Ecuador court confirms DPM concessions; permits delayed by 12 months

While the recent court decision reaffirms Dundee’s mining concessions, the company anticipates that some additional requirements could delay the environmental licence process by at least 12 months. Although this development allows the company to explore other growth avenues, it introduces a potential pause in the project’s progression.

Raj Ray, a BMO Capital Markets mining analyst, said in a note to clients the court decision, while reaffirming DPM’s mining concessions, suggests that the environmental licence process for the Loma Larga project could face material delays. “However, this is not necessarily a bad outcome as it gives Dundee flexibility to look at other growth options,” the analyst said.

Dundee has been working to stabilize its relationship with the Ecuadorian government. It recently signed an investor protection agreement with Ecuador, providing the company with tax stability, legal protections, and various tax incentives, enhancing the project’s long-term prospects.

The decision addresses an appeal of the Constitutional Protective Action that the company filed against the Ministry of Environment, Water and Ecological Transition (MAATE). MAATE is responsible for issuing environmental permits for the Loma Larga project.

The provincial court’s decision clarified that the state must conduct a free, prior, and informed consultation with specific local indigenous populations. The company already planned this consultation as a part of its project development.

The company has paused drilling activities at Loma Larga to seek clarification on the court’s requirements. The company does not anticipate committing significant capital to the project until it receives its environmental licence. It says it aims to understand the steps needed to resume the drilling program for the feasibility study.

“As we assess the court’s decision, we remain committed to the highest applicable standards for environmental protection and stakeholder engagement in line with International Finance Corporation standards,” Dundee’s CEO, David Rae, stated in a release.

Local indigenous groups and communities have opposed the Loma Larga project for years. This opposition dates to the exploration days under its previous owner, INV Metals. In February 2021, Cuenca residents voted to protect their water and wetlands from mining activities. Despite this, Dundee acquired INV Metals that year, believing the referendum would not affect established projects.

Loma Larga, an underground gold-copper-silver project, lies about 30 km southwest of the city of Cuenca.

A 2021 feasibility study revealed that Loma Larga could produce on average about 170,000 oz. gold yearly over a 12-year mine life. The study estimated the initial capital expenditure at US$316 million. However, an update expected in the second half might suggest a higher capex than the current estimate.

Following the recent court decision, shares of Dundee Precious Metals closed up 1.67% Tuesday at $9.15, having tested $5.41 and $10.78 over the past 12 months. The company’s market capitalization stands at $1.7 billion.