Ecuador’s government is continuing to support the development of the country’s mining industry, which for historical reasons is at an immature stage relative to other neighbouring countries such as Chile and Peru, with the full support of President Lenin Moreno.
One of the major recent initiatives includes overhauling the mining tax regime and removing a prohibitive windfall tax on foreign investment.
The windfall tax levied a rate of 70% based upon the difference between the sale price of the metal extracted from the ground and the base price established in the Mining Exploitation Contracts and applied only to large mines in full-scale production.
Henry Troya, Vice-Minister of Energy and Non-Renewable Resources, Government of Ecuador, has said “The windfall tax for extraordinary earnings was our Achilles Heel since it was established by the Correa administration in 2009. We have seen that, when applied in other countries like Mongolia, it affected the mining GDP very seriously. Our windfall tax actually takes 70% of the extraordinary earnings when comparing the base price of the last 10 years and the commodity price during a high cycle. We introduced several modifications to this tax, yet we saw that the investment community could not understand why this was applied. So, president Moreno finally decided to eliminate it. This move has been very well received by the industry.”
Another major initiative was announced by the Ecuadorian government to allow for "scout (reconnaissance) drilling" within exploration concessions. This was announced in July by a representative of the Ecuadorian Ministry of Oil, Mining and Energy (MERNNR) during a presentation at the ‘Investing in LATAM Mining Summit’ held in Santiago, Chile.
As part of this initiative, mining concession holders could drill during the 4-year initial exploration phase through a simplified permitting process. Previously, drilling was only permitted during the advanced exploration phase.
This is positive news for the Ecuadorian mining industry as it is likely to significantly increase the identification of mineral deposits within the initial exploration phase as well as increasing employment, bring more dollars into the Ecuadorean economy and mining investments in the first four years of mineral exploration.
These two major revisions show that Ecuador is committed to developing its mining sector by providing attractive and fair investment conditions which will support the development of responsible mining.
SolGold is highly encouraged by the abolishment of the windfall tax, and the continued progress the Ecuadorean Mining Ministry is making towards better policies. SolGold strongly believes that Ecuador is one of the best jurisdictions for both exploration and development.