The South American country of Ecuador is attracting interest among foreign mining companies, as a low-risk, high-reward market, where government remains supportive of mining, despite the February referendum restricting mining in protected areas.
Market intelligence firm BMI, which publishes a mining risk and reward index, has flagged Ecuador and Argentina as the two countries with improving scores, relative to existing mining industry values.
BMI states that the 2016 landmark agreement between Canadian miner Lundin Gold and the government of Ecuador to exempt the Fruta del Norte project from a 70% windfall profit tax, has bolstered the country’s mining industry.
“Over the past year, major foreign miners, including BHP Billiton, Codelco, Newcrest Mining and Anglo American have announced plans to invest in, or develop, projects in the country,” says BMI.
BHP and other heavyweight miners are opening offices or adding exploration licences in Ecuador as they advance a search for copper and gold in the South American country, which sits on the Andean copper belt.
BMI further states that it appears that the referendum in February is unlikely to derail the industry’s growth outlook, although it concedes that the extent of restrictions on mining remains unclear.
Meanwhile, the US, Canada, Peru and Chile remain the regional leaders in the BMI mining risk and reward index, with these countries posting above-average rewards and risk scores.
BMI states, however, that the spread between top ranked countries and regional laggards in the risk and reward index remains wide as rising political risk in Latin America weighs on some performances.
The political risk has dented the region’s short-term political risk score, particularly Brazil and Colombia’s. Brazil’s election campaign season will heat up over the coming months, narrowing the possibility for significant legislation to advance the mining industry. The upcoming Presidential election in Colombia also poses downward security risks.
BMI further states that the likely victory of leftist populist Andres Manuel Lopez Obrador in Mexico could weigh on mining investment in the near term.
“Nonetheless, rising mineral prices, well-established industries and vast reserves will keep the Americas an attractive mining investment destination,” BMI states.