this is from a silvia santacruz interview with the mining analyst victor flores. negotiations between kinross and ecuador continue to drag on, and will do so for some time to come:
Ecuador has substantial gold, silver and copper resources and reserves. What is the difference between these two?
A project has resources when it has geological certainty; meanwhile, a reserve has geological and economic certainty. In other words, a reserve has a feasibility study, which establishes the costs to build a mine, its technical parameters, production levels, etc. I think Quimsacocha is categorized as a reserve. FDN is still a resource.
How much longer can investors and companies wait for the negotiations between Kinross and the government?
I frankly think that the negotiation process between Kinross and the government will take between 6 and 12 months. I doubt that there will be an agreement this year, and rather hope that they will have it for mid-2010. If it takes longer than that, let’s say late 2010 or in 2011, mining companies will categorize Ecuador as an interesting country from its geological viewpoint, but as very long-term investment. What will happen is that companies will give priority to other developments in other nations. That has already happened with IAMGOLD, which used to categorize Quimsacocha as their star project, but after the mandate, it focused on its African and Canadian projects, pushing Quimsacocha to third place.
The Ecuadorian government has been a tough negotiator with oil companies. Could this strategy create a precedent for mining firms?
They are very different industries. Ecuador’s mining fate will be determined by the Kinross negotiation with the government. The Kinross contract will be the main test that the new legal framework is actually effective. Thus, if Kinross successfully negotiate an attractive tax favorable to both sides, and can develop FDN, Ecuador’s doors are open to international mining operations. After Kinross, IAMGOLD, International Minerals, Corriente and others will follow. On the contrary, if Kinross’ negotiation is delayed or the tax is unfair to the company and its investors, it will be much more difficult to pursue other projects. To me, it is very simple, if it goes well with Kinross, the whole mining industry in Ecuador will do well.
http://www.ecuadorminingnews.com/news.php?id=120
