Ecuador’s mining uncertain with socialist in runoff

Ecuador’s mining industry is bracing for potential changes as the nation’s main socialist party gains momentum in the presidential race headed for a runoff in April. 

Luisa González, a protégé of former President Rafael Correa, is leading a strong push fuelled by public discontent over a struggling economy, gang violence and widespread blackouts. Her platform, which reflects the policies of the influential Citizen Revolution movement, could significantly reshape mining policies if she wins the final round on April 13.

González’s rise to prominence comes amid voter dissatisfaction with the current administration under President Daniel Noboa, a 37-year-old businessman and political newcomer. González narrowly trailed Noboa in Sunday’s election, securing 43.95% of the votes behind his 44.15%.

One candidate had to win more than 50% of the vote in the first round, or at least 40% with a 10-point lead over the nearest competitor, to avoid another round. The mining sector, one of Ecuador’s fastest-growing industries, faces uncertainty as González has made it clear that she would revisit royalty agreements and state control if she won. 

Lundin Gold (TSX: LUG; US-OTC: LUGDF) operates the Fruta del Norte mine, recognized as the country’s largest gold deposit. Silvercorp Metals (TSX: SVM; NYSE-AM: SVM), which bought Adventus Mining and its Curipamba project last year, is leading that development with Salazar Resources (TSXV: SRL) holding a quarter.

Salazar bought the Santiago, Pijilí, Tarqui, and La Canela projects from Silvercorp. Also in the country, the Chinese consortium CRCC-Tongguan Investment operates the Mirador copper mine.

Industry crossroads

Citizen Revolution also secured a substantial presence in the legislature, positioning the party to form alliances that could lead to a majority, potentially amplifying its ability to implement policy changes.

Under Correa’s administration (2007-2017), Ecuador established its fledgling mining industry with policies that attracted foreign investment, but were also criticized for favouring multinational corporations over local communities. González has stated her intent to increase royalties on mining operations, reflecting a broader strategy to redistribute wealth and strengthen state revenue.

Her proposals signal a potential shift away from the market-oriented framework adopted in recent years. This change could result in increased regulation, higher taxes on extractive industries, and a reevaluation of existing contracts with foreign companies. While such measures may boost government revenues, they could also deter foreign investors, particularly if the policies are perceived as unpredictable or overly burdensome.

In contrast, Noboa represents continuity for Ecuador’s market-friendly mining policies. Support from younger voters and his business background could help decide the runoff. However, his administration has struggled to address crime and economic challenges. That gives González and her platform an opportunity.