Ecuador Officially Lowers Taxes. Step 1 Toward Becoming A “Go To” Mining Destination?

Ecuador is going to be recognized, more broadly, as a go-to destination for mining.  Located between Colombia and Peru, Ecuador is the last frontier for grassroots exploration along the Andes Mountains corridor.  While exploration activity has started heating up over the last few years, with the entrance of major state-owned mining firms like Codelco and Grupo Mexico, little to no modern day exploration has been done since the 1980’s (if ever).  Yet amazingly, considering the lack of effort, several world class deposits have already been discovered, including Lundin Gold’s (LUG, TSX) Fruta Del Norte with an estimated 14 million ounces at up to 9.6 g/t Au, and SolGold’s (SOLG, TSX) Cascabel deposit with an estimated 729 Mt at 1.06% Cu.

To help ensure its vast resource potential isn’t wasted any longer, the Ecuadorian government has laid out the following goals for the mining industry by 2021:

Comparatively speaking, Ecuador offers many competitive advantages for the mining industry.  The country has electric power generating capacity of 9 GW, among the lowest electricity costs in South America.  Deep water shipping lanes, roads, and airports are in place.  And now, as of last week, Ecuador has officially eased the tax burdens on miners.  According to the Mining-Journal, new regulations under the Productive Development law in Ecuador will provide greater fiscal stability for miners and reduce their taxation burden, including the elimination of the controversial windfall tax.

“The new system in more attractive because investors can recover their investment in less time,” said mining law expert Cesar Zumarraga (who cuts right to the heart of the matter).

Ecuador’s hands really are quite tied on this issue of mining and whether or not to be a pro-mining country, unless they want to turn into a Venezuela.  Taxes flowing into government coffers from Oil has been declining, with no upturn in sight.  And a large proportion of Ecuador’s debts are payable in U.S. dollars.  An important point there, because they can’t just print money to pay down debt.  Ecuador’s only hope is to grow its way out and build out its mining economy.  So when you throw everything into a pot – 1) tax burdens eased; 2) windfall tax eliminated; 3) excellent under-explored geology;  and 4) infrastructure advantages – what’s the argument against Ecuador as a place for resource speculators to park some money over the next 12 to 24 months?

Many of the world’s largest miners have already come to the logical conclusion, Ecuador is a place they have to have some representation in.  The following map doesn’t even include names like BHP, Anglo American, First Quantum, and Hancock Prospecting.

Denoted by blue triangles, you’ll see Salazar Resources (SRL, TSX-V) is positioned nicely from north to south.

I might sound like a broken record on this, but the greatest tunes are worth playing over and over again (they never go out of style).  Do not doubt me on this – SRL is headed higher.  It has to.  Salazar is the preeminent project generator in Ecuador.  Of course, I don’t know precisely when SRL makes its big run.  But I believe we’re getting ever closer.  And there’s really no downside to this play, not that I see anyway (which makes for a relatively safe bet).

Yes, the chart is still spotty.  However, to me a pattern is clearly forming.  We’ve got support at 11 and resistance at 13 cents.

 With only 165,000 shares offered up to 16 cents it won’t take much for SRL to get there once it punches past 13.

Since the first of the year and into February we can also see some activity.  Indeed, volume is starting to pick up and SRL is trading on nearly a daily basis now!

That’s been a long time coming.  So why the extra interest all the sudden?

I pin the recent uptick in interest on three things:  1) obviously, growing confidence in Ecuador as a mining country following the easing of tax burdens; 2) Salazar’s recent corporate development hire, Mr. Marr-Johnson, who represents Arlington Group A.M. (they’ve got 21 million reasons/shares to promote this opportunity); and 3) savvy speculators starting to place bets on some excellent economics in the coming PEA.

Of course, that doesn’t include those who are positioning for exploration drilling results from 3 unique projects that’ll probably start rolling out around Q2 and through the remainder of the year.

Then again, maybe more people are starting to pay attention to how Salazar’s infill drilling results from El Domo keep getting better and better.  Yesterday they announced a 24 m intercept grading 5.4% Cu, 6.4 g/t Au, 58 g/t Ag, and 2.6% Zn!  Results so good you’d think they were coming from the Congo.

Like I said Friday: “You don’t need a high IQ to be a great speculator. However, to be a smart speculator you do need to know how to read the tea leaves. You must know how to connect the dots. You’ve got to skate to where the puck is going!”

Altius Minerals’ (ALS, TSX) business decision to pay $10 million for a 2% royalty on Curipamba (Salazar owns 100% until Adventus (ADZN, TSX-V) spends $25 million on the property) is one of those tea leaves worth reading.  In my view it’s a clear tipoff that the coming PEA and resource update will be strong.  Therefore, we’ve got 1 or 2 positive catalysts already in the bag during the next few months (if not sooner).

Working into Q2 and Q3 news flow shifts to drilling results.  I’ve already stuck my neck out by saying “2019 is the year of renewed discovery for Salazar-Adventus.”  Within the 22,000 hectare property, hosting one of the world’s highest grade VMS deposits, vast exploration potential remains.  More than 10,000 m of regional drilling will be conducted this year with an aim toward making a new discovery at Curipamba.

El Domo is a flat lying VMS deposit, almost exactly as the geologic textbooks write them up.  VMS deposits occur in clusters.  Therefore, the odds of Salazar making a new discovery is nearly a certainty it’s only a question of time and effort.

Also, just speaking to the prospectivity of this general area. Luminex (LR, TSX-V) has signed JV deals on two projects practically bordering Curipamba to the north and east.  Anglo American would spend $57 million to earn 70% on Pegasus A and First Quantum would spend $38 million to earn 51% of the Orquideas property (Pegasus B).

Big commitments and pretty nice company to be in eh?

I’m beginning to run out of ways to say it, but SRL is a holding that should be in your portfolio assuming you believe, like the major mining companies do, that Ecuador is a discovery destination with a regulatory path toward mining.