Ecuador expects to start production of four major mining projects by the end of President Guillermo Lasso’s first term in office in 2025, as he seeks to diversify the economy beyond oil exports, the Ministry of Natural Resources said on Friday. Lasso has been trying to attract private investment to boost the economy, which was in a deep recession last year, exacerbating Ecuador’s cash-strapped economy.
To do so, the President has issued a new decree, paving the way for investment in the nation and mining projects. This has the potential to open the floodgates for miners looking to expand or begin mining in the mineral-rich country.
Ecuador has rich mineral resources but lags behind its Andean neighbors Peru and Chile in the development of large mines. Many large mining projects in Ecuador face resistance from local communities and are struggling to fill informal miners who have slowed their development. However, the right approach with consultation with local communities has proven to be extremely effective. Successful projects like Solaris Resources’ (TSX:SLS) Warintza Project have been proven to be some of the most promising copper projects in the entire Andean region, and have been models of how mining companies can work hand in hand with local communities to uphold critical ESG principles.
Three gold concessions of Canadian companies Dundee Precious Metals (TSX:DPM) in Loma Largo, Atico Mining Corp (TSXV:ATY) in Plata, and Adventus Mining Corp (TSXV:ADZN) in Curipamba are in advanced exploration phase and could begin production by 2023, the Department of Energy, Non-Renewable Energy and Natural Resources said in its statement. The Cascabel concession, operated by Australia’s SolGold Plc, is expected to start copper production by 2025, the ministry added.
The largest copper mine in South America, the Mirador Project, operated by a subsidiary of the Chinese consortium CRCC Tongguan, commenced production in mid-2019. Its first major gold mine, the Canadian Lundin Gold Inc.’s (TSX:LUN) Fruta del Norte mine project, started in November this year. Its authorities expect exports of mineral resources to reach $1.6 billion a year, an increase of 7.4% from 2020.
With Ecuador positioning itself as a nation of open arms for the mining industry, it is set to catch up to, and surpass its neighbours in the coming years and decades.
Shares of Lundin Mining Corporation (TSX:LUN) (Nasdaq Stockholm:LUMI) closed down 9.4% on Monday at $10.27 after announcing that it would need to cut guidance at its copper-gold Candelaria complex in Chile. The guidance for 2021 production was cut to 150,000-155,000 of copper and 85,000-90,000 oz of gold on a 100% basis. The near-term adjustment comes after the company operated in line with forecasts to date during the second quarter of 2021 due to the short-term mining sequence in Phase 10 for the second half of the year.
The reduction hit the company and its shares hard as Candelaria originally accounted for over half of Lundin’s previous forecast 2021 guidance of 275,000-299,000 tonnes of copper and 170-180,000 oz of gold. The company took a hit knocking its market cap down to $7.6 billion
The Candelaria open pit contains known fault zones, and Lundin Mining (TSX:LUN) (Nasdaq Stockholm:LUMI) is continuously monitoring these areas. Part of the change comes from the need to manage the production risks in a localized area of Phase 10 that, while nominal in volume, could eventually impact activities on lower levels of the site and on the main ramp. Reducing these risks means taking additional precautionary measures, including a wider step out in the area, mining smaller benches and with smaller blasts, and delaying mining immediately below the fault zone to later phases.
The reduction in output is the result of the additional caution during the mining process while in the Phase 10 fault zone areas. The additional measures will affect productivity and result in less ore production from the area over the remainder of 2021. The second half of 2021 is expected to return average copper mill feed grades for the Candelaria Copper Mining Complex of 0.64% from low-grade stockpiled ores. The expected feed grade for the year is 0.59% copper.
Lundin Mining (TSX:LUN) (Nasdaq Stockholm:LUMI) may need to update the outlook for the life-of-mine plan pending the outcome of a review. With these changes in mine sequence creating new impacts for the project, some further guidance may need modification. However, production outlook for the company’s other operations as well as cash-cost guidance will be provided in July along with the second quarter operating results, and these are expected to be generally the same.
The Candelaria mine has been a productive project for the company. In 2019, the company reinvested in the mine fleet to help with efficiency and bring the project into alignment with the company’s overall clean mining goals. The project goes back to 2014 when Lundin Mining (TSX:LUN) (Nasdaq Stockholm:LUMI) acquired an 80% interest and operatorship of the Candelaria Copper Mining Complex in Chile, with the other 20% owned by Sumitomo.
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