The state mining company Enami is allying itself with Barrick, Solaris and Hanrine, which promise investments of USD 172.5 million, although anti-mining pressures persist.
Reference image of Enami technicians, April 2015.
The new management of the National Mining Company (Enami) begins 2024 with an ambitious plan, after closing with figures in the red in 2023.
This is said by Emmanuel Delaune, manager of this public company, which reported USD 5 million in losses in 2023.
One of the main strategies is to sign investment agreements for exploration with transnational mining companies, which are among the most important in the world:
The public company already signed one of the agreements with Hancock Prospecting PTY LTD (Australia) on April 4, 2024 , through its subsidiary Hanrine Ecuadorian Exploration and Mining .
The agreement will allow the exploration of 28,276 hectares , divided into six concessions , located in Imbabura.
And it is expected that in the coming weeks another agreement will be signed with Solaris Resourses (Canada), which will carry out explorations in Morona Santiago.
With these two agreements, the two mining companies will invest USD 145 million in exploration and will pay Enami 1% as part of the agreement, explains Delaune.
Already in November 2023, Enami signed a similar agreement with the Canadian mining company Barrick International , which committed to investing USD 27.5 million in exploration in 40,000 hectares in southern Ecuador, and paid USD 275,000 to Enami.
But how will these explorations advance at a time of tension due to the opposition of the indigenous movement and with a mining registry closed to grant new concessions?
Delaune explains that an appeal is being prepared that could be a ministerial agreement, which would allow the company, as a public entity, to receive new concessions, despite the fact that the mining cadastre has not been granting them since 2018.
How does Enami start 2024?
The biggest challenge is the lack of resources, which has affected us a lot in the operational part, because we do not have fiscal resources, everything we receive is through self-management.
That is why it is important to implement a business vision, which is very clear.
We have to promote “trade agreements” with private companies, since we do not have sufficient resources to carry out exploration. We have already signed two agreements and one more is in the process of signing.
We have to strengthen agreements with private companies, we do not have sufficient resources.
This is a new figure, which was created through a regulation issued in 2023, which allows us to hire companies through these commercial agreements to carry out exploration in mining areas.
Which companies will carry out the explorations and how much will they invest?
The commercial agreement that has already been signed since 2023 is with the mining company Barrick International. Then another was signed with the mining company Hanrine and another with the company Solaris Resources is on the way.
With Barrick International, the investment to be made in exploration is USD 27.5 million, with Hanrine it is USD 120 million and with Solaris Resources it is USD 25 million.
Of these investment amounts, in the public tender it was established that 1% be allocated to Enami accounts. In the case of the agreement with Barrick International, the resources that corresponded to Enami already entered in November 2023.
In what areas will companies explore if the mining registry is closed and Enami’s concessions have social and legal conflicts?
For now we are working on a regulation that allows Enami to request areas, even when the cadastre is closed, as long as we are the holders of the concession. This may be made possible through a ministerial agreement.
Let’s start from what the Constitution establishes, which establishes that natural resources are property of the State and Enami, being a public company, is also the owner of the resources.
And, in addition, Enami has what is known as preferential or first option right over new areas, according to the Mining Law.
This right means that if a petitioner requests an area, the Ministry of Energy consults Enami if we want to execute our preferential right in that area. If we decide to execute, those areas reach us preferentially.
Now we are working on that regulation that I mentioned, to have access to certain mining areas through that preferential right, to encourage the attraction of new investments.
In the case of Barrick International and Solaris Resources, the areas to be explored are not yet listed in the mining cadastre, which is why the process will take longer.
And in the agreement with Hanrine, the areas are already graphed, so the process will be faster. Ownership of these areas has already been requested and is in process. We hope that next week we will be granted those concessions.
Will these agreements be enough to lift Enami after closing 2023 with USD 5 million in losses?
These figures are the result of a drag of several years. There was a recommendation from the Comptroller’s Office to deregister three projects that we had as assets, for USD 3.9 million.
The above because there was no type of management in those projects and there were even social and legal problems.
This was reflected in the financial situation as a loss, which added to what was carried over from other years, amounted to USD 5 million in 2023.
The vision we have, in addition to the agreements already mentioned, is to clean up the portfolio of the 27 concessions that we have in 14 projects.
Currently all Enami projects are facing some type of problem, social or legal.
One way to unblock this is perhaps to assign and transfer a part of the projects that correspond to us or the entire project to other companies, if there are interested parties. This will allow us to have some additional resources for the company.
Another strategy is an expansion plan through obtaining new areas. That happens through the preemptive right that I mentioned before.
As a public company, Enami may have access to certain reverted or archived mining areas. For example, if a concessionaire returns the concession, we can incorporate them into our project portfolio and, depending on the case, seek new commercial agreements.
And a last point in the strategy to grow is to find financing to have its own processing plant.
Why invest in a profit plant if you face the problem of lack of resources?
We want to do it for two reasons. We believe this plant is necessary to process ore seized from illegal mining.
In this aspect there are many problems because there are many dark interests around, in addition to a terrible bureaucracy that makes the process very complex, not at all agile.
This plant is necessary to process mineral seized from illegal mining.
The idea is to make the processing of seized material more agile.
The second objective is to be like Enami in Chile, where they process the material from small and artisanal mining and sell it. This breaks the vicious cycle of illegal mining.
Furthermore, by processing artisanal and small-scale mining material, we can provide solutions to the environmental problems that some of its processing plants may generate.
We also want to propose a comprehensive tailings management service.
We have already had some signs of interest from financing sources, it will be an investment of USD 3 million or USD 4 million.
Why hasn’t seized illegal mining material been processed and sold since 2021?
Within the legal procedure it is established that the Ministry of Finance must finance the processing of that material.
This begins in the Prosecutor’s Office, to determine the crime of illegal mining and the intervention of the Regulation and Control Agency is requested, which in turn asks the Geological and Energy Research Institute to determine the content of the material.
Then the Agency returns to make an economic assessment, and with that we ask the Ministry of Finance to give us the funds to process the material.
I am just taking up this position, but from what I know, after that last batch that was processed in 2021, the Ministry of Finance said it did not have resources for new processes.
The Ministry of Finance said it did not have resources for new processes (for processing seized illegal mineral).
What is the income goal that has been set for 2024? Can the downward trend of previous years be reversed?
I can’t give a global figure. For example, the income that we could have from the assignment and transfer of concessions is data that will depend on the public tender that we carry out, on whether interested parties propose upward amounts.
But we can project the income from trade agreements:
From Hanrine we would have USD 1.2 million and from Solaris Resources, USD 250,000.
Other income expected this year will be about USD 178,000, which we expect from an asset auction process that we will do in July and from debt collection as well.
What state are the concessions they have in the Chocó Andino area after the popular consultation?
We have two concessions in that area, in Pacto. It is important to clarify that, despite the results of the popular consultation, the rights that have been granted are not retroactive, and the law is clear: the mining right is to explore, exploit, refine and market.
Despite the results of the popular consultation, the rights that have been granted are not retroactive.
I do not agree with how some anti-mining groups act, because they distort the information and tell people that since the popular consultation won, we cannot continue there, but that is not the case.
Currently, of the approaches we have on the social side, 50% of people are against and 50% in favor.
At Pacto we can make an assignment and transfer to another company. I couldn’t say yet what the valuation is and what offers we have on this project. The most likely thing is that it will allow us to cover all the deficits we have had, they are much higher amounts.
But precisely one of the problems in valuing a project is that if it is already known that there are these social problems, the valuing of the project is lowered.
However, we have some signs of interest from companies that are willing to take that risk.
They are companies that know the problem, they are Ecuadorian investors and they know how to enter with a sustainable model for the communities and the environment.
