Mining Newcomer Bets on $1 Billion Copper Project for Growth

(Bloomberg) -- Ecuador’s ambition to become a mining superpower is being tested as the South American nation’s first large-scale copper mine starts operations.

The $1 billion Mirador project in Zamora-Chinchipe province started ramping up production Thursday, Ecuador’s vice-ministry of mines said. The open-pit copper, gold and silver mine, owned by a Chinese consortium, has faced delays amid opposition by environmental groups and local communities.

The mine is key to Ecuador’s goal to boost mining exports to $1.89 billion by 2021, from $270 million last year, and to quadruple its share of the country’s gross domestic product to as much as 4%. It’s a first step toward mirroring the growth story of Chile, which exported $40 billion in mining products in 2018. But the path isn’t free of challenges.

“It’s the start of a new era in the economy of the country,” if it’s responsibly managed, said Fernando Benalcazar, Ecuador’s deputy mining minister, by telephone. “Symbolically, it’s the equivalent of when, in 1972, the president received the first barrel of oil.”

The mine is owned by EcuaCorriente SA, a joint venture of Tongling Nonferrous Metals Group Co. and China Railway Construction Corp. It will process 10,000 tons of minerals per day in the short term, which will rise to 60,000 within months, Resources Minister Carlos Perez said during the inauguration of the mine on site. Over its lifetime, it will pay royalties and taxes amounting to $7.6 billion, he added.

The project could help alleviate tightness in a copper market that’s expected to post a 189,000-ton deficit by the end of this year with few new projects coming on line and existing mines facing production disruptions, according to the International Copper Study Group.

Accelerate Investment

“Success in this operation could accelerate investment by this and other companies into other large mining projects,” said Erik Heimlich, a CRU Group analyst in Santiago, Chile. “Maintaining environmental standards and good community relations will be key to the success of mining in Ecuador.”

Mirador was initially set to start producing in 2016, but construction was suspended after environmental and indigenous organizations alleged the Chinese-owned consortium had committed human-rights abuses. Construction resumed in March, but the victory of opponents to industrial mining in local elections later that month raised alarm bells again.

“Let’s not forget that there is a proceeding before the Inter-American Human Rights Commission for the reparation of environmental rights of local communities that should be a worry for the state,” said lawyer Mario Melo, who has represented indigenous communities in high-profile environmental cases. ”There are worries regarding aspects like the tailings dam and the infrastructure construction that have already caused a worsening of environmental conditions in the region, and of living conditions.”

The mine sits in a remote, mountainous jungle area on the Condor mountain range, close to the border with Peru. While gold and silver can be shipped by plane, trucks transporting copper concentrate will face a 220-mile journey through narrow, meandering roads across the country’s southern provinces.

Next on Ecuador’s pipeline of big projects is Lundin Gold Inc.’s Fruta del Norte, which is set to start producing during the fourth quarter. Most of the world’s top mining companies are exploring for gold and copper in the country, including BHP Group Ltd., Hancock Prospecting Pty., Fortescue Metals Group and Newcrest Mining Ltd.

Source: Ecuador Vice-Ministry of Mines

To contact the reporters on this story: Laura Millan Lombrana in Santiago at lmillan4@bloomberg.net;Stephan Kueffner in Quito at skueffner1@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Reg Gale, Steven Frank

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