Yeah I know I'm on holidays, but this is important.

El Comercio - Quito - Ecuador | 7 de junio del 2008

http://tinyurl.com/522kat

94 million ounces is the gold potential of Ecuador

The gold reserves are concentrated in 14 sites in the country. The most interesting projects are in Zamora Chinchipe, Azuay, El Oro, Bolivar and Pichincha.

Business Editors

Ecuador could leave behind its dependence on petrodollars. A study endorsed by the Faculty of Geology, Mining, Oil and Environment (Figempa) of the Central University revealed yesterday that the country has probable gold reserves of 94 million ounces.

This amounts, at the current price of $ 898 an ounce of gold, to U.S. $ 84 000 million.

The Mandate

The Ministry of Mines and Petroleum continues to work on drafting the legislation to implement Mandate 6. On Monday of next week the mining authorities will report on the progress of the implementation of Mandate 6. According to forecasts, the price of gold will continue to rise until 2015. Next year it will remain above U.S. $ 1 000 an ounce, according to Edgar Pillajo.

According to the report prepared by the Foundation for the Resarch of Mining Geology of Ecuador (Fungeomine), in 2000, the gold map of the country showed potential reserves of just five million ounces.

However, upwardly climbing metal prices from 2000 led to increased investment in exploration, especially by foreign companies.
Thus explained the author of the paper and president of Fungeomine, Edgar Pillajo yesterday, in a presentation attended by university authorities and representatives of the mining guild.

The gold reserves are concentrated in 14 sites in the country. According to the study, the most interesting sites are located in Zamora Chinchipe, Azuay, El Oro, Bolivar and Pichincha.

Furthermore, the gold map of 2008 show 6,800 kilometers of riverbanks with signs of gold, among which are the Napo, Zamora and Nangaritza rivers. At the moment, there are more than 200 backhoe excavators working on these sites, Pillajo explained.

The study covered 200 prospects and gold deposits that had good information quality and reliability. "That is to say, those which have advanced geophysical aand geochemical geological data ...", said the expert.

These mining projects were chosen from a base of 637 and those studied were in various stages of exploration and exploitation.

The most important is headed by the Canadian mining company Aurelian, which reported an initial 13.7 million ounces.

However, after the adoption of Mandate 6 to regulate mining in the country, companies with large-scale plans, including Aurelian, suspended their activities. To continue with their programs, they await the approval of the new Mining Law, which is in full preparation by the Ministry of Mines and Petroleum.

"It is not possible, with this potential, that Ecuador continues discussing whether or not to have mining. The exploitation of gold is a new alternative that the country can do with proper techniques for protecting the environment, "said Pillajo, referring to the treatment the Assembly has given to the issue of mining.

The bill, however, will face a strong environmentalist trend in the Assembly and the Executive, which has pronounced itself open to mining activity.

The dean of the Figempa, Edgar Lopez, believes it is possible to technologize [lit.] the activity to perform an operation of low environmental impact.

To Pillajo, the environmental problem is generated by small-scale mining. "They have no environmental conscience and there is no control (...) This is attributed to lack of credit for improvements in technology." [lit. technologizing the work]

Javier Cruz, of the Chamber of Mines warns that companies expect the new law to provide a clear picture about the future of the activity.

[trans: ebear]

***

What's significant here is recognition of the need to replace petrodollars with some other form of income. What hasn't been recognized is the monetary role that gold can play in reducing Ecuador's dependance on the dollar as its de-facto currency, a policy which exposes the nation to considerable financial risk.

In Colombia they ask, how would you like to be paid? In silver or lead? In Ecuador they can ask, how would you like to be paid? In dollars or gold? (I should be Correa's speech writer)

The point is, and more Ecuadoreans need to realize this, the nation has hitched its wagon to a dying horse. It is stuck with the international value of the dollar, and must pay that amount for all it imports. Bad news if you want to diversify your trade.

A central bank, flush with (depreciating) petrodollars, should be buying gold to protect itself. In addition to amounts received via taxes and royalties, the central bank (on behalf of the treasury) should be buying local production in order to build a gold reserve. Why sell gold out of the country when you have the dollars to keep it at home? This is MONEY we're talking about here. Real money.

Little countries, especially those with pegs, or dollars as currency, need to protect themselves against an emerging dollar crisis. The best way to do this is to maintain a strong gold reserve to underwrite the nation's credit. Fortunately, Ecuador is able to do this, if it so chooses.

ebear