Insight - Ecuador: emerging opportunities for Australian mining services, training and technologies

This insight article has been written by Marie Hill, Trade Commissioner Austrade (Peru and Ecuador)

Australian mining investment and know-how is set to play a major role in developing Ecuador’s nascent mining sector. The Andean country is a relatively new entrant to the international mining scene, and is looking to transition from its historical focus on oil and gas to developing its minerals base.

The main area of opportunity for Australian firms is in services and technologies relevant to exploration and early construction, including training, drilling, geological mapping and analysis and scoping studies.

In the education sector, institutions are charged with building a workforce equipped for a future with greater mining sector activity.

Both government and industry players are also seeking expertise and services to build a sustainable industry. There is strong demand for proven expertise in responsible resource management, water and the environment, and community relations. There is also a need for capacity building in Ecuador’s ministries and government agencies responsible for the commercialisation of mining concessions and regulatory oversight of operations.

Javier Cordoba, Ecuador’s Mining Minister, has visited Australia twice to familiarise himself with Australian expertise, and is in Australia later this month for the International Mining and Resources Conference (IMARC).

Following IMARC, Austrade is organising the Australia-Ecuador Business Summit in November to be led by Robert Fergusson, Australia’s Ambassador to Chile, Colombia, Ecuador and Venezuela and held in partnership with the Ecuadorian Ministry of Mining. The Summit will provide an unprecedented opportunity for Australia METS suppliers and educators to learn more about this emerging market and make connections to create business opportunities.

Market challenges

Ecuador remains an emerging market and not without risks. The economy is feeling the impact of a decline in oil revenue, the cost of rebuilding following a 2016 earthquake, and servicing its debt obligations (mostly to China). Recognising that no other sector has the potential to drive growth and improve living standards for Ecuador’s dollarised economy, the government is keen to foster the mining industry and is implementing an investor-friendly mining regime.

The competitive environment

Ecuador’s large copper, silver and gold reserves, combined with the Government’s efforts to encourage investment, have attracted some big players to the market. Two projects – Australian Solgold’s Cascabel in the north and Swedish-funded, Canadian-listed Lundin Gold’s Fruta del Norte in the south – are acting as litmus tests for other investors, hoping to be ‘fast seconds’.

Total Australian investment in Ecuador to date is estimated at US$440 million. In addition to Solgold, Australian mining investors FMG, Newcrest and Hancock Prospecting, together with firms from Canada, Chile and China, already have a presence. In June this year, BHP announced a US$41 million investment in exploration projects in two areas in northern Ecuador. Several Australian companies, including Cardno, QBE, and LATAM Autos are also established in Quito along with a handful of METS firms delivering services.

Project Portfolio

The current status of mining projects is detailed below. Among them, Lundin Gold’s Fruta del Norte project is the largest confirmed gold discovery in Ecuador to date. It is scheduled to move into construction phase this year and begin operation between 2019 and 2020.

Nearby is Ecuador’s most advanced project, Mirador, owned by China’s EcuaCorriente, where mine construction is underway with a view to production commencing in late 2018.

Also scheduled for construction is the medium-sized Río Blanco project, operated by Junefield, also from China.

The next most-cited advancing projects are INV Metal’s Loma Larga (gold), Llurimagua, operated by the Ecuadorian state mining company, ENAMI, in a joint venture with Chile’s Codelco and Solgold’s Cascable project. The Cascable project has reported early exploration results from its porphyry copper and gold deposits could be among the biggest discoveries in the world in the past ten years.

Project Proponent/s Contained metals Stage
Cascabel Solgold/Cornerstone Copper/gold Exploration and development
LlurimaguaENAMI/CodelcoCopperExploration and development
La PlataToachi MiningGold, copper, zincExploration and development
CuripambaSalazar ResourcesCopper, gold, zinc, silver Exploration and development
TelimbelaENAMICopper, molybdenumExploration and development
Rio BlancoJunefieldGold, silverConstruction
Loma LargaINV MetalsGold, silverFeasibility study initiated
Vetas GrandesCornerstoneGoldExploration and development
Bella MariaCornerstoneGold, copperExploration and development
CangrejosLumina GoldGoldExploration and development
Warintza Trek Mining Copper, molybdenum Exploration and development
Panantza-San Carlos ExploCobres Copper, molybdenum Exploration and development
Encrucijada Cornerstone Gold Exploration and development
Zaruma Dynasty Metals and Mining Gold, silver Exploration and development
Caňa Brava Cornerstone Gold Exploration and development
Mirador EcuaCorriente Copper, gold Construction (open pit)
Fruta del Norte Lundin Gold Gold, silver Construction (underground)
Cóndor Lumina Gold Gold Exploration and development

Source: MINERGÍA Ecuador 10th edition, 9 March 2017

According to Rebeca Illescas, Ecuador’s Vice-Minister of Mines, during 2017, ENAMI received more than 800 exploration requests for mining concessions, from both local and international companies. As at July 2017, 233 had been granted. These concessions include commitments totalling US$400 million in investment over the next four years. The Ecuadorian Government’s goal is to reach 350 concessions by the end of 2017.

Opportunities

Services and technologies

With the majority of operators in the exploration and development phase and just a handful moving into construction, the opportunities for Australian suppliers relate to services and technologies relevant to drilling, geological mapping and analysis, geotechnical testing, surveying, planning and scoping studies.

A major challenge for the government and the mining sector is the legacy of informal mining and its impact on local waterways and the environment, as well as the flow-on effect on public perceptions of mining. This challenge has driven demand for expertise in responsible resource management and community relations.

International OEMs including Caterpillar, Komatsu, Atlas Copco, Liebherr and others have representatives in Ecuador which have to date focused primarily on oil and gas, hydro-electricity and civil infrastructure, along with some local construction firms. In addition, firms such as laboratory service providers, drilling contractors, geotechnical consultants, and some environmental consultants, along with suppliers of mining consumables such as explosives and safety equipment, either have a presence or are engaged in promotional activities.

Skills development

With less than three years’ mining history, Ecuador lacks the skills at an academic and technical level for the development of the mining sector, both in government (for regulatory oversight of mining) and in industry. Here the immediate need is for skills relating to exploration, but in the intermediate term construction and production skills will be required.

Staff of the Ministry of Mining need specialist technical training and advice to develop and implement responsible mining practices in such areas as community relations, pollution mitigation and water management. Similarly, the staff of ENAMI, along with Ecuador’s mining inspectorates ARCOM (both affiliate institutions to the Ministry), also seek to benefit from Australian training and advisory services to build their expertise. Newcrest is supporting the provision of training to approximately 30 personnel from the Ministry of Mining, to be delivered by a Canadian university.

Institutions such as Canada's CIRDI (Canadian International Resources and Development Institute) have been active. It has agreements at government level for the development of mining institutes in regions close to mines, including an accelerated high school and a project concerning the certification of relevant technical training to address short, medium and long-term labour demands. The base level of education in the regions in which mines are forecast to operate is low. Lundin Gold has told Austrade it is investing in several parallel tracks, including lower secondary education, to get prospective employees to a stage where they are capable of responding to VET-level training to work on its construction and production stages.

While skills gaps are recognised, government capacity to invest in skills development is contingent on revenue from a sector that is in the early stages of development. Therefore, alliances with mine operators and investors are critical to realising skills development projects, not only to create a suitably qualified workforce but also to help build acceptance of mining and its benefits to communities.

Fortunately Ecuador has a number of universities and technical institutes close to new mining operations. Several universities have good facilities (including laboratories and simulators) and qualified teachers. Universities and technical institutions, both private and public, are exploring the possibility of partnering with foreign counterparts to help transition their expertise from a focus on oil and gas to mining through the creation of joint degrees in mining engineering and/or diplomas or short courses. Relevant fields include mining rights, contract development and management, negotiation, mining registries, resource valuation, risk assessment, environmental oversight, process automation, HR management and vocational education.

The Particular Technical University of Loja (UTPL) is a case in point, located close to Ecuador’s southern mining corridor. The university is dual sector (vocational and university provider) and incorporates the Centre of Innovation and Development for the Mining Industry (CIMA). The facilities are large and modern, and the Centre has expertise in energy and geology. UTPL does not offer a mining degree but has been approached by Lundin Gold to train its employees.

UTPL has also been approached by the Mining Ministry to train workers in a certificate course covering exploration and resource evaluation; mining economics; negotiation models for new and brownfield projects; mining registry management; oversight of the mining lifecycle; and technical inspections. UPTL also has a request from mining firm ECSA (Solgold) to develop large-scale mining project management expertise and sees a need to develop expertise in underground operations in areas including OHS, certification of technical skills via consultancies, in-house delivery and accreditation of online programs.

Australia Ecuador Business Summit

The upcoming Australia-Ecuador Business Summit brings together Australian investors, METS suppliers and education providers, together with Australian Government representatives, to demonstrate the benefits of Australian expertise for the mining sector in Ecuador through the value chain.

Its purpose is also to build connections and solicit opportunities for Australian suppliers in fields related to mining exploration and early construction phases. It serves to consolidate relationships with key Ecuadorian Government representatives and agencies, following the recent election of Lenin Moreno as president. President Moreno was vice-president to the former president Rafael Correa and represents the same party, Alianza Pais.

The Australia-Ecuador Business Summit will take place on 13 November in Quito, and be followed by a program of mine site visits from 14-16 November. As an alternative to mine site visits, participating education providers may opt for a program of appointments in Quito. To join the mission and for more information, visit www.austrade.gov.au/australiaecuadorsummit2017

For more information on Ecuador and opportunities contact Marie.hill@austrade.gov.au