Presentation notes from Rafael Poveda

1. Development of Ecuadorian Basic Industries
Opportunities in the Oil, Gas & Energy sector
ECUADOR
MINING

3. • ADVANTAGES MINING OF ECUADOR
• Government stability and
• support
• Operational advantages

4. Ecuador is a well-established democracy where the
government enjoys high approval rates
Stable and well-established democracy
President Rafael Correa Delgado won:
72%Approval
Popularity rating
President Rafael Correa is one of the most
popular presidents in Latin America
Extremely popular Government during 90
months in office
9Consecutive
electoral processes
Including:
2 reelections in the first round
3 referendums

5. 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, Ecuador
grew 4,26% while Latin America
grew in average 3,15%

6. 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

7. 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%.

8. 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
5.1
5.1
5.4
5.5
6.1
6.2
9.1
12.4
13.6
Uruguay
Jamaica
Argentina
Nicaragua
Guatemala
Mexico
ElSalvador
CostaRica
Colombia
Bahamas
Paraguay
DominicanRep.
Chile
Venezuela
Honduras
Haiti
Brazil
Suriname
Belice
Peru
Panama
Ecuador
Bolivia
Source: ECLAC, AGO/2013, Ministry of Finance
10 11
18
21
24
28 29
31 31 32 33 34 35
38 38 39
46
59
Chile
Paraguay
Peru
Ecuador
Guatemala
Haiti
Mexico
Bolivia
Nicaragua
Colombia
Dominicana
Honduras
CostaRica
Argentina
Panama
Uruguay
ElSalvador
Brazil
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

9. Evolution of Public Debt in Ecuador
INTERNAL + EXTERNAL DEBT % GDP - CURRENT US$
* Date for Jan-Jul 2014
Source: Ministry of Finance

10. 10
12 improved and 3 new
351 millions USD 2007 – 2014
AIRPORTS
FIBRE OPTIC COVERAGE
2006 – 3.500 KM
2014 – 35.000 KM
ROADS $ 7.600 millions
TOP 3 IN LATINAMERICA
GENERATION OF
ELECTRICITY
2006 – 3.700 MW
2016 – 8.700 MW
6.200 millions 2007 - 2014
Ecuador has improved its competitiveness by investing in ports,
airports, telecommunications, roads, and electricity generation

11. Historical National Government Investment
in Strategic Sectors
ACCUMULATED INVESTMENT: $30.4 BILLION
Note: *Estimated Budget as of August 2014
Source: MICSE

12. 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

13. • ADVANTAGES MINING OF ECUADOR
• Government stability and support
• Operational advantages

14. 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

15. 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 165
Fruta 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 80
Llurimagua 84
Panantza 89
Long term price ¢350/lb
USD/ozUSD¢/lb
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

16. The state has taken concrete actions to reduce the
tax burden and to provide tax stability
16
INCENTIVES APPROVED
Fiscal Stability Contracts
Available for metal mining projects
Accelerated depreciation
Of 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
1
2
3
4
5

17. 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
1
2
3
4
5
6
7
12
13
1
13
2
3
4
5
6
7
8
9
10
11
12
8
9
10
11
13 blocks of mining concessions to be auctioned in 2015

18. 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
3
4
5
6
7
12
15
16
13
14
18
17
1
2
3
4
5
6
7
8
9
10
14
13
11
12
18
15
16
17
19
11
19
19 major discoveries are under currently evaluation and development
as private projects…

19. … 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
24
25
22
23
27
26
23
22
20
21
27
24
25
26
Note: ENAMI is the National Mining Company

20. Investing in Ecuador is
investing for the future.