Ecuador... From Promise to Reality. Javier Córdova Unda Minister of Mining

Transcription

1 Ecuador... From Promise to Reality Javier Córdova Unda Minister of Mining

2 Ecuador is positioned to become one of the world s most attractive new mining regions 1 Promises Delivered 2 Projects are a Reality 3 The Future is Bright

3 Promises fulfilled in 4 key areas have returned Ecuador to the world mining map 1 Promises Delivered A. Continue to Ensure Competitive Fiscal Regime B. Improve Systemic Advantages C. Reopen Mining Cadaster D. Strong Social Commitment 2 Projects are a Reality 3 The Future is Bright

4 A. 1A Since 2014 we have continued to build trust in the competitiveness of the Ecuadorian fiscal regime % of revenues Fiscal burden compared to mining countries in the region Ecuador: 2014 tax burden Ecuador: 2015 tax burden Ecuador: After 2016 Range: Current fiscal burden of regional peers 30% Large scale copper project 27% 23% Large scale gold project 27% 25% 21% Competitive fiscal burden presented at PDAC 2016 is now officially implemented Improvements implemented during the last year include: Windfall tax cannot apply until after 4 years have passed since investment payback Equal base price applied for all projects Sovereign adjustment officially includes all cash flows since the start of the concession Additional incentives ( ) improve predictability, stability, and competitiveness: Fiscal stability contracts Accelerated depreciation VAT refund ISD tax exception for the mining sector Base price by formula Foreign investment for small scale mining Source: Wood Mackenzie. Notes: (1) Fiscal burden calculated in present value terms; assumes long term Cu price of $3.50/lb, Au price $1,353/oz, (2) Regional peers: Chile, Peru, Colombia, Brazil, Mexico (blue box on graph)

5 1B. We continue to enhance our systemic advantages Costs Advantages in 40% of mining operating costs 1 Some of the lowest electric costs in the region Labor Cost Fuel and Transport Most projects forecasted to be in the 1st or 2nd quartile Excellent Geology Privileged location on the metal hotbed of the Andes Less than 10% of the territory has been explored World class gold project under development (Fruta del Norte) Potential world-class copper discovery (Cascabel) Infrastructure USD 40.5 billion invested in strategic sectors since 2007 More than 2 GW of new hydroelectric capacity in the last 2 years Continued investments in modern airports and ports Production Factors Accelerated Baccalaureate Provides qualified labor force Training for heavy machinery certified workers Access to water Source: (1) Wood Mackenzie estimates

6 1C. We successfully reopened the mining cadaster using an objective, fast and transparent process Prospecting Concession request submitted Prequalification Mining Concession Request Process Concession posted to website Submission of proposal(s) (confidential) Evaluation of proposal(s) Swiss Challenge option to match Concession awarded to successful bidder Exploration and submission of required reports Legend Interested Party Ministry of Mining Process initiated by an interested party, and rapidly advanced by the Ministry of Mining Scoring of bids Technical qualification (Y/N) Score is based on the value (amount) of the investment commitment Swiss Challenge rules: First bidder submits the concession request and a closed-envelope first bid Others may submit bids First bidder has option to match highest bid of another party (maximum bid increase = 100% of initial bid)

7 EXPLORATION ACTIVITY 1C. The success of this process is manifested by the 420 new mining concessions requested to date H1 2017: 260 more to be granted in the coming months H2 2016: 160 concessions granted to private companies and individuals from around the world, representing investment commitments of $120M in 650,000 ha PDAC 2016: Announcement of new process to allow private parties to request new concessions PDAC 2015: Commitment to reopen mining cadaster TIME

8 1D. Striving for an inclusive, responsible sector builds a strong social commitment for mining activity Improving communities influenced by strategic industries ($ 169 million invested in mining provinces) 1 60% of royalties required by law to go to social investment projects and regional development 50% of social investment projects aimed at indigenous groups or territorial constituencies, when appropriate Transition from Artisanal Mining to Small Mining Formalization & modernization programs, led by the Undersecretary of Artisanal and Small Scale Mining Improved support for small mining companies Indirect Benefits of Mining Development Catering Las Peñas (Fruta del Norte Project) APOSAE Ecolac: Milk production Sources (1): Ecuador Estratégico Water & sewage Health Education Millenium Community Safety Culture & sports Electricity & telecom Highways & tourism

9 Ecuador`s industrial scale mining era is underway 1 Promises Delivered 2 Projects are a Reality A. Fruta del Norte B. Mirador C. Rio Blanco D. Loma Larga E. Cascabel F. Other important developments 3 The Future is Bright

10 2A Fruta del Norte Project Beginning of negotiation process Start of exploitation phase 13 Jul 2016 Environmental license granted 24 Oct 2016 Exploitation contract signed 14 Dec 2016 Investment contract signature 19 Dec 2016 FDN begins construction Start of production Sources: Office of the Vice-president of Ecuador, Agencia Andes, The Northern Miner

11 2B Mirador Project Exploitation contract signature 05 Mar 12 Subscription of investment contract 10 Apr 2013 Concentrator construction Emission of the license update for 60,000 ton/day 18 Dec 2015 Project inauguration 21 Dec 2015 Environmental license for the concentrator Start of production Source: Corriente 11

12 2C Rio Blanco Project Feasibility study upgrade 16 Jan 2014 Categorization of the project under medium mining regime 23 Jul 2015 Environmental license granted for exploitation phase 6 Nov 2015 Start of exploitation phase 11 Nov 2015 Development proposal, mining investment plan presentation 23 Dec 2015 Project Construction Inauguration 11 Aug 2016 Start of production 2 nd semester Source: Junefield

13 2D Loma Larga Project Pre-feasibility study at medium scale Start advanced exploration phase Publication of pre-feasibility study at large scale Pre-agreement negotiations began 2 March Source: Wood Mackenzie

14 2E Cascabel Project Announcement first year exploration program Granting of 4-year environmental license for drilling Increased ownership to 85% Increasingly attractive drill results New investors: Newcrest 10%, Maxit Capital 5%, Guyana Goldfields 6% 18,400 m of drilling, resource taking shape of the 30 best drill holes for copper porphyry in history (Paradigm Capital) Source: Solgod

15 2F There are important advances in other projects Privately Owned Llurimagua Cu Au ENAMI (National Mining Company) Constitution of new joint venture in mts of perforation until 2018 La Plata Au Capital raise up to $4 million for drilling Drilling program installed Cangrejos Au Cu Zaruma Au Completed acquisition of Cangrejos lands Oct 2015 Announcement of $4 million ounce Inferred Gold Resource Purchased by Goldgroup on 2016

16 2F. The industry is waking up to Ecuador s progress, lifting its Fraser Institute ranking to 3 rd quartile in 2016 Ecuador s Fraser Institute ranking for Investment Attractiveness is much improved Percentile: (100% = jurisdiction with the best ranking) 50% 1 Investment Attractiveness went up more than 10 points from 2015 to % 76 Policy Perception Index also improved meaningfully Fraser Institute ranking is a lagging indicator, but the industry is beginning to understand and accept the progress 3 0% Source: Fraser Institute Survey of Mining Companies,

17 2F. And the markets have also reacted positively to these improvements SolGold Lundin Gold +1224% +35% Lumina Gold INV Metals +128% +509% Source:

18 The opportunity is here and has a promising future 1 Promises Delivered 2 Projects are a Reality 3 The Future is Bright A. Investment and Employment B. Taxes and Exports C. GDP

19 3A All these advances are carrying investment and employment to a new level Total of the Period: Investment Foreign Investment (US$ millions) % % Most of the investment impact will be in the next 3 years There is potential of receiving investment of ~ $1 billion annually in the next 4 years 179 Employment Employment, industrial mining (annual average x 1000) 15,9 Indirect Direct 1,1 +236% 3,7 +330% It is projected that the construction and operation of the medium and large scale projects will generate ~16,000 new jobs in the next 4 years Source: (1) Values as of 2016 and are Wood Mackenzie projections Source: ARCOM, SRI, Banco Central, Wood Mackenzie analysis. Tax values include anticipated royalties and profit sharing (state portion)

20 3A 3B Impact on taxes and exports is similarly notable Total of the Period: Taxes Fiscal Income (US$ millions) % % An estimated increase of $100 MM in annual tax receipts, to fund additional public investment 324 The fiscal impact will be much greater after 2020 when the projects are in full production Exports Mining Exports (US$ millions) % % The contribution of mining to exports will be greater than traditional goods such as shrimp, flowers and tuna, in the next 4 years 643 Source: (1) Values as of 2016 and are Wood Mackenzie projections Source: ARCOM, SRI, Banco Central, Wood Mackenzie analysis. Tax values include anticipated royalties and profit sharing (state portion)

21 Region Mining GDP (Million) Ecuador Mining GDP (Million) The evolution of the mining GDP has experienced an important growth in the last 15 years 3C $ $ $ $ Ecuador Mining GDP Region Mining GDP $1.600 $1.400 $1.200 $1.000 $800 $ $5.000 $ Year $600 $400 $200 $- Source: CEPAL

22 Ecuador... the opportunity is here