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Ecuador to sign mining contracts 'within days'

Ecuador's President Rafael Correa says $3-billion worth of stalled mining contracts will be signed within a matter of days.

Guillermo Granja/Reuters/Guillermo Granja/Reuters

Ecuador's President Rafael Correa said Thursday his government is "within days" of signing contracts with mining companies set to develop large copper and gold projects in the mineral-rich Andean nation.

Deputy mining minister Federico Auquilla told Reuters earlier this week that Canadian-listed Kinross Gold Corp. and Ecuacorriente would soon sign contracts for two projects worth $3-billion (U.S.) in total.

The negotiations have been long and difficult, in part because the government was asking companies to pay an 8-per-cent royalty share, whereas miners were offering 6 per cent.

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"We're negotiating the contracts very hard … They will be signed in the next few days," said leftist leader Mr. Correa, who has also renegotiated part of Ecuador's foreign debt and oil exploration contracts with foreign companies.

The government is demanding advance payments on royalties before the miners start extracting, the president added in comments on local radio.

The extra income from advance royalty payments would be used for social projects, including schools and roads, Mr. Correa said. In power since 2007, he has made resource nationalism a centrepiece of his policies and may run for another term in an election due in January, 2013.

Kinross plans to develop Ecuador's largest gold project, Fruta del Norte, while Ecuacorriente – an affiliate of Canada's Corriente Resources – will work on the Mirador copper mine.

Mr. Correa did not say how much royalty the miners would be paying, but mining sources familiar with the negotiations say the final percentage will likely be closer to the figure demanded by the government.

"Mining companies have agreed to the demands of the Ecuadorean state and we're completely satisfied," Mr. Auquilla, the government's top mining official, said during the same radio show.

Mr. Correa has had a tumultuous relationship with foreign investors throughout his rule, revising oil contracts to better favour the government and defaulting on the nation's debt.

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He is striving to diversify the Ecuadorean economy from crude exports, and he has taken a softer approach to investors planning to develop mines than the oil companies with large investments in the OPEC member country.

Ecuador has a nascent mining industry. Some larger projects were initially delayed as Mr. Correa's government tightened regulations for the sector.

Ecuador is also negotiating contracts with International Minerals over its Rio Blanco gold-silver project, with Ecuacorriente over its Panantza-San Carlos copper deposit and with IamGold, which plans to develop the Quimsacocha gold-copper-silver mine.

High oil prices have allowed Mr. Correa to increase social spending this year, which has fuelled economic growth and boosted his popularity among the majority poor.

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