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New Regulations for Scout Drilling in Ecuador

On June 28, 2018, Minister of Mines, Carlos Pérez, signed the Ministerial Decree Nro. 2018-0034 (Decree 34) which will allow mining concessionaries to perform scout drilling during the initial exploration phase of mining concessions in Ecuador.

Up until now, drilling activities were only permitted during the advanced exploration phase of mining concessions. Undoubtedly, this situation affects the initial exploration activities that according to the Mining Law must be performed during 4 year since a mining title is granted.

According to Decree 34, test or reconnaissance boreholes can be drilled in a maximum of forty (40) platforms within each mining concession. Exceptionally, in areas that intersect with highly sensitive ecosystems legally declared by the Ministry of the Environment, test or reconnaissance boreholes can be drilled in a maximum of twenty (20) platforms within each mining concession.

Test or reconnaissance boreholes are understood as exploratory wells drilled at various angles and depths, using human portable or air transportable rigs. The platforms must be of maximum  10 meters per side and use efficient water systems and biodegradable drilling fluids.

As far as we know, the Ministry of the Environment has not declared any mining area as an “area with a highly sensitive ecosystem,” and therefore the limit of twenty (20) platforms does not currently apply.

With these new regulations, in order to perform scout drilling, no new standards or additional regulations are required. Nevertheless, considering that the mining concessionaire will use water for this purpose, it must obtain an authorization for industrial use of water at the National Water Secretariat (SENAGUA). In some cases, it also would be necessary to get a registration of hazardous waste and a forestry feasibility certificate (if the areas are within protected forests).

Certainly, we believe that allowing scout drilling within initial exploration is great news for the Ecuadorian mining industry and especially for investments within the concessions granted through the tender processes that started in 2016. When the process started, many companies committed to make investments with the understanding that permits and authorizations would be granted in a timely manner. Regretfully, this did not occur and investments have slowed due to the delay on issuing licenses and permits specifically from the Environmental Ministry and the National Water Secretariat.

We are confident that the possibility of carrying out scout drilling during initial exploration activities should restart the flow of investments. For Ecuador and the companies it is a win-win situation.