Ecuador revokes hundreds of mining licences (February 04, 2008)

Hundreds of mining concessions have been annulled in Ecuador by the country’s leftist government, which is preparing to pass a new mining law later this year.

While bigger players like Aurelian Resources (ARU-T, AUREF-O), Corriente Resources (CTQ-T, ETQ-X), and Iamgold (IMG-T, IAG-N) were left alone, mining concessions at Ascendant Copper’s (ACX-T, ASCPF-O) Junin property were revoked by the government.

The markets took note — Ascendant shares fell about 29% on the Jan. 25 news, or 6, to 15 apiece on 1.3 million shares traded.

Ascendant’s manager of investor relations, John Haigh, says he hasn’t heard a word from the government, even though Mining and Petroleum Minister Galo Chiriboga has told local news agencies in Ecuador’s capital, Quito, that 587 mining contracts would be revoked for not paying concession fees.

“We’ve gone back to our people in Quito and we have received nothing from the government,” Haigh says.

Haigh says Ascendant has paid its fees for all its concessions and believes that its Golden 1 and Golden 2 claims, on the Junin property, have been revoked for a different reason.

Ascendant won a Supreme Court battle surrounding its concessions in 2004, in which the local government claimed the company’s concessions were transferred to it illegally.

Haigh says a local environmental NGO, DECOIN, is behind continuing government opposition to the project.

Last March, Ascendant agreed to cut its workforce to 59 workers from 148 people, limiting work on the property until an agreement could be made with the environmental group.

Ascendant wasn’t alone in losing concessions; later in the day, on Jan. 25, a note from the Ministry of Mines and Petroleum said more than 5,300 sq. km of land was returned to the state, including Ascendant’s properties. No other companies were named.

He calls the whole ordeal “absolute bologna.”

That’s because Ascendant has spent US$10 million on the property in the last two years, Haigh says. The property has an inferred resource of 19.2 billion lbs. copper and 864 million lbs. molybdenum at a 0.4% copper cutoff, with grades of 0.89% copper and 0.04% molybdenum.

“If you’ve got someone out there that has staked a concession that hasn’t done any work on it, then the government should take it back, but that is not the case with Ascendant Copper,” Haigh says.

He says the property has a value of $100 billion and that DECOIN’s strong opposition to the project is the real reason Ascendant was listed among the companies that lost concessions.

An August 2006 letter from Ascendant president and CEO, Gary Davis, charged that DECOIN has published false information on its website about lawsuits that don’t exist. The NGO has also made allegations, which the company denies, that Ascendant hired people to lie to weaken or disrupt the local government and had been involved in cutting off people’s phones, manipulating the police, violent behaviour and issuing death threats.

Other concessions the government has reclaimed were double staked, or covered watersheds, parks and even graveyards.

Upcoming reforms to the country’s constitution will include a new mining law, which is what confuses Haigh about the government’s recent actions.

“Why would you do this before making the new mining law?” Haigh asks.

The government plans to increase state participation in deals and tighten environmental control. Under current law, it’s nearly impossible for the government to reject requests for mining licences.

Darryl Jones, chief financial officer for Corriente, says the government isn’t arbitrarily seizing mining concessions. He says that several months ago, the government said it would take a closer look at the 4,000 concessions totalling 29,000 sq. km that had been granted in the country — some of which included clearly unsuitable land, such as city squares.

“When you get people who sit there on land, or who speculate — it’s a problem,” Jones says. “When Aurelian hit their Fruta del Norte strike in the early days, people were flocking to Ecuador to go stake concessions.”

But many of those people buy property to sell it again for a profit without doing any work on it, while others hold on to concessions for ages without working on them.

“That doesn’t do anything for the state of the country,” Jones says.