Kinross To Restart Fruta Del Norte Drilling

VANCOUVER–With newly minted mining regulations in place, Kinross Gold (K-T, KGC-N) says the Ecuadorian Ministry of Non-Renewable Natural Resources has given it the green light to jump-start exploration activity at its Fruta del Norte gold project.

Kinross got the project, in Zamora-Chinchipe province, through an $870-million acquisition of Aurelian Resources in 2008 at a time when mining prospects in Ecuador were at their lowest.

Ecuador’s government had, earlier in the year, thrown a grenade at the country’s mining and exploration industry in the form of a review of its mining laws. Investors fled and all exploration ground to a halt.

But with both a mining law and now concomitant regulations officially approved by government, the country’s mineral explorers, Kinross chief among them, can get back to work under a more or less transparent regulatory environment.

Kinross says it plans to start a 20,000-metre drill program in the near future at Fruta del Norte and predicts it will have a prefeasibility study of the project complete by January 2010. Fruta del Norte’s inferred resource weighs in at 59 million tonnes grading 7.23 grams gold per tonne.

Exactly what the impact of the mining regulations will be on bottom lines of potential producers in Ecuador is still somewhat uncertain, however. The regulations, though signed, have not yet appeared in the government’s official register.

Paramount among questions is how the government will deduct production costs and mining royalties, as set out in a January 2009 mining law, against its constitutionally mandated share of mining proceeds.

Article 408 of Ecuador’s constitution, updated in October 2008 following a referendum, states that the Ecuadorian state is to “participate in the benefits” from the exploitation of natural resources, minerals included, in an amount not less than those companies exploiting them.