Ecuador’s main export for several decades has been oil. Minerals have not constituted a major export of Ecuador and the first large-scale mines only started production in November 2019, when the Fruta del Norte mine, operated by Lundin Gold through its local subsidiary Aurelian, started producing gold, and the Mirador mine, operated by Chinese Tongling and China Railway through its local subsidiary Ecuacorriente, started producing copper. Both projects are located in the south-east of Ecuador, in Zamora Chinchipe province. It is expected that together the projects will have combined sales of more than USD1 billion per year, an amount which will make mining one of Ecuador’s biggest exports.

On 10 December 2019, the Fruta del Norte mine produced its first export: 177 tons of gold concentrate. A total investment of USD2.7 billion has been made in the project and it is expected to produce 310,000 ounces of gold per year and 400,000 of silver. In 2020, the Mirador project, owned by Ecuacorriente, also started production in the first large-scale copper mine in Ecuador. In June 2024, an exploitation contract was signed for the Cascabel project, making it the third large-scale mining project in Ecuador to transition into the exploitation phase. The construction of the mine is anticipated to commence in the near future.

Ecuador has not yet been fully explored for minerals and its potential has, in recent years, attracted major multinational companies such as Newcrest, Anglo American, BHP and Codelco. However, even though mining activities are fully regulated and legally possible, political opposition from different groups makes investment move slowly, with the need to overcome the legal and constitutional objections that are regularly brought against mining projects.

Ecuador’s legal system is a civil one; the main sources of legislation are the Ecuadorian Constitution, the Mining Law, the Environmental Law, plus the regulation applicable to all commercial activity, including the Civil Code, the Labour Code and various tax laws.

There are also several subsidiary regulations that detail further the pertinent procedures for obtaining a mining concession, maintaining it and all procedures for environmental and social matters.

The Ecuadorian Constitution provides that natural resources belong to the State of Ecuador, that their exploitation shall be conducted in accordance with all environmental and social provisions and that the benefit to the exploiting company shall always be lower than the benefit to the State of Ecuador. It also provides that environmental consultations and engagement between mining companies and indigenous communities shall be conducted in pertinent cases in accordance with the treaties entered into by Ecuador.

The Mining Law and regulations cover all aspects of the granting of a mining concession, payment of maintenance fees, royalties, passing into different stages, including advanced exploration and exploitation, and all other aspects concerned with a mining concession.

The Environmental Law and regulations provide all the aspects regarding environmental licences indispensable for mining activities.

The Civil Code is a set of general rules applicable for all matters when there is no special provision for a particular matter. The Tax Code and related laws and regulations also apply to mining activities, in addition to the Labour Code for all employment matters.

All Ecuadorian legislation is applicable to companies operating in Ecuador and therefore all mining subsidiaries holding mining concessions in Ecuador are subject to all the laws applicable in Ecuador.

The Constitutional Court of Ecuador has the capacity to qualify requests for public consultation on different matters, including mining matters. Its decisions are binding.

While several international treaties provide for consultation with indigenous communities, a law defining to whom, when and how a community consultation should be made has not been passed, in part due to the Constitutional Court prohibiting the issuance of a ministerial decree in that regard.

In March 2023, an Executive Decree was issued regulating the environmental consultation process; however, this Executive Decree will only be in force until the National Assembly issues an Organic Law regulating such consultation.

In Ecuador, mineral resources belong to the Republic of Ecuador. The State of Ecuador has the right to explore and exploit all minerals and it can do this through the national mining company ENAMI (Empresa Nacional Minera). However, ENAMI does not have sufficient financial means and technical resources. Therefore, on the few projects it is handling, it has looked for partners.

The central government acting on behalf of the State of Ecuador is allowed to grant mining concessions for the exploration and subsequent exploitation of metallic and non-metallic minerals. Mining concessions for construction materials are granted by municipalities.

Article 1 of the Constitution mentions that the non-renewable natural resources on the territory of the State belong to its inalienable and imprescriptible patrimony. The central government will have exclusive competence over energy, minerals, hydrocarbons, water, biodiversity and forest resources.

Article 408 of the Constitution mentions that non-renewable natural resources and, in general, products of the subsoil, mineral and hydrocarbon deposits, substances whose nature is different from that of the soil, including those found in the areas covered by the waters of the territorial sea and maritime zones, as well as biodiversity and its cultural heritage and the radio-electric spectrum, shall be the inalienable, imprescriptible and unseizable property of the State. These assets may only be exploited in strict compliance with the environmental principles established in the Constitution.

The State will participate in the benefits flowing from the use of these resources, in an amount that will not be less than that of the company that exploits them.

The State shall guarantee that the mechanisms of production, consumption and use of natural resources and energy preserve and recover natural cycles and allow for dignified living conditions.

In spite of the fact that all subsoil products belong to the State, the regional autonomous governments in whose territory non-renewable natural resources are exploited or industrialised will have the right to participate in the income received by the State for this activity, in accordance with the law.

The role of the state is always grantor-regulator. Since the State is also the owner of mineral resources, it can operate through its wholly owned company ENAMI but this is rarely the case. When this does happen, however, the State may be simultaneously grantor-regulator and owner-operator through different government entities.

ENAMI shall have the preferential right to apply to the Ministry of Energy and Mines for the concession to any free mining area, in accordance with the certification issued for this purpose by the Energy and Non-Renewable Natural Resources Regulation and Control Agency. It shall also have the right of first option to apply for the concession to areas whose rights have been extinguished due to expiry, extinction or nullity, or which have been restored to the State.

Mining concessions are always granted and regulated by the State, independently of those that are granted to a government-owned company or any other petitioner. Once production starts, the role of the State, in addition to controlling environmental, social and labour matters, is to collect royalties and verify that the rule which states that the benefits must always be higher for the State of Ecuador than for the mining concession holder is satisfied.

The mining sector is structured as follows:

• the Sectoral Ministry (Ministry of Energy and Mines);
• the Mining Regulation and Control Agency;
• the National Institute of Geological, Mining and Metallurgical Research;
• ENAMI; and
• the municipalities in the competences that correspond to them.

Article 8 of the Mining Law establishes the creation of the Mining Regulation and Control Agency (ARCOM) as the technical-administrative body in charge of exercising the state power of surveillance, auditing, intervention and control of the phases of mining activity carried out by ENAMI, and in mixed-mining companies, private initiative, small-scale mining and artisanal and livelihood mining, in accordance with the regulations of this law and its regulations.

ARCOM has the competence to supervise and adopt administrative actions that contribute to the rational and technical exploitation of the mining resource, and to the claiming of the fair share of the benefits by the State as a result of its exploitation, as well as to the fulfilment of social and environmental responsibility obligations assumed by the holders of mining rights.

ARCOM has the following attributions, among others:

• to keep a register and cadastre of mining concessions and publish it by electronic means;
• to inspect the mining activities carried out by the holders of mining rights and titles; and
• to grant licences for the commercialisation of mineral substances determined in the present law.

ARCOM also regulates the assignment and transfer of mining rights as well as other industry issues, as it is the regulating entity.

All minerals and products thereof found underground belong to the State of Ecuador, as per the provisions of the Ecuadorian Constitution. The law allows the State of Ecuador to grant a mining concession through the issuance by the central government of a mining concession title, which, subject to the provisions of the law, including environmental laws and regulations, enables the mining concession holder to explore and produce minerals. Mineral rights granted through concessions do not have the status of property, but of rights to explore and produce. Once the minerals are produced, they become the property of the concession holder, who can sell them freely on the market.

Any natural or legal person, national or foreign, except those prohibited by the Constitution of the Republic, has the power to prospect freely, for the purpose of seeking minerals, except in protected areas and within the limits of mining concessions, in urban areas, populated areas, archaeological areas, goods declared to be of public utility and in Special Mining Areas.

The President of the Republic of Ecuador may declare Special Mining Areas, subject to Article 407 of the Constitution of the Republic, in those areas in which there is potential for mining development and which are not concessioned, with the purpose that the Ministry of Energy and Mines, through its attached entities, carry out cadastres, geological-mining investigations or other types of activity of scientific interest, within their respective competencies.

The declaration of a Special Mining Area shall expressly establish the term of validity of the Special Mining Area, which may not exceed four years; once this term has expired, it shall be lifted without the need for any provision that so declares. In all cases, the declaration will respect the legally established rights or those derived from them.

Natural or juridical persons, national or foreign, who are holders of mining rights or who carry out mining activities, are subject to the laws, courts and judges of the country.

Mining Scale

Mining concessions are divided into large-scale concessions, medium-sized mining and small-scale mining.

Small-scale mining is considered to be that which, due to the characteristics and geological conditions of the deposits of metallic and non-metallic mineral substances and construction materials, as well as their technical and economic parameters, makes their rational exploitation viable in a direct manner, without prejudice to the fact that exploration work precedes it, or that exploration and exploitation work is carried out simultaneously.

Medium-sized mining is considered to be that which, due to the size of the deposits and depending on the type of metallic and non-metallic mineral substances in question, has been able to quantify reserves that allow the exploitation of those reserves over the processing volume established for the special regime for small-scale mining and up to the volume established by law.

Large-scale mining is considered to be that which exceeds the maximum volumes established for medium-sized mining.

Non-Metallic Mining Regime and Construction Materials

The exploration and exploitation of non-metallic mining must comply with the general rules applicable to mining concessions in the terms provided by the Mining Law and its Regulations.

In the case of construction materials, the State, through the Ministry of Energy and Mines, may grant concessions for the use of surface clays, sands, rocks and other materials of direct employment in the construction industry, with the exception of river beds, lakes, sea beaches and quarries that shall be governed by the limitations established by law.

In the framework of Article 264 of the Constitution, each municipal government shall assume the powers to regulate, authorise and control the exploitation of arid and stone materials found in the beds of rivers, lakes, lagoons, beaches and quarries, according to the Special Regulations that will establish the requirements, limitations and procedures to that effect. The exercise of competence shall be limited to the principles, rights and obligations contemplated in the municipal ordinances that are issued in this regard. The municipal governments shall not establish conditions and obligations other than those established in this law and its regulations.

The granting authority for mineral rights is the central government, through the Ministry of Energy and Mines, which in turn has agencies in different regions of the country.

The granting of a mining concession is an administrative act issued in a form and substance predetermined by the law and in a format pre-established from time to time by the Ministry. The terms and conditions of the administrative act are not negotiable. All mining concessions have the same terms except for the area and remaining term of the concession. The law recognises different types of mining: small-scale, medium-scale and large-scale, plus non-metallic and construction material mining concessions.

Ecuadorian laws are applicable to all mining concessions and the mining title does not contemplate international arbitration.

For the granting of mining concessions, the Ministry of Energy and Mines will call for a public auction for the granting of all metallic-mining concessions. Likewise, it will call for a public auction for the granting of mining concessions on areas of concessions that have expired or that have been returned or reverted to the State, in which the petitioners shall participate and present their respective offers in accordance with the procedure established by the law.

The mining concession is an administrative act that grants a mining title, over which the holder has a personal right, which is transferable prior to the mandatory qualification of the suitability of the transferee of mining rights by the Ministry of Energy and Mines, and on this may be established pledges, assignments in guarantee and other guarantees provided by law, in accordance with the prescriptions and requirements contemplated in this law and its general regulations.

The mining title, without losing its personal character, confers on its holder the exclusive right to prospect, explore, exploit, benefit, melt, refine, commercialise and dispose of all the mineral substances that may exist and be obtained in the area of that concession, becoming a beneficiary of the economic yields obtained from those processes, within the limits established in the present regulation. The mining concessionaire must comply with its tax obligations in order to benefit from and carry out the activities conferred by this title and may only do so once the preliminary administrative acts have been met. These include acquiring an environmental licence and an independent certificate from the water authority that evidences that the proposed activities shall not have any impact on water sources.

The mining concession shall have a term of up to 25 years, which may be renewed for equal periods, provided that a written request from the concessionaire has been submitted to the Ministry of Energy and Mines for that purpose prior to its expiry and a favourable report has previously been obtained from ARCOM and the Ministry of the Environment.

The mining concession will be divided into an exploration stage and an exploitation stage. During the exploration stage, a distinction will be made between the initial exploration period, the period of advanced exploration and the period of integral economic evaluation of the deposit. It will incorporate the main, secondary and other minerals of economic value.

Mining holders may suspend activities when the protection of the health and life of mining workers or communities located within a certain distance of the area where mining activity takes place so requires, as provided in the general regulations of the law, when required by the Civil Defence or when non-compliance with the environmental licence by the competent environmental authority is verified. In any case, the suspension of mining activities shall be ordered exclusively by the Minister of Energy and Mines, by means of a reasoned resolution.

A mining concessionaire who is prevented from carrying out their mining activities normally, due to force majeure or a fortuitous case duly proven, may apply to the Ministry of Energy and Mines for the suspension of the concession term for the period that the impediment lasts. For this purpose, the Ministry of Industry, by means of a reasoned resolution, shall admit or deny any such request.

Grant, Exploration and Exploitation Stages

Mining concessions are granted through a competitive process where the first applicant has the right to match other offers, except in the case of applications made by ENAMI.

Unfortunately, the mining registry and procedure for new applications, called “Catastro Minero”, has now been closed for almost seven years and it is impossible to predict when it will be reopened. Therefore, the only possible way to enter now is to partner with somebody who already holds mining rights or with ENAMI.

In accordance with the mining law, a mining concession has up to four years for initial exploration, up to four years for advanced exploration, up to two years (renewable by an additional two years) on economic evaluation and what remains of up to 25 years on exploitation. The exploitation period can be extended for up to another 25 years.

Once the initial exploration period or the advanced exploration period, as the case may be, has been completed, the mining concessionaire will have a period of up to two years to carry out the economic evaluation of the deposit and request, before its expiry, the beginning of the exploitation stage and the corresponding subscription of the Mining Exploitation Contract, in the terms indicated in this law. The mining concessionaire shall have the right to apply to the Ministry of Energy and Mines for an extension of the period of economic evaluation of the deposit for a period of up to two years from the date of the administrative act accepting that application.

In the event that the mining concessionaire does not request the start of the exploitation stage in the terms indicated in the foregoing, the mining concession shall be declared extinguished by the Ministry of the Sector.

Within six months from the resolution declaring the beginning of the exploitation stage, the mining concessionaire must sign with the State, through the Ministry of Energy and Mines, a Mining Exploitation Contract containing the terms, conditions and terms for the construction and assembly, extraction, transportation and commercialisation stages of the minerals obtained within the limits of the mining concession.

The holder of a mining concession may not carry out exploitation work without having previously signed the respective contract.

Fees, Royalties and Taxes

Maintenance fees per hectare “patente” must be paid annually during exploration and exploitation stages, on a scale that is adjusted annually in proportion to the minimum wage of Ecuador (USD460 for the year 2024). For small-scale mining, the patente is equivalent to 2% of the minimum wage (USD9.2 per mining hectare). For medium and large-scale mining, the patente shall be paid as follows:

• initial exploration, 2.5%, equivalent to USD11.50 per mining hectare;
• advanced exploration and economic evaluation, 5%, equivalent to USD23 per mining hectare; and
• exploitation, 10%, equivalent to USD46 per mining hectare.

The benefits of the project are understood to be the revenues from the sales of minerals, minus amortisation of investments, operating costs and all pertinent taxes, government royalties and profit-sharing. The benefit to the company must be lower than the benefit to the State that is formed by all taxes and royalties paid by the company in the same fiscal year. An adjustable formula called “ajuste soberano” is incorporated into the contracts to ensure that the benefits to the State remain higher than the benefits to the operating company throughout.

If a project is considered to be large-scale before entering into the exploitation stage, the concession holder must execute a contract with the State of Ecuador where minimum investments on the project and future royalties are set up.

Termination and Transfer of Rights

The State of Ecuador may declare unilateral termination of a mining concession if the company has breached certain provisions of the law, including non-payment of annual per-hectare maintenance fees or royalties, not meeting minimum commitment investments, employment of children, material environmental damage duly proven through the Ministry of Environment and pertinent courts, and transference of mining rights without prior approval of the ministry.

Unilateral termination is conducted through a process where the company has the right to defend itself and, if possible, correct – and compensate for – the fault that led to the unilateral termination.

Mining rights are transferable, provided prior approval is granted by the Ministry of Energy and Mines. For the transfer process, a request must be submitted to the Ministry specifying the percentage of the area to be transferred and attaching supporting documents. If the documentation is complete, the Ministry will request ARCOM to issue three reports: legal, technical and economic. With these ARCOM reports, the Ministry will issue a resolution approving the transfer of concessions. This resolution must be registered in the Mining Registry under the charge of ARCOM. Subsequently, a Public Deed must be executed between the assignor and the assignee, attaching the registered approving resolution. At the end of the process, the Public Deed must also be registered in the Mining Registry under the charge of ARCOM.

Commercialisation, Marketing and Export

The mining law establishes the right to free commercialisation; the holders of mining concessions can commercialise their production freely inside or outside the country. However, in the case of gold from small-scale mining and artisanal mining, the Central Bank of Ecuador will market it directly, or through public and private economic agents previously authorised by the Bank.

Natural or legal persons who, without being holders of mining concessions, are engaged in the marketing or export of metallic mineral substances or in the export of non-metallic mineral substances, must obtain the corresponding licence from the Ministry of Energy and Mines, in accordance with the provisions of the general regulations of the law. The same licence must be obtained by the mining concessionaires who trade in metallic mineral substances or export non-metallic substances from areas outside their concessions.

Natural or legal persons engaged in the internal commercialisation of non-metallic mineral substances, as well as jewellery artisans, will not require this licence. The marketing licences granted are valid for periods of three years, are non-transferable and can be renewed for the same periods.

Clandestine trade in mineral substances is considered in the case of:

• holders of mining concessions who trade internally in metallic mineral substances, or export metallic or non-metallic minerals from other concessions, without the required licence; or
• mining producers who sell metallic mineral substances to persons or entities not authorised to commercialise them.

Before any activity on a mining concession can start, an environmental licence granted by the Ministry of Environment must be obtained. There are different types of licence depending on the activity contemplated. For initial exploration activities, the licence, called an environmental registry, can be obtained faster than for advanced exploration or exploitation, for which it can take up to two years to obtain the environmental licence.

In addition, it is a requirement that an independent certificate from the water authority be obtained, evidencing that the proposed activities shall not have any impact on water sources.

As a signatory of different international treaties, Ecuador also requires community consultation in cases involving indigenous communities and, in all cases, it is mandatory to disclose and inform the people of the area about the potential environmental impacts of each activity.

Community rights and continuous constitutional actions against mining companies brought by political leaders are a serious concern for mining investors and have to be analysed carefully before entering into any project in Ecuador.

Environmental licensing is an obligatory process for mining concessionaires, so that they can proceed with the different mining stages, and this must be managed through the Unified Environmental Information System (SUIA).

In order to obtain the environmental licence, it is necessary to request an Intersection Certificate which verifies the location of the concession within protected areas, or not, since, if this is the case, it will be necessary to act differently.

In all cases, the mining title holder must obtain from the National Environmental Authority the Intersection Certificate from which the intersection of the mining rights in relation to the National System of Protected Areas, Protected Forests and Vegetation, State Forest Heritage or other conservation areas declared by the National Environmental Authority is detached.

If the mining right intersects with the National System of Protected Areas, as far as extractive activities are concerned, it will proceed according to the provisions of Article 407 of the Constitution of the Republic of Ecuador and the competent environmental regulations.

In the event that the mining right intersects with Protective Forests and Vegetation or the State Forest Heritage, the mining title holder, prior to the start of the environmental licensing process, must apply to the National Forestry Directorate of the Ministry of the Environment for certification of environmental viability qualified with the report on the feasibility of the mining right. This certification will be issued by the National Forestry Director.

The Intersection Certificate will be issued for the mining rights, among others authorised by the Ministry of the Environment, or for those cases in which the title holder requires only the environmental licence of the operating area.

It is the responsibility of the mining title holder to contract an external consultant qualified by the Ministry of the Environment, who will be in charge of carrying out the Environmental Impact Study within which a technical file of the project must be included, a description of the study area and a complete description of the project prior to the beginning of any stage of exploration, exploitation or others.

Likewise, in conjunction with the Environmental Impact Study, it is necessary to carry out the Environmental Management Plan, which includes methods of evaluation and monitoring of the project, as well as a general schedule containing a budget within which the environmental policy requested by the same ministry is included.

The Environmental Impact Study must identify, describe, quantify and evaluate, in a precise manner and according to the characteristics of each case, the foreseeable effects that the execution of the mining project will produce on the different environmental and socio-economic aspects.

The Environmental Management Plan will also include aspects of monitoring, evaluation, monitoring and contingency, partial closures of operations and closure and abandonment of mining operations, with their respective programmes, schedules and budgets.

There are different types of environmentally protected areas throughout Ecuador. In most of them, mining is not possible; however, in certain buffer zones it may be possible with the Ministry of the Environment’s prior consent.

The Ministry of the Environment manages the National System of Protected Areas, which guarantees the conservation, management and sustainable use of biodiversity, as well as the functional connectivity of terrestrial, insular, marine, marine-coastal ecosystems and the rights of nature.

Protected areas are priority spaces for conservation and sustainable development. Regional autonomous governments should incorporate protected areas into their land-use planning tools.

The National Environmental Authority will carry out periodic technical evaluations in order to verify that the protected areas comply with the objectives recognised for them. If necessary and considering the results of such technical evaluations, the National Environmental Authority may delimit them or change their status, as appropriate.

In all cases, the mine owner must obtain from the National Environmental Authority the Certificate of Intersection indicating the intersection of mining rights in relation to the National System of Protected Areas, Protected Forests and Vegetation, State Forest Heritage or other conservation areas declared by the National Environmental Authority.

Article 407 of the Constitution prohibits the extraction of non-renewable resources in protected areas and in areas declared as intangible, including logging. Exceptionally, such resources may be exploited at the justified request of the Presidency of the Republic and following a declaration of national interest by the National Assembly, which, if it deems it appropriate, may convene a popular consultation.

All types of metallic mining in any of its phases are prohibited in protected areas, urban centres and intangible zones.

Community consent constitutes the most prominent issue for most mining projects in Ecuador. Opposition, political activism and community claims are common. There is no magic cure for the problems caused for mine owners by the issue; only companies’ best practices can help to overcome community and community leaders’ opposition to mining projects.

It is usual for community leaders and local politicians to file constitutional actions before the local judge, requesting suspension or termination of mining rights. The usual arguments are environmental damage and lack of proper indigenous or environmental consultation. How the local judge is going to rule is unpredictable. The decisions of the local judge can be appealed to a superior court that, again, has broad scope on how to decide. From the superior court it is possible to file an extraordinary protection action with the Constitutional Court; however, this Court hears only a limited number of cases and takes quite some time to resolve them.

The Mining Law establishes that all title holders must have a Community Relations Plan that reduces, mitigates and compensates for the socio-environmental impacts of their activity. This plan will be developed with the communities located in the area affected by the project, and in co-ordination with the development plans of the local governments involved.

The Ecuadorian Constitution provides for several types of consultations, to indigenous aboriginal communities, to the affected population on environmental matters and even to the general population on any matter.

In accordance with the Ecuadorian Constitution and the Indigenous and Tribal Peoples Convention, 1989 (“ILO 169”), prior consultation is only mandatory for indigenous communities; however, other forms of consultation, such as with the public at large, can also block a project. The Constitutional Court has rejected some of the general requests for consultation but has not been able to provide a clear rule on how and when consultations are possible. Therefore, the issue is still uncertain and remains a great uncertainty for mining projects.

The Constitution recognises and guarantees indigenous communes, communities, peoples and nationalities free, prior and informed consultation, within a reasonable time, on plans and programmes for the prospecting, exploitation and commercialisation of non-renewable resources found on their lands that may affect them environmentally or culturally, allowing them to participate in the benefits that these projects bring and to receive compensation for the social, cultural and environmental damages caused to them. This type of consultation is known as indigenous/ancestral consultation. The consultation to be carried out by the competent authorities shall be obligatory and timely. If the consent of the community consulted is not obtained, the Constitution and the law shall apply.

Article 398 of the Constitution establishes that any State decision or authorisation that may affect the environment must be consulted with the community, to which ample and timely information shall be provided. This type of consultation is known as the environmental consultation. The consulting subject shall be the State. The law shall regulate the deadlines, the people consulted and the criteria for assessment and objection to the activity submitted for consultation.

If the referred consultation process results in a majority opposition of the respective community, the decision to execute the project, or not, will be adopted by a duly motivated resolution of the corresponding higher administrative instance in accordance with the law.

The Environmental Law establishes that the competent environmental authority shall inform the population that could be directly affected about the possible realisation of projects, works or activities, as well as the possible expected socio-environmental impacts and the pertinence of actions to be taken. The purpose of the participation of the population will be to collect their opinions and observations in order to incorporate them in the Environmental Studies, provided that they are technically and economically viable.

A key aspect of the Environmental Impact Study is to include mechanisms of socialisation and citizen participation, so that the population is informed of the environmental impact of carrying out projects; this will be channelled through the tools set out in the Organic Code of the Environment.

In March 2023, an Executive Decree was passed regulating environmental consultations; however, indigenous groups filed an unconstitutionality action to the Constitutional Court claiming that the Executive Decree was unconstitutional. The Constitutional Court ruled that the Executive Decree will be in force until the National Assembly issues a new law regulating environmental consultation. As of January 2025, such a new law regulating environmental consultation has yet to be issued.

Regarding indigenous/ancestral consultation, in March 2024, an Executive Decree was issued regulating this consultation. However, similar to the Executive Decree regarding environmental consultation, a group of people made a filing before the Constitutional Court claiming that this Decree was unconstitutional. The Constitutional Court has not yet issued a decision. Therefore, as of January 2025, the only references and parameters to indigenous/ancestral consultation are those provided in the Executive Decree that is being challenged, in ILO 169 and in the parameters set by the Constitutional Court.

Ecuador is made up of a large ethnic mix of indigenous peoples and immigrants who arrived a few centuries ago. Technically, only the indigenous/ancestral communities are required to have prior consultation but, considering the large and diverse ethnic mix, everybody claims to be a community subject to consultation and special rights. The issue has to be analysed on a case-by-case basis, and it is impossible to predict an outcome.

Community development agreements are possible, but not mandatory. It is advisable to have co-operation agreements with local communities and to include them as much as possible as part of the project.

Former President of Ecuador Guillermo Lasso issued Executive Decree No 754 by which the Regulations to the Environmental Organic Code were reformed, and a chapter regarding environmental consultation was included. Environmental consultation must be carried out during the process of obtaining an environmental registry for initial exploration and environmental licensing for advanced exploration and exploitation. Indigenous groups filed a constitutional action against the Executive Decree, claiming that environmental consultation should be regulated by virtue of an organic law and not subsidiary regulation. The Constitutional Court ruled that the Execute Decree No 754 is not constitutional because environmental consultation shall be regulated by organic law. However, it ruled that the Executive Decree will be valid and in force until the National Assembly issues an organic law regulating environmental consultation.

Illegal mining has become an issue in Ecuador in recent years, posing challenges to both the government and the legal mining sector. Large illegal mining operations, such as the one named the “Buenos Aires Mine”, have gained control over some areas of the country, making it difficult for authorities to effectively intervene. Additionally, small but recurrent illegal mining operations have occurred within concessions legally held by mining companies, disrupting lawful industrial mining activities and creating environmental and social issues.

The Ecuadorian government has taken increasingly strict measures to address illegal mining, particularly in the last year. However, the problem remains widespread and challenging to control. Illegal mining is classified as a serious criminal offence under the Criminal Code and comes with severe penalties. Individuals engaging in unauthorised extraction, exploitation, exploration or commercialisation of mineral resources face imprisonment of 16 to 20 years. If the activity causes environmental damage, imprisonment increases to 22 to 26 years. In cases where the activity is linked to organised crime or armed groups, the penalty escalates to 26 to 30 years, along with fines ranging from 1,000 to 1,500 times the unified basic salary (the minimum wage for private sector workers se annually by the Ministry of Labour).

Despite these severe penalties, illegal mining persists as a pressing issue. Mining concession holders are legally required to report instances of illegal mining within their concessions. However, such reports often fail to produce effective results, highlighting the ongoing challenges in combating this issue.

The worst example is Cooper Mesa v Republic of Ecuador, regarding a large copper deposit. After several years of debate between the company and the community leaders, and independently of winning in court, the government of Ecuador declared unilateral termination of the mining concessions. This resulted in Cooper Mesa winning an arbitration award. The project is now being developed by ENAMI in association with the Chilean mining company CODELCO.

One of the difficult issues to overcome in Ecuador is illegal mining. Lately, the government has been making important efforts to combat this, but it has not yet been controlled (see 2.8 Illegal Mining).

The best example of community relations/consultation is the Lundin, Fruta del Norte Project that, with a good integration programme with surrounding communities in place, has started production on a large-scale gold mine.

Climate change is not, in general, a major concern for the mining industry in Ecuador. The big issue is community consultations.

No legislation is being passed regarding mining and climate change. What is being discussed is the right of the population, whether indigenous or not, to vote in a referendum or other type of consultation against mining projects.

Ecuador has many NGOs; some of them promote sustainable development, but most of them simply oppose mining projects, and blocking mining development seems to be their ultimate goal.

There are no legislative initiatives related to the increasing demand for the so-called energy-transition minerals, such as lithium and nickel, in Ecuador. Political opposition to mining has caused the government to refrain from leading any mining initiative.

The main rule originating in the Constitution is that the benefit to the State shall always be higher than the benefit to the operating company.

The benefit to the State is mainly formed of a 12% share of mine profits, a 25% income tax, royalties between 3% and 8%, and 15% VAT. It is important to note that community support or generation of employment is not treated as a benefit for the purposes of satisfying the Constitutional rule.

The benefit to the operating company is the total amount of sales minus amortisation of investments in accordance with applicable accounting rules, minus all operating costs (it is important to note that contributions to community development are not tax-deductible), minus all amounts paid in royalties between 3% and 8% on large-scale mining projects, minus 12% profit-sharing currently being paid to the central government and minus 25% of income tax.

There is no different treatment for national or foreign investors. While a tax of 5% applies to all transfers of funds from Ecuador abroad, it is exempted for dividends.

There are no material incentives, since the rule that the government benefit be greater than the company benefit is a Constitutional concept that does not admit any exemptions.

On large-scale mining projects, it is necessary to execute a contract before entering production. In that contract, stabilisation clauses may be possible, provided that the aforementioned benefit rule is maintained.

The general tax regime provides for capital gains of up to 10% on the transfer of mining concessions’ rights or shares, except when the local project represents less than 20% of the value of the total transaction.

Ecuador had a boom in the attraction of mining investment in 2016 and 2017. This was due to several factors, including:

• exploration potential;
• that, at that time, it was possible to apply for new mining concessions directly from the government; and
• political and community opposition being manageable.

While the exploration potential remains, the other two factors are not so clear: it is uncertain when it will be possible to apply for new mining concessions and how judges and courts are going to rule on Constitutional actions aiming to block mining projects.

There are no restrictions on foreign investments. Foreign and Ecuadorian capital and companies receive the same treatment.

Ecuador has resigned from most of the treaties it had signed for protection of investments from other countries, called bilateral investment treaties (BITs). The protection of investments can only be achieved from local judges and courts or, eventually, through clauses on the exploitation contract before the production period or a protection of investments agreement with the Ministry of Production aiming to achieve international arbitration for disputes between the parties.

Exploration, development and mining have been financed from different sources in Ecuador, depending on the type of company behind the projects. Most of the junior mid-sized companies seek capital in foreign stock exchanges and finance their activities with loans by finding a major as a partner. The few majors that have arrived have their own resources.

The domestic securities market has not been a player in the financing of exploration, development and mining in Ecuador. Most of its financing comes from abroad.

It is possible to take security on the shares of local subsidiaries, the mining concession itself and the assets. Security must be registered on local registers.

Production of copper at the Mirador project, and gold on the Fruta del Norte project, both large-scale projects, indicates the considerable opportunities for the mining sector in Ecuador.

The arrival into Ecuador of Newcrest, Anglo American, BHP, CODELCO, Fortescue and others in 2016 and 2017 was a sign of trust in the country and, eventually, may provide a foreign income stream to replace that currently produced by oil exports, which may start to decline at some point.

In 2024, the Cascabel project entered the exploitation phase, becoming the third large-scale mining project in Ecuador to reach this phase, with construction of the mine and production anticipated in the coming years. Additionally, the Curipamba project, a medium-scale mining project, has also advanced to the exploitation phase. This progress is a positive and encouraging development for the country’s mining sector. Several other projects, such as La Plata and Cangrejos projects, are also on track to enter the exploitation phase and begin production in the near future, reflecting the growth of Ecuador’s mining industry and the potential for further growth.