Oil and Gas

UPDATE 3-Ecuador's Correa backs large-scale mining freeze

(Recast, adds Correa’s and assembly member comments and details)

QUITO, April 17 (Reuters) - Ecuador will suspend large-scale mining exploration projects while a new mining law is approved to regulate the country’s nascent sector, President Rafael Correa said on Thursday.

Correa, who has sought to tighten state control over Ecuador’s natural resources, said a new mining law is expected to be approved in six months. A special assembly rewriting the constitution is expected to pass a decree on Friday to revoke illegal concessions and suspend mining activity in medium and large-scale exploration projects.

“Some concessions where there has been investment and exploration and that were about to enter the exploitation phase will be suspended for 180 days until there is a new legal framework,” Correa told foreign reporters in Quito. “And we will write new (mining) contracts based on that legal framework.”

The constitutional assembly is working to overhaul the mining sector to increase state control, which is fueling investor concerns over whether Correa will seek more control over mining operations as his ally, Venezuelan President Hugo Chavez, has done with the oil sector.

A suspension would delay the construction plans of companies that found large deposits in the Andean country, which lacks significant output of precious metals. Dozens of Canadian companies such as Aurelian Resources ARU.TO and Corriente Resources CTQ.TO are exploring for gold and copper.

The stock price of Aurelian was down 13 percent to $7.49 while Corriente shares were down 17 percent to $4.53.

Assembly member Betty Tola, the head author of the decree, said if approved the order would suspend all activity in exploration projects, including gathering samples for environmental studies.

“It applies to all medium- and large-scale exploration concessions,” Tola told Reuters. “The suspension will take effect immediately after the decree is approved.”

The decree will also slash mining holdings for companies to three concessions.

Correa reiterated he supports large mining projects that could bring billions of dollars in revenues to the poor nation, but said companies will have to comply with stricter controls and share more of its future profits with the state.

“The issue here is not about if we say yes or no to mining ... the challenge is to do it (mining) right,” Correa said.

The 130-member assembly, controlled by Correa’s Alianza Pais party, plans to vote on the decree that will also revoke concessions owned by companies that have not invested until late 2007 or have failed to pay their government fees. (Reporting by Alonso Soto in Quito, editing by Jim Marshall)