On October 26, 2023, the “Regulations for the assignment and transfer of rights of the mining concessions of the ENAMI EP” (hereinafter the “Regulations”) were published in the Official Gazette number 425.

The following are the main elements of this regulation:

1.The proposal for an assignment and transfer process may come from a legal entity in the private or public sector, national or foreign, with an interest in a mining concession of ENAMI EP.[1] It can also be a proposal from ENAMI itself[2].

2. For a proposal from a legal entity, a letter of intent must be submitted with (i) the name of the mining concession(s); (ii) name of the legal entity submitting the proposal, (iii) its experience in the mining sector, (iv) capacities and projects in Ecuador and abroad, and (v) judicial domicile[3].

3. It must also present (i) the appointment of the legal representative or attorney-in-fact; (ii) domicile in Ecuador if it is a foreign company, (iii) corporate, tax and labor compliance certificates and (iv) economic support for the acquisition of the concession and its development[4].

4. ENAMI’s exploration manager will coordinate with other areas for the issuance of technical, economic, and legal reports that determine whether to continue with the public tender for the assignment and transfer of ENAMI’s concessions[5].

5. There are two types of assignment and transfer procedures: (i) direct and (ii) public tender. The process of assignment and direct transfer applies only when (i) the proposal is from ENAMI[6], (ii) when “the mining titles […] are part of commercial agreements, strategic alliances, associativity agreements or consortia signed between ENAMI EP and a third party” and (iii) that the obligations of the corresponding instrument have been complied with[7]. ENAMI will carry out the assignment and transfer process directly with the signatory of the corresponding instrument[8].

6. For the process of assignment and direct transfer, there must be (i) a report from the administrator of the corresponding instrument confirming compliance with the obligations of the instrument, the name of the concession and its details, the name of the legal entity to which the mining rights will be transferred and the value of the assignment and transfer; (ii) the result of the valuation (resource estimate in an NI 43-101 or similar) of the concession; (iii) a certification of compliance with mining tax obligations; and (iv) the authorization of the Board of Directors of ENAMI to initiate the process of assignment and direct transfer of the concession.

7. With the above requirements, the manager of ENAMI will request “planning, technical, economic, environmental and legal reports” with recommendations on whether the assignment and direct transfer of the concession should be carried out[9]. If the recommendations are affirmative, the general manager of ENAMI will instruct the legal department to sign and perfect the corresponding contracts[10].

8. The process of assignment and transfer by public tender applies to “mining titles […] that are not part of commercial agreements, strategic alliances, associativity agreements or consortia signed with ENAMI EP, unless due to the effects of such agreements they have been abandoned, waived, transferred or in any other way that implies that they are freely available by ENAMI EP”.[11]

9. For the process of assignment and transfer by public tender, ENAMI’s exploration management will request the general manager to initiate the public tender process for the assignment and transfer of the concession or concessions, either by private initiative or by ENAMI.[12]

10. The general management will request a report with the name of the concession, its details, geological information, validity of the concession and previous acts in accordance with Article 26 of the Mining Law, and the convenience and necessity of the assignment and transfer. In addition, it requires (i) the results of the valuation of the concession (resource estimation); (ii) certification of compliance with mining tax obligations; and (iii) authorization from the Board of Directors for the initiation of assignment and direct transfer[13].

11. With the above requirements, the general manager of ENAMI will request “planning, technical, economic, environmental and legal reports” with recommendations on whether or not the assignment and direct transfer of the concession or concessions should be carried out[14]. If the recommendations are affirmative, the manager of ENAMI will instruct the legal coordination to sign and perfect the corresponding contracts[15].

12. With this, ENAMI will prepare the bases of the public tender that must have the technical, environmental, social, economic, financial, and legal requirements; the schedule of the process; the evaluation and qualification system; and the disqualifications of participation.[16] The call may be made through the ENAMI website, the press, or other electronic and digital means of communication[17]. If only one interested party comes forward, the qualification process can continue[18].

13. To select the best bidder, a technical committee will be set up consisting of (i) the general manager, who will chair it; (ii) the head of the technical area in charge; (iii) the head of the financial administrative area; (iii) the head of the Corporate Affairs and Sustainability area[19]. Its delegates may appear in their stead. The commission will present a report to the general manager with the qualification of the bidders and the recommendation whether to continue with the opening of envelopes[20].

14. Bids must be submitted in physical form at the time and in the manner indicated in the call for tenders[21]. The bids will be evaluated by the technical committee, which will prepare a report with its recommendation[22]. The commission must choose the bidder that offers the greatest economic and strategic benefits for ENAMI.[23] It may also declare the public tender void in the event that (i) no bids are submitted within the procedure, (ii) if the bids submitted do not meet the parameters, (iii) when the process and the result of the negotiations are not convenient for institutional interests[24]. The general manager will then declare the cancellation of the process, without any compensation to the bidders[25].

15. The general manager may order the archiving of the process (i) if the need does not persist, (ii) because it is inconvenient to the institutional interests and (iii) if there are violations or non-observances in the process[26]. A restart of the process may also be ordered[27].

16. When there is only one qualified bid, a single negotiation session will be held between the technical committee and the only qualified bidder[28]. The bidder must increase its bid depending on the value of its initial offer: by 2%, 6%, 8%, 10%, when the values offered are USD 1 million, USD between USD 1 million and USD 10 million, between USD 10 million and USD 50 million and more than USD 50 million, respectively[29].

17. The technical commission must issue a report on the result of the negotiation and will recommend the award or not, and the general manager must decide on its approval[30] and will resolve the respective award and signing of the respective contracts, if applicable[31].

18. In order to enter into assignment and transfer contracts, it must be necessary to have (i) the valuation of the concession (estimate of resources in an NI 43-101 or similar), (ii) the certificate of validity of the concession, (iii) the sworn statement that the assignee is not disqualified in accordance with Article 20 of the Mining Law and Article 23 of its regulations and (iv) “the others that are indicated in the applicable sectoral regulations”[32]. In addition, it is provided that “the resolution authorizing assignment and transfer issued by the corresponding Zonal Undersecretary of Mining” must be attached to the contract[33]. The contract and the authorization of assignment and transfer must be registered in the Mining Registry and if they are not registered, “the mining title will expire and the concession will revert to the State and the area will be free”.[34]

19. Also, before the signing of the contract, the winning bidder must provide an unconditional, irrevocable, and immediate guarantee, which may be granted by the bidder’s parent company[35].

20. Assignment and transfer contracts must include “penalty clauses [for delay of contractual obligations], as well as one related to the period within which the entity must proceed with an advanced payment, if any; which may not exceed the term established in the Contest Rules”.[36] They must also include “a clause of subrogation of obligations and rights to the new mining owner”.[37] If there are mining operation contracts in force, a clause must be included for the termination of the contract, if the assignee is the mining operator, and another for subrogation to the new mining owner[38].

21. With the issuance of the Regulation, resolution number 118 of the ENAMI of October 31, 2017, and any regulation of equal or lesser hierarchy that opposes it are repealed.

For more information, please do not hesitate to contact us.

This bulletin contains a summary of legal developments of interest, and therefore cannot be considered as advice provided. If you have any concerns, please contact the team at AVL Abogados.

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[1] Art. 5.

[2] Art. 6.

[3] Art. 5.1.

[4] Art. 5.1.

[5] Art. 5.2.

[6] Art. 7.

[7] Art. 7.1.

[8] Art. 7.1.

[9] Art. 7.1.

[10] Art. 7.1.

[11] Art. 8.

[12] Art. 8.1.

[13] Art. 8.1.

[14] Art. 7.1.

[15] Art. 8.1.

[16] Art. 8.2.

[17] Art. 8.4.

[18] Art. 8.4.

[19] Art. 8.3.

[20] Art. 8.3.

[21] Art. 8.5.

[22] Art. 8.9.

[23] Art. 8.9.

[24] Art. 8.10.

[25] Art. 8.10.

[26] Art. 8.10.

[27] Art. 8.10.

[28] Art. 8.11.

[29] Art. 8.11.

[30] Art. 8.12.

[31] Art. 8.12.

[32] Art. 9.

[33] Art. 10.

[34] Art. 11.

[35] Art. 15.

[36] Art. 13.

[37] Art. 13.

[38] Art. 13.