Ecuador, an OPEC member known for its oil industry, has recently begun to explore opportunities for economic advancement through mining. Until early 2015, foreign mining firms faced significant barriers due to a presidential decree in 2008. However, the establishment of the Ministry of Energy and Mines in 2015 coincided with the discovery of substantial copper and gold deposits, leading to increased interest and activity from major foreign mining companies. Despite challenges in attracting foreign investment, Ecuador’s mining sector shows promising signs, with the ministry projecting minimum investments of USD 8 billion by 2024 and a growing international interest.

Ecuador offers several advantages that make it appealing for mining operations. The country has relatively low input costs compared to its regional counterparts, with electricity costs being one-third of those in Chile and Colombia, and roughly half that of Peru. This is partly due to adequate state investment in hydropower projects. Furthermore, Ecuador boasts an adequate infrastructure network, including ports, roads, and airports, which facilitate mining activities. However, the primary allure lies in the vast untapped gold reserves, with only a small percentage of the country’s territory having been explored as of 2018.

Canadian company Core Gold, which entered Ecuador in 2015, operates the nation’s largest Portovelo Processing Plant. The company’s CEO has praised Ecuador’s geology as being among the best in the world. Core Gold’s turnaround story is notable, having been saved from bankruptcy and transformed into an exploration and development enterprise focused on Ecuador. Currently, its mill produces approximately 1,800 ounces of gold per month, with plans to more than double this output by the end of 2018. Core Gold intends to boost production further by exploiting the mineable gold resource at its recently discovered Linderos project, which has shown promising surface mineralization. Anticipated gold reserves for the project range from 3 million to 10 million ounces based on surface sampling.

Another Canadian company, Lundin Gold, has also made significant investments in Ecuador. By late September 2018, it had completed a substantial portion of the construction and mine engineering at the Fruta del Norte project. Lundin Gold expects to begin tapping into the ore body in the first quarter of 2019, with the first gold pour anticipated later that year. The company has managed to reduce its all-in sustaining cost estimate for Fruta del Norte, leading to increased production estimates of 4.6 million ounces of gold over the mine’s 15-year lifespan. These improvements have been achieved without adjusting the earlier gold price estimate, indicating the project’s profitability.

According to S&P Global Market Intelligence, building mines in Ecuador may prove cheaper than acquiring existing facilities due to the vast untapped territory available for exploration. Despite the risks associated with exploration, this potential cost advantage may discourage merger activity, as companies opt to develop their own mining projects. Data comparing the period of 2008-2017 with 1999-2008 shows that the average unit cost for acquired gold reserves in Ecuador increased by USD 121.93 per troy ounce, while the average unit cost for gold reserves derived from exploration increased by only USD 41.74 per troy ounce. This trend suggests that new mining projects are economically viable, especially considering the declining share of gold reserves growth from acquisitions over the past decade.

Ecuador’s mining sector presents significant opportunities for both domestic and international mining companies. With large untapped gold reserves, favorable input costs, and an improving regulatory environment, the country has the potential to become a major player in the global mining industry. While challenges remain, such as improving rankings in business indices and addressing corruption concerns, Ecuador’s commitment to attracting foreign investment and developing its mining resources sets the stage for a prosperous future.