Ecuador has suffered an escalating drug trafficking-related security crisis since 2020 that culminated in the Ecuadorian government declaring war on armed gangs after masked gunmen broke into a public TV station during a live broadcast. Despite this, the country’s young mining sector is taking steps to work around the escalating violence and continue production.
Ecuador contains extensive mineral resources and is one of the world’s largest exporters of copper, silver and gold. Gold and silver mines owned by China-based Tongling Nonferrous Metals Group Co. and Canada-based Lundin Gold Inc. have continued production at normal rates even as Ecuadorians prepare for potential violent confrontations between security forces and the armed gangs spreading violence throughout the country.
Maria Eulalia Silva, executive president of the Mining Chamber of Ecuador, says near-production projects by Dundee Precious Metals Inc. and ADventus Mining Corp are poised to receive $1 billion. Silva noted in a recent interview that increased insecurity across Ecuador has increased production costs as miners have to spend more on security measures. She says that while images of escalating violence present a major obstacle to Ecuador’s young mining industry, the challenge is not insurmountable.
No mining company has announced its exit from Ecuador so far, Silva said, and the sector is working intimately with Ecuador authorities to deal with any insecurities that may arise.
The country is still grappling with high rates of illegal mining that have resulted in a significant human and environmental toll and tarnished Ecuador’s mining industry’s reputation. Silva says that recently passed national measures that allow soldiers and police to deploy lethal force against gangs will “stop and unmask” the groups that are hampering the country’s legal mining industry. Ecuador has also improved some of its regulatory policies in recent years, Silva added, such as the clarification of rules that govern prior consent for mining projects.
Ecuador President Daniel Noboa also included two reforms in a national referendum list asking voters to approve international arbitration and temporary labor contracts that will most likely be voted on in March.
Silva notes that some of the wording on a question about illegal mining that would allow for the revocation of concessions in areas considered to be of “national interest” is misguided and risky. She explained that national interest is not a legal concept in the nation’s constitution and that revoking duly awarded concessions would do nothing to curb illegal mining in the country.
The challenges being faced by miners in Ecuador underscore why major extraction companies such as Royal Gold Inc. (NASDAQ: RGLD) always conduct due diligence on the sociopolitical environment of a jurisdiction in which they are considering setting up shop. Unrest like that being witnessed in Ecuador can sometimes turn an otherwise solid investment into a nightmare for mining companies.
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