Ecuadorian Miners Question Government’s Imposition of Inspection Fees

According to the Mining Journal, the Ecuadorian government intends to implement a new mining tax aimed at bridging the fiscal gap, but it may deal a severe blow to the exploration sector.

The proposed mining inspection fee (Tasa de Fiscalización Minera) is expected to generate $229 million in annual tax revenue for Ecuador, with the intention of strengthening technical and environmental monitoring of the industry. This tax applies to all levels of mining activities, except for small-scale mining.

The Ecuadorian Mining Chamber (CME) has strongly criticized this move, stating, "This matter was never consulted with the industry, and we believe it represents a significant technical obstacle to the responsible and sustainable development of the mining sector."

While acknowledging the need for enhanced state control and industry regulation, the CME has criticized the structure of the tax. It is levied per hectare, with different tax rates for projects at various stages.

The CME claims, "For medium-to-large-scale mining projects, especially those in the exploration phase, this approach is not feasible."

The final tax amount may exceed the exploration investment of the project, the CME added. "This makes regulation an obstacle rather than a tool."

Ecuador's largest mining projects include Lundin Gold's Fruta del Norte gold mine and EcuaCorriente's Mirador copper-gold mine.

Exploration

The CME has also criticized the new tax for imposing additional financial burdens on non-revenue-generating exploration companies, which are in the most vulnerable growth phase.

"Although we understand that, as an administrative fee, it does not require formal legal authorization, it must adhere to the constitutional principles of appropriateness, reasonableness, and equality. From its design, this fee is unrelated to the cost of the services it provides or the economic capacity of taxpayers, and it may have an extraordinary impact on exploration activities," the CME stated.

The CME's analysis indicates that this fee will make Ecuador less competitive in exploration compared to other Latin American countries. Ecuador's fee is $11.5 per hectare, while Colombia's is $6.7, Chile's is $4.5, and Peru's is $3.

"Ecuador is the most expensive country for exploration in the region, and the new tax makes this difference even more pronounced," the CME said.

In 2024, exploration investment in Ecuador was $67 million, compared to $493 million in Argentina, $568 million in Peru, and $637 million in Chile.

In other aspects, the cost of mine construction in Ecuador is relatively high. Although the country provides mining investors with the ability to sign investment protection agreements, thereby stabilizing their financial situations, its mining law adopts a floating royalty rate that varies between 3% and 8% depending on changes in metal prices. Under the current gold and copper prices, mining companies are facing the situation of the highest royalty rate.