywords: ECUADOR MINING/TAX

For Related News, Double Click on one of these codes:

[C] [MTL] [GRO] [SOF] [M] [T] [D] [RNP] [PTD] [PCM] [PREC] [GDM] [CA] [MET] [BMAT] [MINE] [MTAL] [LATAM] [EMRG] [EC] [MIN] [TAX] [ENV] [LEN] [RTRS] [ARU.TO] [IMG.TO] [CTQ.TO]

For Relevant Price Information, Double Click on one of these codes:

Monday, 07 April 2008 14:25:31RTRS [nN07211413] {EN}ENDS

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So this can only mean one thing: OTTO ROCK HAS SAVED THE MINING SECTOR OF ECUADOR SINGLE-HANDEDLY! Any other logical conclusion is just wild speculation on your part....ok? Got it? Stop imagining things.

UPDATE: There's now this link to the Reuters report in Spanish on the open web. It says the same thing.

*presented under Otto's other secret codename