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Chile’s Codelco, the world’s No. 1 copper producer, is taking Ecuador to international arbitration over the Llurimagua exploration project, which is being jointly advanced by the  two nations.

The 982-million-tonne Llurimagua copper project, about 80 km northeast of Ecuador’s capital of Quito, is in the advanced exploration stage and could become the first mine the Chilean giant operates abroad.

The relationship between Codelco and Ecuador’s National Mining Company (Enami EP) dates back to 2008, when both state-owned miners inked a cooperation agreement.

The parties only began talking about Llurimagua in 2015, and four years later they reached a deal on terms and conditions of their partnership.

Six years later, Codelco is still waiting for Enami to fulfill its part of the cooperation, it said in a statement.

“Current agreements provide for an arbitration based in Paris before the International Chamber of Commerce (ICC) for the resolution of controversies,” Codelco said.

The copper giant noted it hoped the process “will allow for a mutually beneficial agreement that will lead to the development of the Llurimagua project.” 

Copper sector “crown jewel”

The tropical nation’s former vice minister of mining, Fernando Benalcázar, once referred to the project as one of the copper industry’s “crown jewels.” Its development, however, has faced intermittent resistance from nearby communities over environmental concerns.

“Having this deposit in our soil and partnering with the world’s number one copper company, opens the doors for development technology, employment opportunities and economic growth. This project can change the lives of Chileans and Ecuadorians,” Benalcázar said in 2019.

Codelco sent a letter to Ecuador’s Attorney General in November seeking to begin “friendly talks” with Enami over its “failure to deliver” on their accord to jointly develop Llurimagua.

Tensions between the two miners began brewing in July last year, after Ecuador passed a reform to its mining law that could make Codelco lose close to 42,600 hectares of exploration ground.

The modified legislation does not include articles that allowed state companies to be awarded concessions. They now have to participate in auction rounds just as private companies do.

Codelco holds a 49% stake in the Llurimagua deposit and has the right of first refusal to buy Enami’s stake should it be put up for sale.

Ecuador holds this weekend the second round of its presidential election, which could have critical implications for the country’s nascent mining industry.