Ecuador's congress has approved a new mining law to boost investments in the sector, a move that comes just days after Canadian firm Kinross Gold abandoned its $1.2bn gold project over a 70% windfall tax issue.
The new law is also aimed at reducing the country's dependency on oil production.
The move has eased investment conditions, with royalties now set to the minimum levels and the 70% windfall tax on sales only implemented when mining companies completely recover their investments, reports Reuters.
An 8% mining royalty cap has been set for exports of copper, gold and silver. Small-scale mining projects will have to pay 3% in royalties, medium size mines 4% and large mines a minimum of 5%.
Besides removing red tape, the new law imposes penalities for environmental violations and illegal mining activites.
The mining law, backed by President Rafael Correa, has received 105 votes in favour, with 14 against and 14 abstentions, reports the news agency.
Ecuadorean mining chamber head Pablo Acosta said the new mining law will attract small and medium-size firms to invest in the country.
"Regarding large-scale mining, the tax burden is still a big problem, especially the windfall tax," Acosta told Reuters.
The mining chamber anticipates that the new law will attract enough investors to take over the Fruta del Norte gold project, abandoned by Kinross.
"The state will have to put it up for tender, or it will look for a partner to exploit it ... But you can be sure that this deposit will be exploited," Acosta added.
Ecuador is also looking to negotiate its contracts with mining majors such as International Minerals; Ecuacorriente and INV Metals.
Image: Kinross Gold pulls out of Fruta del Norte gold project in Ecuador over 70% windfall tax on sales. Photo: Courtesy of Kinross Gold Corporation.