Ecuador, Kinross Continue Talks For Deal For Fruta Del Norte

Canadian gold mining company Kinross Gold Corp. (KGC, K.T) and the Ecuadorian government are continuing negotiations for a deal that will allow the company to mine the Fruta del Norte deposit.

President Rafael Correa and Kinross chief executive Tye Burt are planning to hold a meeting in Quito, officials say.

Fruta del Norte, located in Zamora Chinchipe province, is the largest gold deposit in Ecuador. It has proven and probable mineral reserves estimated at 6.8 million ounces of gold and 9.1 million ounces of silver.

"There is still no confirmed date for the meeting, but we are working on it and hope it will be soon. It will depend on the schedules of both people," Kinross's vice president in Ecuador, Dominic Chaner, told Dow Jones Newswires. "Talks continue and there is a very good working environment."

Ecuador expects to start large-scale mining production in 2014, eventually allowing it to become one of the Andean nation's biggest sources of revenue.

However, negotiations with mining companies to sign contracts to allow production are more complex than expected due to the government's decision to obtain more than 50% of mining revenues, including annual royalties and several taxes.

In early December, Kinross and the government reached an agreement for Fruta del Norte, which, among others, established the government's share of project economic benefits at a minimum of 52%, including royalties and taxes.

However, in February the government announced that the final contract might not go through due to the company wanting to renegotiate the terms of the agreement.

Chaner expects that a "fair and balanced deal" between the Ecuadorian government and Kinross will be reached at the latest by June.

Last month, Ecuador signed a 25-year contract with Ecuacorriente, a company controlled by the China Railway Construction Corp. (601186.SH, 1186.HK) and the Tongling Nonferrous Metals Group Co. (000630.SZ) for the Mirador copper project, with about five billion pounds in recoverable reserves of copper.

The Chinese companies also own the Panantza-San Carlos copper project, near the Mirador.

According to official data, five projects that the administration of President Rafael Correa considers highly important will involve an investment of about $8 billion over four years for the construction of the mines and production facilities.

Those projects include Mirador, Fruta del Norte, Panantza-San Carlos, and Rio Blanco and Gaby.

Rio Blanco and Gaby projects are operated by the local unit of International Minerals Corp.'s (IMZLF, IMZ.T).

An study from the private Council of Responsible Mining, or Conmin, said that the five strategic projects could generate annual sales of $2 billion when they all reach production stages, possibly in about five or six years.

The study added that Ecuador has a potential of 35 million ounces of gold, 70 million ounces of silver and eight million tons of copper.

-By Mercedes Alvaro, Dow Jones Newswires; 5939-9728-653; [e-mail]