Only four months into his presidency, miners are impressed with the novice 36-year-old. He led the coalition government in an anti-corruption sweep, imposed a state of emergency that suspended some constitutional rights, and sent in the army to quell prison riots and target gangs. Thousands were arrested.
“He certainly has started out strong,” says Ron Hochstein, president and CEO of Lundin Gold (TSX: LUG), which operates one of just two modern mines in the Andean nation. “He’s got a tremendous amount of public support, appears to have support within the National Assembly and we have seen things happen in his first 100 days.”
Canada has a vested interest in Noboa’s turnaround plan. It’s the mineral-rich nation’s biggest foreign investor, pouring $2.6 billion into the country in 2022. The countries are negotiating a free trade agreement while Canadian companies Dundee Precious Metals (TSX: DPM), Adventus Mining (TSXV: ADZN), Atico Mining (TSXV: ATY), Solaris Resources (TSX: SLS) and others are advancing their respective gold and copper projects.
Noboa is looking to deepen ties. He’ll need cash to fight the cartels, and Ecuador’s economy has vastly underperformed the rest of South America, with GDP per capita still languishing behind 2019 levels. The U.S.-educated president and scion of one of Ecuador’s richest families made his first official visit to Canada during the PDAC convention in March with much of his cabinet in tow.
“We’re open for investment and we’re open to honour our commitments to companies that are willing to take the risk and go to Ecuador,” he told miners and dignitaries at a luncheon organized by the Canadian Council for the Americas.
Corruption purge
Noboa, who has just two years of political experience as a member of the National Assembly, is serving out the term of former president Guillermo Lasso, who was ousted after he dissolved the assembly last year to avoid impeachment on corruption charges. The next election is due in February 2025.
Ecuador’s gang violence is localized along the northern border with Colombia and around the Pacific ports including Guayaquil. Gangs have turned Ecuador’s largest city into a major cocaine exporter.
The curfews and army mobilization have slashed violent deaths by 80% and gunshot wounds by 90%, Noboa said at the Toronto luncheon. Recent polls put his approval rating at 81%.
“There’s a sense of peace. Calm. It’s a sense of progress,” he said. “War was never something that I expected to start, but it was something that was needed.”
In the remote southeast province of Zamora-Chinchipe, mining has been a key driver for economic growth. It hosts both of the country’s large-scale mines, Fruta del Norte and Mirador.
“The economic impact in Zamora-Chinchipe, the unemployment numbers, a lot of the reduction of poverty levels — that’s due to mining,” Lundin’s Hochstein says.
The company’s Fruta del Norte produced more than 480,000 oz. of gold last year at an all-in sustaining cost of US$860 per oz. sold and a head grade of 10.2 grams gold per tonne. It reports no impact from gangs even though the mine depends on the port at Guayaquil for supplies and to ship out concentrate.
“The mining industry in Ecuador, despite these headlines, it is thriving,” Solaris president and CEO Daniel Earle said. The company’s Warintza copper-gold project is in Morona Santiago province, just north of Zamora-Chinchipe.
Noboa used PDAC to sign agreements with Adventus, Atico, and Australia-based SolGold (TSX: SOLG; LSE: SOLG), which is to invest US$3.2 billion in its Cascabel copper-gold project in Imbabura province. The administration has sought to address permitting delays, showing it’s serious about attracting new mining investment. Adventus and Salazar Resources (TSXV: SRL) received environmental permits for their El Domo-Curipamba joint venture project in central Ecuador in January, for example.
“They’ve cleared through approximately 50% of the backlog of environmental permits in the first 60 days,” Earle says. “The Ministry of Environment now is graded on the value of the permits that they approve — of course, at the highest international standards.”
Indigenous consultation
The government has also committed to reopening the country’s mining cadastre — the mineral claims registry, which has been closed since 2018. In addition, Noboa introduced in March the first-ever guidance on Indigenous consultation for resource development.
However, the guidance, which doesn’t give Indigenous communities a veto over development on their ancestral lands, was immediately rejected by the Confederation of Indigenous Nationalities of the Ecuadorian Amazon (Cofeniae).
“Continuing with its extractivist and neoliberal agenda, President Noboa turns our rights into a mere administrative procedure to facilitate the interests of the mining industry and speed up the approval process of mining concessions,” a statement issued by Cofeniae reads.
Indigenous opposition has stalled many projects in the country, including Dundee Precious Metals’ Loma Larga and Warintza, before Solaris, a spinout of Equinox Gold, took over the project in 2018. Earle says Solaris turned around opposition to its project by pioneering a new type of agreement and partnership with Indigenous communities that he calls participatory mining.
“That’s supported by good faith, transparent dialogue,” he said. “Once we got to the root causes of the prior issues, that led to a memorandum of understanding on a new framework for cooperation and then ultimately to an impact and benefits agreement which has been updated multiple times.”
The $660-million market cap company expects to release an updated resource for Warintza in the second quarter, followed by a prefeasibility study next year. Current in-pit indicated resources at the Warintza Central deposit stand at 579 million indicated tonnes grading 0.47% copper, 0.03% molybdenum and 0.05 gram gold per tonne (0.59% copper equivalent). Inferred resources add 887 million tonnes at slightly lower grades.
However, one Indigenous group still opposes the development. The Shuar-Arutam People (PSHA), with support from non-profits Mining Watch Canada, Amazon Watch and WITNESS, filed a complaint with the British Columbia Securities Commission in late February claiming they haven’t been consulted. They also say Solaris hasn’t fully disclosed to shareholders the extent of Indigenous opposition to Warintza’s development.
Earle wouldn’t comment on the claim. But he did say the company has agreements with the two Shuar communities with pertinent ancestral lands, allowing their general assembles to make deals regarding the project.
“Beyond that, what you’re talking about is basically acceptance from the broader Indigenous community,” he added, noting the company’s recent agreement with the largest Shuar organization (Interprovincial Federation of Shuar Centers or FICSH) and Ecuador’s Alliance for Entrepreneurship and Innovation to ensure more widespread benefits.
In that release, the communities that do have agreements with Solaris reiterated their rights as registered owners of the ancestral lands that host Warintza.
“We reject the false statements made by foreign non-governmental organizations (NGOs) and the Shuar Arutam People’s Associations (PSHA) which ignore our voice and speak against our interests,” said Froilan Juank, president of Yawi Center.
Mine expansions
Despite the risks in Ecuador, both Fruta del Norte and the Mirador copper mine, owned by Chinese consortium CRCC-Tongguan, were permitted in 12 months and built on time and on budget.
And Ecuador’s rich geology has much more to give.
At Fruta del Norte, which the late Lukas Lundin used to describe as a “buried gold bar,” the company is expanding throughput to 5,000 tonnes a day this year from 4,500 tonnes, and planning a major exploration push. The operation still has a mine life of 11 years, but positive drill results show the potential for further epithermal gold discoveries, Hochstein said. The company will spend nearly $40 million to drill over 56,000 metres this year — its largest exploration campaign yet.
“I think this has the potential to become a district,” Hochstein said. “Not just a single mine, but another Timmins.”
Meanwhile Mirador, which began production in 2019, is undergoing a major expansion to more than double its capacity to 2,000 tonnes per day by 2026.
“It represents what’s possible in copper in Ecuador in this district where you’ve got this excellent infrastructure, and a low-cost framework surrounding that where they’ve brought that project on for one of the lowest capital intensities in the industry,” Earle said.
That’s something Noboa is eager to capitalize on.
“We’re a country that has everything,” he told the Toronto luncheon. “Natural resources, a young, healthy population. We just need people like you to believe in us the same way that we believe in ourselves.”
