The mining sector is of great economic importance in Ecuador and contributes significantly to GDP (contributing around 4% of the national GDP from 2017 to 2021), the generation of employment opportunities for the country and especially in the neighboring communities to the mining concessions. The country has important deposits of minerals such as gold, silver, copper and zinc, and in recent years, the mining industry has experienced significant growth due to the investment of international companies and the implementation of public policies to promote such sector. Nonetheless, Ecuador remains one of the least explored, untapped and mineral-rich regions in the world.
The main challenges the mining industry in Ecuador is facing nowadays include, amongst others:
- Insecurity: The increase in criminal groups linked to illegal mining.
- Social and environmental opposition: The blind opposition is hindering the development of the mining industry. As an example, via public consultation of August 20, 2023, Ecuadorians voted to stop the granting of mining concessions in the Chocó-Andean region.
- Closing of the mining cadastre: The mining cadastre was closed in 2017, and consequently, the Ecuadorian government stopped the granting of concessions to regulate the compliance of all the requirements in the processes to award concessions, including prior consultation processes with communities as required by the legal regime enforceable.
- Legal system: There is a need to update the legal framework of the mining sector to promote the development of the mining industry and attract investment.
- ENAMI: The lack of resources and capacity of the Ecuadorian National Mining Company (ENAMI) to explore, exploit and develop mining concessions: as of the end of 2022, ENAMI’s debt reached US$581 million. This, together with the need to enter associations and strategic alliances to fund and develop the mining industry, under the scope of a restrictive law regime, has prevented ENAMI from fulfilling its purpose.
Recent events and innovative partnering
In 2023, ENAMI carried out several negotiation rounds with important national and international mining companies to promote its mining portfolio and explore possible partnerships to develop mining activities under the scope of the enforceable legal regime, resulting in an innovative agreement with Barrick International Ltd.
On September 19, 2023, ENAMI and Barrick International Ltd. entered into a Commercial Agreement by which Barrick International Ltd. comprised the investment of US$100 million for the exploration of 40,000 hectares of geologically interesting areas, with a minimum initial investment of US$27.5 million.
Under this initial agreement, ENAMI benefits not only from the funds committed by Barrick International Ltd. for the exploration of the mining areas and its expertise, but also from partnering with a renowned mining company with pioneering technology and capacity in the sector. This will enable ENAMI to obtain new information on mining areas of interest for its portfolio, which would otherwise remain undiscovered.
This is the first of many steps of this alliance that requires further negotiations to implement the agreements under which Barrick International Ltd. will carry out its exploration activities as well as the obtention of ENAMI of the titles of the mining areas of interest that will be under the scope of this agreement.
This is certainly an innovative way of successfully partnering with the Ecuadorian government and entering new opportunities in the mining sector, and an example of a way forward for Ecuador’s mining sector. We will have to wait and see how this agreement works in practice before we are likely to see other mining companies investing and partnering with EMANI.
For more information on this topic please contact the author, Maria del Mar Heredia.