Iamgold says Ecuador nearing new mining law

Iamgold (IMG-T, IAG-n) says Ecuador’s recent referendum, in which 63.9% of all voters supported a new constitution bodes well for a new mining law in the country. The referendum included the mandate to form a new policy for mining that had been made available in draft form.

Iamgold says it views the referendum as a vital next step in the country’s journey towards developing a modern and responsible mining industry.

“We are very encouraged by the results of the referendum and are optimistic that Ecuador will proceed quickly towards a new mining law that will allow responsible mining to the benefit of all stakeholders,” Joseph Conway, president and chief executive, said in a statement.

A newly appointed legislative body was expected to convene at the end of October to consider the new policies that formed part of the referendum, and the government has stated its intention to pass a new mining law by the end of the year.

But a number of issues have yet to be resolved, Iamgold notes, including royalty levels, taxation and community benefits.

The Ecuadorian government froze mining exploration and revoked most concessions in April. Since then, it has been working on a new mining law designed to strengthen controls over the industry.

At the Denver Gold Forum in early September, the country’s acting vice-minister of mines, Xavier Cordova, told a luncheon gathering that he expected exploration companies would be back at work by the middle of October. That target has come and gone.

The minister also noted that an unpopular 70% windfall profits tax on mining was not part of the proposed new mining code and that his ministry had made a proposal to the Ministry of Revenue to neutralize the tax or eliminate it altogether.

According to a draft of the new mining law on the ministry’s website, a sliding scale royalty of up to 8% will be based on the sales of minerals extracted.

Iamgold owns 100% of Quimsacocha, a 3.5-million-oz. gold project in southern Ecuador, about 480 km south of Quito and 40 km southwest of the city of Cuenca.

It expects to wrap up a final feasibility study by the end of next year.