Ecuador Mining Project Pipeline

Ecuador is emerging as a new mining jurisdiction in Latin America. With only 10% of the country explored, Ecuador has incredible potential due to its location at the northern end of the Andes Mountain range. Ecuador is estimated to have sizeable reserves, most notably, world-class copper and gold deposits.

Mining executives are taking notice. According to the annual Fraser Institute of Canada survey, the country ranked 24th among 84 mining jurisdictions globally. It increased its score to 72.79 out of 100 compared to 57.95 that it reached in 2020. The only Latin American country in 2021 to improve its ranking.

Ecuador already has two large-scale mines in production with several more world class deposits advancing towards construction. Although there is a lot of excitement, the road to becoming a full-fledged mining jurisdiction is still not guaranteed. The country is facing challenges from environmentalist, lack of clear environmental regulations, and illegal mining.

Mines in Production

 Fruta del Norte –

• Lundin Gold is the owner of Fruta del Norte, an underground gold-silver mine in that had its first full year of operations in 2021.
• Lundin increased the mines reserves by 8% to 5.41 million ounces, due to changes in the planned mining method.
• Based on the new figures, it now expects to produce almost 4.8 million ounces of gold at Fruta del Norte over a 14-year mine life.
• Lundin plans to put US$49.9mn into Fruta de Norte in 2022

Mirador –

• Mirador is a large-scale, open-pit, copper-gold project that went into production in 2019.
• The project contains 3.2 million tonnes (Mt) of copper, 3.4 million ounces (Moz) of gold, and 27.1Moz of silver in proven and probable reserves.
• The current mining and processing production scale is 20 Mt of ore processed per year, with 60,000 t daily. The annual output of copper concentrate will be 354,000 t and the amount of copper metal 96,000 t.
• The second phase of the expansion will see the development of the north orebody and eventually see a production scale of 120,000t of ore per day.
• The company also has Mirador Norte, which is located a few kms north of the Mirador copper-gold project.
• Copper and gold mineral resources have indicated resources of 171 million tonnes of 0.51% copper and 0.09 g/t gold and Inferred resources of 46 million tonnes at a grade of 0.51% copper and 0.07 g/t gold.
• Mirador Norte increases the estimated resources available for processing at the planned Mirador concentrator by 28% to 11 billion pounds of copper.

Project Pipeline

The Ecuadorian government recently announced that they expect total investments of around US$11bn to begin construction on seven mines between 2023 and 2025. The most notable projects are listed below but some of the projects could be delayed due to permiting and community relations.

Cascabel –

• Alpala is the largest deposit found at the Cascabel concession and could become the largest underground silver mine, third-largest gold and the sixth-largest copper in the world.
• It has measured and indicated resources of 2.7 billion tonnes grading 0.53% copper-equivalent (0.37% copper, 0.25 grams gold per tonne, and 1.08 parts per million silver) for 9.9 million tonnes of contained copper, 21.7 million oz. gold and 92.2 million oz. of silver. 
• Once in production, the USD$2.7b Cascabel project would produce an average of 150,000 tonnes of copper, 245,000 ounces of gold and 913,000 ounces of silver in concentrate per year during its 55-year life-of-mine. 
• The prefeasibility study was released in April 2022. SolGold is now working on the final engineering studies and permitting to begin construction hopefully in 2024

Curipamba –

• Owned by Adventus Mining and Salazar Resources, Curipamba is an open-pit copper-gold mining operation with proven and probable mineral reserves of 6.47 million tonnes (Mt) grading 2.52g/t gold (Au), 1.93% copper (Cu), 45.69g/t silver (Ag), 0.25% lead (Pb) and 2.49% zinc (Zn).
• Construction of the Curipamba mine is expected to start in 2023, with production beginning by 2024. The mine is estimated to require an investment of USD$248m.
• The feasibility study completed suggest an open pit mine that will produce 10,500t/y of copper annually during its first decade before operations move underground. There are sizable underground reserves that will increase the life of the mine.

Cangrejos –

• Owned by Lumina Gold, the Cangrejos is another impressive copper-gold discovery. Cangrejos is expected to be one of the 15 largest gold projects under development in the world..
• A preliminary economic assessment completed in 2020 suggested that the deposit has 571Mt in indicated resources. The project could support an open pit mine with annual capacity to produce 366,000oz of gold and 45 million pounds (20,400t) of copper over a 25- year mine life. Capital expenditure is estimated at US$1 billion.
• Drilling has continued and executives announced recently that they estimate to conclude pre-feasibility studies early in 2023, with feasibility and construction permits in the second half of 2023, and a goal to start construction in 2025.

La Plata –

• La Plata is a high-grade gold-rich VMS deposit which supported a small scale mine operation from 1975-1981.
• La Plata inferred resources at 1.9 million tons at an average grade of 4.1 g/t Au, 49.4g/t silver, 3.3% Cu, 4.5% Zn, 0.6% Pb
• For 2022, Atico is focused on completing the Definitive Feasibility Study by the end of the year. The Environmental Impact Study was approved by regulators in May 2022. 
• The project has been identified by the Government of Ecuador as one of the next mining operations and included in its economic recovery plan.
• The estimated USD$70m project consists of a 900 tpd underground mining operation and processed with a state-of-the-art flotation plant while using the latest filtered tailing technology to mitigate its environmental footprint. In addition, the project will need infrastructure upgrades such as new access road and a 69kV powerline.
• The filtered tailings will allow for efficient use of water by significantly reducing water consumption through recirculating almost all the water needs for the processing plant.

Loma Larga –

• Loma Larga is an underground gold-copper-silver project located in the Azuay province of Ecuador.
• The Loma Larga project is expected to produce 139,958 ounces (oz) of gold, 794,561oz of silver and 5.1 million pounds (Mlb) of copper annually over an estimated mine life of 12 years.
• The initial mining operation is expected to be at the rate of 3,000 tonnes per day (tpd), which will be increased to 3,400tpd from the fifth year. The underground mine will be accessed through a 1.2km ramp, which will also be used for hauling waste and ore as well as for ventilation purposes.
• Ore will be transported 3.5km from the portal to the process facilities where it will be go through two stages of crushing – primary and secondary, followed by single-stage ball milling.
• The project currently has complications due to a popular consultation that took place in 2021 which prohibited mining near water sources. The company maintains that it is not located and is going through judicial procedures so that construction and further exploration can advance.

Advanced Exploration

 Ruta de Cobre –

• Owned by Grupo Mexico, the copper-molybdenum project covers three concessions: Janeth 1, Janeth 2 and Janeth 3.
• There is very little information on the project, but directors of Grupo México are expected to start talks with the Ecuadorian government on the US$2.5bn investment contract for the project.
• The Ruta de Cobre project is supposly in the process of economic evaluation with the feasibility study under development. 

Warintza –

• Solaris Resources is the owner of the Warintza copper project in southeastern Ecuador.
• The company has been aggressively drilling and the latest results suggest inferred resources of 887 million tonnes, grading 0.39% copper, 0.01% molybdenum, 0.04 gram gold for 3.5 million tonnes of copper, 0.13 million tonnes of molybdenum and 1.1 million oz. gold.  
• The company in June announced signing an Investment Protection Agreement with the Ecuadorian government which includes tax incentives such as a 5% reduction of income tax, fixing the income tax rate applicable to the company at 20%, exemption from the capital outflow tax, as well as the exemption of all import duties

Conclusion

Ecuador has done a great job of turning around the industry since 2015 and is now starting to see the benefits with two projects in production and some world class discoveries that should be built over the next 5 years.

It is not without its challenges. There are still long wait time for permits. Community oppositions and recent referendums have tied up projects in courts. Access to skilled workers and service providers poses challenges to companies who are trying to ramp up.

Although Ecuador has been successful at rebuilding its reputation, it will take significant work by both the government and private industry to overcome early growing pains. 

For mining service and technology providers, the success of Ecuador could provide significant opportunities that will add to the already large project pipelines in Chile and Peru. All of these countries together create a massive opportunity for METS companies that have interesting services and products. 

Ax Legal is an advisory firm that works with foreign companies in Latin America. Our team of legal and commercial advisors have a distinguished track record of helping foreign technology and services companies to grow and operate in Latin America. Over the years, we have worked with starts up, mid-size businesses, and publicly listed companies. The one common factor that connects our clients is that they are leaders in their field, providing innovative technologies and services to the industrial sectors.

To better understand how we can support you in the Region, please contact Cody Mcfarlane at cmm@ax.legal