Rafael Poveda
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Transcript of Rafael Poveda
Development of Ecuadorian Basic Industries
Opportunities in the Oil, Gas & Energy sector
ECUADOR
MINING
Ecuador is a well-established democracy where the
government enjoys high approval rates
Stable and well-established democracy
President Rafael Correa Delgado won:
72% ApprovalPopularity rating
President Rafael Correa is one of the most popular presidents in Latin America
Extremely popular Government during 90 months in office
9Consecutiveelectoral processes
Including:2 reelections in the first round3 referendums
Ecuador: One of the most dynamic economies in Latin
America
Source: World Bank, ECLAC y CEPAL
ECUADOR VS LATIN AMERICA – GDP GROWTH RATE (%)
(%) Between 2007 – 2014, Ecuadorgrew 4,26% while Latin America grew in average 3,15%
Ecuador has one of the lowest unemployment rates in Latin
America
Latin American Average: 6,5%
Source: Central Banks and Statistic Offices of each country
UNEMPLOYMENT RATES - 2014
Ecuador has experienced many developments in social
economical aspects over the past decade
PER CAPITA GDP GREW 70%
CREDIT ACCESS INCREASED BY 9 P.P.
Per capita GDP (PPP)U$K
Credit Access% of GDP
Source: UNPD (United Nations Development Programme), World Bank, Central Bank of Ecuador, Ministerio de Finanzas, CIA World Factbook
+70%
+9 p.p.
POVERTY REDUCED BY 23 P.P.
Population below poverty line% de of the population
-23 P.P.
IDH INCREASED 7%
Human Develop Index (HDI)Measure 0.0 – 1.0
+7%.
1.5
2.5 2.8 2.9 3 3.1 3.3
3.3
3.3 3.6
3.6 3.7
3.7
4.6 5
.15
.1 5.4 5.5 6
.1 6.2
9.1
12
.4 13
.6
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ica
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Hai
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ame
Bel
ice
Per
uP
anam
aEc
uad
or
Bo
livia
Source: ECLAC, AGO/2013, Ministry of Finance
10 11
1821
2428 29
31 31 32 33 34 3538 38 39
46
59
Ch
ile
Par
agu
ay
Per
u
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ado
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atem
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ican
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Ho
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Co
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Ric
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Arg
enti
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Pan
ama
Uru
guay
El S
alva
do
r
Bra
zil
Average: 31%
Ecuador has also been able to sustain high level of
investment while managing a relatively low public debt
CENTRAL GOVERNMENT DEBT (%GDP, 2012) CAPITAL EXPENDITURE (%GDP, AUGUST 2013)
Source: ECLAC, Ministry of Finance
Average: 4,922
Evolution of Public Debt in Ecuador
INTERNAL + EXTERNAL DEBT % GDP - CURRENT US$
* Date for Jan-Jul 2014Source: Ministry of Finance
10
12 improved and 3 new351 millions USD 2007 – 2014
AIRPORTS
FIBRE OPTIC COVERAGE2006 – 3.500 KM 2014 – 35.000 KM
ROADS $ 7.600 millionsTOP 3 IN LATINAMERICA
GENERATION OF ELECTRICITY
2006 – 3.700 MW2016 – 8.700 MW
6.200 millions 2007 - 2014
Ecuador has improved its competitiveness by investing in ports,
airports, telecommunications, roads, and electricity generation
Historical National Government Investment
in Strategic Sectors
ACCUMULATED INVESTMENT: $30.4 BILLION
Note: *Estimated Budget as of August 2014Source: MICSE
Public Expenditure in Higher Education (As a percentage of GDP)
Source: Ministry of Finance and Secretary of Science, 2013.UNESCO, Total Public Expediture on Higher Education as % of GDP, 2010.
Ecuador: Country with the highest investment in superior
education in Latin America
2,6
The mining sector in Ecuador presents competitive advantages, such as low electricity costs and developed infrastructure:
Electricity tariff for industrial sector by country Other advantages
Current copper grades
Ecuador has some of the best copper grade
projects in the region
• Very good mineral grades• Low overburden ratio• Access to water• Modern infrastructure- Ports and roads
• Dollarized economy (stability)
Opportunities in the Mining sector
USA
Kazakhstan
(1) Currently the industrial tariff is 8,0 cents/kWh
Operating costs: Ecuador’s gold and copper
projects are forecast to be very low cost
15
Note: This analysis only includes production costs of the mine, excluding the gold used for investing and tax.
Source: Wood Mackenzie
Gold and Copper mining: operating cost of accumulated production capacity (t) (World, 2020)
0
1,500
1,000
500
0
1,5001,000500
Loma Larga 165Fruta del Norte 293
Long term price $1.350/oz
Ecuador projects
Others
Peru: Latest projects
Chile: Latest projects
20,000
0
300
40,000
200
100
30,000
400
0 10,000
Mirador 80Llurimagua 84Panantza 89
Long term price ¢350/lb
USD
/oz
USD
¢/l
b
Gold
Copper
• Gold and copper project
expected to be 1st Quartile
• Operating costs much
lower than regional peers
• Competitive advantage in
40% of operating costs:
o Work force
o Electricity
o Fuel
o Freight
The state has taken concrete actions to reduce the
tax burden and to provide tax stability
16
INCENTIVES APPROVED
Fiscal Stability ContractsAvailable for metal mining projects
Accelerated depreciationOf 5-10 years, allowing the mining sector to increase its tax shield
NPV used to calculate the Sovereign Adjustment cumulative benefits on present value basis (discounted net cash flow)
ISD tax credit for the mining sector (tax on foreign exchange outflow)
Standardized extraordinary gains tax fix the base price to guarantee predictability
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2
3
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5
Block Province Potential
Block 1 Esmeraldas Au
Block 2 Carchi, Imbabura Au, Mn
Block 3 Esmeraldas, Imbabura Au, Pt, Co, Mn, Te
Block 4 Santo Domingo Au, Ag, Cu, Pb, Zn
Block 5 Napo Au
Block 6 Cotopaxi, Bolivar, Los Rios Au, Cu
Block 7 Chimborazo Zn, Cu, Ag
Block 8 Cañar Au, Ag, Zn
Block 9 Morona y Santiago, Azuay Au, Magnetite, Pyrite
Block 10 El Oro Au, Zn, Co, Te, Poly
Block 11 Zamora Chinchipe Au, Ag
Block 12 Loja Au, Ag, Pb, Zn
Block 13 Zamora Chinchipe Mo, Th, Ba, U, Ce, W,
Nb, Sn, Pb
12
3
4
5
6
7
12
13
1
13
2
3
4
5
6
7
8
9
10
11
12
8
910
11
13 blocks of mining concessions to be auctioned in 2015
Project Company Metal
Mirador ECSA Copper
Fruta del Norte Lundin Gold
Rio Blanco Junefield Gold
Loma Larga INV Metals Gold
Panantza ECSA Copper
Cascabel Novomining Gold/Copper
Curipamba Curimining Gold/Silver
Caya 21 Lowell Gold
Ruta de Cobre Southern Copper Copper
Condor Gold Condor mining Gold
Vetas Grandes Cornerstone Gold/Silver
Caña Brava Cornerstone Gold/Silver/Copper
Bella María Cornerstone Gold/Copper
Barranco Colorado Agriplaza Gold/Silver/Copper
El Palmar – Los
Mandariyacus
Edgar Salazar Gold/Silver/
Copper/Zinc
Rio Zarza Dynasty Metals Gold/Copper
Warints Lowell Mineral Expl. Copper
Cangrejos Odin Mining Gold/Copper
Zaruma Dynasty Metals Gold
10
9
8
1
2
34
5
6
7
12
15
16
1314
1817
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2
3
4
5
6
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8
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10
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13
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12
18
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19
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19 major discoveries are under currently evaluation and development
as private projects…
… and 8 more are currently under evaluation and development
as state-owned projects
Project Company Metal
Llurimagua ENAMI y Codelco Copper
Tola Norte ENAMI Iron Ore
Telimbela ENAMI Copper
El Torneado ENAMI Silver/Copper
Pacto ENAMI Gold/Copper
La Bonita ENAMI Gold/Copper
Sangola ENAMI Gold
Nanguipa ENAMI Gold/Copper
20
21
2425
2223
27
26
23
22
20
21
27
24
25
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Note: ENAMI is the National Mining Company