Document:

WITNESSETH:

    

     

    
      WHEREAS, that the present
juridical framework, is insufficient and it does not respond to the interests of
the nation, for this reason, it is necessary to correct and stop environmental,
social and cultural damage by means of safe and efficient regulations, in
accordance to the new model of development wished by the
Country.

    

     

    
      Whereas, the Constitution of
the Republic of Ecuador, in Art. 408 establishes that "Non-renewable natural
resources,  and in general, sub-soil products, mineral deposits and
hydrocarbons, and substances obtained from sources different from soil,
including those found in the areas covered by the waters of the territorial sea
and maritime zones, as well as the biodiversity and the genetic heritage and
radio-electric spectrum are inalienable and non-prescriptible property of
the State".

    

     

    
      WHEREAS, non-renewable natural
resources are considered a strategic sector, as set forth in the Constitution in
Art. 313, this way, the State reserves for itself the right to administer,
control, regulate and manage  the strategic areas, according to the
principles of environmental sustainibility, caution, prevention and efficiency;
as well as to delegate the private initiative, pursuant to Art. 316 of the
Constitution of the Republic of Ecuador.

    

     

    
      WHEREAS, "The State recognizes
diverse forms of organization of production in the economy, and they are
communitarian, cooperative, enterprise, public or private, associative,
familial, domestic, autonomous and mixed", as provided in the Constitution of
the Republic of Ecuador in Art. 319.

    

     

    
      WHEREAS, the State shall
promote a better quality of life of the population, and it shall incentivize
those ways of production that preserve its rights and respect to
nature

    

     

    
      WHEREAS, the State shall
guarantee the right to work, recognizing any and kinds of work, in a state of
dependency or autonomy including those of self sustenance and human care as
social productive factors to all workers of any gender.

    

     

    
      WHEREAS, the State shall
promote the development of economic activities by means of juridical order and
political institutions that promote, foment and defend them, through the
accomplishment of the Constitution and the Law.

    

     

    
      WHEREAS, "The State shall
avoid the concentration or monopoly of diverse forms of organization of
production, promoting its redistribution and eliminating privileges or
discrimination in their access," as provided in the Constitution of the Republic
of Ecuador in Art. 334.

    

     

    
      WHEREAS, the State shall promote and
support the development and diffusion of knowledge and technologies aimed to
improve processes of production.

    

     

    
      WHEREAS, Municipal Governments
shall regulate and control the exploitation of arid and petrified materials,
found at the bottom of rivers, lakes, lagoons, sea beaches and
quarries.

    

     

    
      WHEREAS,the
Constitution of the Republic of Ecuador in Art. 395,  sets forth that
"the State shall guarantee a sustainable pattern of development, environmentally
balanced and respectful of the cultural diversity, which preserves the
biodiversity, the capacity of natural regeneration of ecosystems and ensure the
satisfaction of the necessities of present and future
generations,"

    

     

    
      
        
        

      

      
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    ISSUES
THIS

     

    MINING
LAW

     

    Title
I

     

    BASIC
PROVISIONS

     

    Chapter
I

     

    GENERAL
RULES

     

    Art. 1.-  Purpose of this
Law.- This Mining Law regulates the exercise of the
sovereign  rights of the Ecuadorian State, in order to administer,
regulate, control and manage the strategic mining sector, pursuant to the
principles of sustainability, caution, prevention and efficiency. Oil and other
hydrocarbons are exempted from this Law.

     

    The State
shall delegate its participation in the mining sector, to mixed mining companies
which have a majority of capital shares, or to private initiative and to popular
and mutually binding economy, for the prospection, exploration and exploitation,
or processing, smelting and refining, as the case may be, in addition to local
or international trade of mineral substances.

     

    Art. 2.- Extent of application.-
In order to regulate the previous  article, the Mining Law
hereto establishes norms for the relations of the State with mixed-economy
mining companies; natural persons and legal bodies, foreign or national, public,
mixed , private, , and the ones among themselves, in connection with the
obtaining and termination of  mining rights and the performance of
mining activities.

     

    Art. 3.- Residuary rules.-
They are applicable in mining affairs, in the relation State-particular
people, and among them, the regulation: Administrative,
Contentious-Administrative; food sovereignty; tax, penal, penal processing;
public companies, associations, civil, civil processing, of decentralized
autonomous governments, cultural heritage and more regulations governing the
Ecuadorian legislation applicable on mining-geologic sector, in all the
corresponding aspects and which are not  expressly regulated by the
Law hereto.

     

    Chapter
II

     

    FORMULATION,
EXECUTION, AND ADMINISTRATION OF MINING POLICY

     

    Art. 4. - Definition and direction of mining
policy. - The definition and
direction of the mining policy of the State corresponds to the President of the
Republic of Ecuador.

     

    For the
development of said policy, its execution and application, the State shall act
by means of the relevant Ministry and the entities and organisms determined in
this Law.

     

    The State
shall administer, control and regulate the development of mining industry,
prioritizing the sustainable development and the fomentation of social
participation.

     

    Art. 5. - Institutional structure. - The mining sector shall
be structured as follows:

     

    a) The
relevant Ministry;

     

    b)
Directorate of the Agency of Mining Regulation and Control;

     

    c) The
National Institute of Geological and Mining Metallurgic Research;
and,

     

    d) The
National Mining Company.

     

    e) The
Municipalities in their corresponding competence

     

    
      
        
        

      

      
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    Art. 6. - The Relevant Ministry.
- Defined by the Presidency of the Republic, that is the main and
planning authority of the mining sector. Said authority is in charge of the
establishment of policies, guidelines and applicable plans in the corresponding
areas for the development of this field, according to the Constitution and the
Law, its regulations and the plans of development established at a national
level.

     

    The State
shall determine, in accordance to Art. 279 of the valid Constitution and
according to principles of decent life, as well as those of the economic,
environmental, social and cultural necessities, the areas susceptible to mining
exploration and exploitation, prioritizing the rationalization of the use of
natural resources, the generation of new areas of development and the principle
of regional balance.

     

    National
Mining Policies shall promote at all levels the innovation, technology and
research that allow an local development of the area, for this process the
relevant Ministry shall coordinate with the institutions of science, technology
and high studies in the country.

     

    The State
shall establish mechanisms of fomentation, technical assistance, training and
financing towards a sustainable development of small scale and artisan
mining.  Likewise, it shall establish systems of incentives for
environmental protection and generation of productive and more efficient
units.

     

    Art. 7. - Competence of the Relevant
Ministry. - The Relevant Ministry is in charge of:

     

    
      
        	
              	
                a)

              	
                To
      direct the public policies of the geologic-mining area, the issuance of
      agreements and administrative resolutions required in its
      management

              

      

    

     

    
      	
            	
              b) 

            	
              To
      represent the State in affairs of mining
policy;

            

    

     

    
      	
               
      

            	
              c)

            	
              Evaluate
      policies, plans and projects for the development, administration,
      regulation and management of the mining
sector;

            

    

     

    
      	
               
      

            	
              d)

            	
              To
      execute, in a decentralized way, the defined public policy for the
      development of the sector;

            

    

     

    
      	
               
      

            	
              e)

            	
              Promote,
      in coordination with the public and/or private Universities and
      Polytechnic Schools, the scientific and technological research on the
      mining field;

            

    

     

    
      	
               
      

            	
              f)

            	
              To
      define, in coordination with the entity in charge of national planning,
      the National Plan of Development of the mining
  sector;

            

    

     

    
      	
               
      

            	
              g)

            	
              To
      supervise the accomplishment of objectives, policies and set goals in the
      mining area and performed by natural persons and legal bodies public
      and/or private;

            

    

     

    
      	
               
      

            	
              h)

            	
              To
      set forth the parameters and markers for the follow-up, supervision and
      evaluation of the management of the public companies and inform the
      Executive branch about the results of such execution and
      measurement;

            

    

     

    
      	
               
      

            	
              i)

            	
              To
      create the Consultative Councils which allow the participation of citizens
      for the making of decisions on mining
policies;

            

    

     

    
      	
               
      

            	
              j)

            	
              To
      grant, administer, and terminate mining rights;
  and,

            

    

     

    
      	
               
      

            	
              k)

            	
              The
      others set forth in executive laws and decrees in force, as well as in the
      Regulation of this Law; Art.

            

    

     

    Art. 8.-The Agency of Mining
Regulation and Control.- It is the technical and administrative authority
in charge of the administration of the exercise of the state surveillance,
auditory, intervention and control of the stages of mining activity performed by
the  National Mining Company, mixed in conformity with the Law hereto
and its Regulations.

     

    The
Agency of Mining Regulation and Control, an institution of public right, with
legal capacity, administrative autonomy , technical, economic, financial and its
own assets, it is attached to relevant Ministry and it has competence to
supervise and adopt administrative actions that assist the rational and
technical development of the mining resource, for a fair share of the profits
that correspond to the State, as a result of its exploitation, and in addition,
to the accomplishment of the obligations of social and environmental
responsibility assume the title holders of mining rights.

     

    
      
        
        

      

      
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    Art. 9. - Attributions of the Agency
of Mining Regulation and Control:

     

    
      	
               
      

            	
              a)

            	
              To
      ensure correct application of present Law, and the correct application of
      legal dispositions in mining
matters;

            

    

     

    
      	
               
      

            	
              b)

            	
              To
      issue regulations and technical plans for a correct functioning and
      development of this sector, in accordance to the Law
    hereto;

            

    

     

    
      	
               
      

            	
              c)

            	
              To
      issue reports for the granting, preservation and termination of mining
      concessions, of authorization for the installation and operation of
      processing plants , smelters, refineries, and the celebration of
      exploitation contracts, by the relevant
  Ministry;

            

    

     

    
      	
               
      

            	
              d)

            	
              To
      keep a register and a geological mapping database of the mining
      concessions and publish it through electronic and digital
      means;

            

    

     

    
      	
               
      

            	
              e)

            	
              To
      be informed of, and resolve the appeals brought in connection to the
      resolutions issued by the decentralized
units;

            

    

     

    
      	
               
      

            	
              f)

            	
              To
      be informed of, and , resolve, in the processes of administrative
      protection;

            

    

     

    
      	
               
      

            	
              g)

            	
              To
      inspect mining activities performed by title holders of mining
      rights;

            

    

     

    
      	
               
      

            	
              h)

            	
              To
      survey that in mining activities executed by the holders of mining rights,
      no children or adolescents work or labor, according to Art. 43 of the
      Constitution of the Republic.

            

    

     

    
      	
               
      

            	
              i)

            	
              To
      sanction according to the Law hereto and its Regulation to mining title
      holders, if from the inspection referred to in item h) it would be
      detected the presence of children or adolescents working, and to report it
      to the Inspectorates of Child Work and other entities in charge of
      investigating and y sanctioning according to
      the  Law.

            

    

     

    
      	
               
      

            	
              j)

            	
              To
      designate an intervener in the cases provided by
  Law.

            

    

     

    
      	
               
      

            	
              k)

            	
              To
      regulate the concession rights in the mining sector according to this Law
      and its regulations, as well as to collect the corresponding amounts of
      fines and penalties;

            

    

     

    
      	
               
      

            	
              l)

            	
              To
      exercise the technical control and apply penalties to ensure the correct
      application of the policies and regulations of the
  sector;

            

    

     

    
      	
            	
              m)

            	
              To
      open, substantiate and decide the proceedings destined to the imposition
      of the penalties set forth in this
Law;

            

    

     

    
      	
               
      

            	
              n)

            	
              To
      watch, evaluate and divulge the market trends and the statistics of the
      mining area;

            

    

     

    
      	
               
      

            	
              o)

            	
              To
      issue licenses for trading of mineral substances set forth in this Law;
      and,

            

    

     

    
      	
               
      

            	
              p)

            	
              The
      others that correspond according to this Law and its
      regulations;

            

    

     

    The Bylaw
of the Agency of Regulation and Control shall determine the competence of the
Regional Agencies, within the framework of the attributions contained in the Law
hereto.

     

    Art. 10.-National Institute of
Geological, Mining, Metallurgical Research.- Create the National
Institute of Geological, Mining, Metallurgical Research in accordance to the
norms of article 386 of the Constitution of the Republic of Ecuador as a public
institution in charge of performing activities of research, technological
development and innovation on the field of Geology, Mining and
Metallurgy.

     

    The
National Geological Research Agency is created, it is a specialized authority of
the relevant Ministry in charge of generating, systematizing and managing the
geological information all over the national territory, in order to promote the
sustainable development of mineral resources, prevent the incidence of
geological  threats, and those provoked by man, and support
territorial regulation.

     

    The
organization and functioning of this Institute, has to conform to the
dispositions of this Law and its Regulations.

     

    
      
        
        

      

      
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    Art. 11. - Directorate of the Agency of Mining
Regulation and Control.
- The Agency
of Mining Regulation and Control shall have a Directorate formed by three
members with no dependence link to this entity. It shall be formed by two main
members and their respective deputies, who need to be knowledgeable technicians
on the subject, appointed by the President of the Republic, and the relevant
Minister or his permanent delegate and his respective deputy, who shall hold the
Presidency of the Directorate.

     

    The
Directorate shall appoint an Executive Director and it shall establish the best
administrative and financial structure for a correct functioning, and the
attributions of its officers.

     

    Art. 12.- National Mining Company.-
It is a society of public right with legal capacity, own assets, with
autonomy for its budget, finance, economy and administration, destined to the
management of mining activity for a sustainable development of the resources
subject matter of this Law, pursuant to its provisions and Regulations. The
National Mining Company It is a society of public right with legal capacity, own
assets, with autonomy for its budget, finance, economy and administration,
destined to the management of mining activity for a sustainable development of
the resources subject matter of this Law, pursuant to its and Regulations. The
Public Mining Company is subject to the regulation and specific control
established en Public Company Act, it has to work displaying parameters of
quality and enterprising, economic, social and environmental
criterion.

     

    Art. 13. - Administrative
Systems.-  The public officers and employees who labor in the
entities and organisms created under this Law, shall be subject to the Organic
Civil Service and Administrative Career Law, and also to the Unification and
Homologation from the public sector, exempting The National Mining Company,
which shall be self regulated according to the Constitution of the
Republic.

     

    Art. 14.- Jurisdiction and venue.-
All national persons or legal entities, local or foreign who hold titles
of mining rights or perform mining activities, are submitted to laws, judges and
law courts in the country. In the case of foreign natural people and legal
entities, it is implied that they shall be subject to the terms of Art.442
of the Constitution of the Republic.

     

    Art. 15. - Public interest. -  Mining is hereby
declared as public interest in all its stages, inside and outside of the mining
concessions.  Therefore, any necessary rights of way shall be
established pursuant to the Law hereof, taking into account the prohibition and
exemption items set forth in Art. 407 of the Constitution of the Republic of
Ecuador.

     

    Chapter
III

     

    STATE
AUTHORITY AND MINING RIGHTS

     

    Art. 16.- Domain of the State over
mines and deposits.-
Non-renewable  natural resources, and in general, sub-soil
products, minerals and substances obtained from sources different from soil,
including those found in the areas covered by the waters of the territorial sea,
are inalienable and non-prescriptible property of the State. Said ownership of
the State shall be exercised with independency of the right of property over
surface lands that cover mines and deposits.

     

    Exploitation
of natural resources and the exercise of mining rights shall meet the principles
of sustainable development, environmental protection, social participation and
responsibility, and with respect for the natural and cultural heritage of the
exploited zones. Their rational exploration and exploitation shall be
performed in function of the national interests, by natural persons or
legal bodies, public companies, mixed or private, local or foreign, granting
mining rights, pursuant to this Law.

     

    Exploration
and exploitation of mining resources shall be based on a public environmental
sustainability strategy that shall prioritize the audit, inspection, regulation
and prevention of contamination, as well as the promotion of social
participation and citizen surveillance committees.

     

    Either
direct exploitation agreements or auctions for mining concessions shall only be
performed in those areas defined in the National Plan of Territorial
Development.

     

    Art. 17.- Mining Rights.-
 Mining
rights are those stemmed from the titles of mining concessions of exploration
and exploitation, licenses and permits, as well as the authorizations to install
and operate processing, smelting and refining plants, and from trade
licenses.

    

    
      
        
        

      

      
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    Chapter
IV

     

    SUBJECTS
OF MINING LAW

     

    Art. 18. -  Subjects of mining right.-  The
subjects of mining right are, natural persons having full legal capacity and
legal entities, local or foreign, public, mixed or private, communitarian or
self-managed, whose business purpose and function are in conformity with the
legal dispositions in force of the country.

     

    Art. 19. -  Domicile of foreigners.- Foreign
natural persons or legal entities, in order to be owners of mining rights, must
be domiciled in the national territory, and they shall receive the same
treatment granted to any other national natural person or local legal
body.

     

    Art. 20.- Ineligible
persons.-  Any party who has conflicts of interest or may make
use of privileged information, such as: natural persons or legal bodies related
to organisms of decision of the mining activity, either through a direct
participation or  their shareholders and relatives in a fourth degree
of consanguinity and second of affinity or former officers of the ministry of
natural resources, ministry of energy and mines or their  immediate
relatives of up to fourth degree of consanguinity and second of
affinity  and natural or juridical persons related to the institutions
in charge of taking decisions in the mining sector, described in Title IV
"contracts" Chapter I " of the capacities, inabilities or nullities" from the
Organic Law of the National System of Public Contracting, among
others.

     

    Chapter
V

     

    MINING
ACTIVITY

     

    Art. 21. - National Mining Activity. -  It is developed by
means of public companies, of mixed economy or private, communitarian,
associative and familial business, of self management or natural persons, in
accordance to this Law. The State performs its mining activities through the
National Mining Company, and it is entitled to incorporate mixed economy
companies. Mining activities developed by public companies, of mixed and
private economy and natural persons enjoy the same corresponding guarantees
and they deserve state protection, as established by the Constitution and the
Law hereto.

     

    Art. 22. - Juridical Regime of the National
Mining Company and the private concessionaires.- The obtaining and the
exercise of mining rights from the National Mining Company shall be subject to
the juridical regime established in this Law and in accordance to article 316 of
the Constitution in force. Likewise, private concessionaires involved in it
shall also be subject to the provisions of this Law and to the common applicable
juridical regulations on national investment and the development of productive
activities in the country.

     

     Art. 23. - The intervener in mining activities. - The intervener shall be
appointed by the Agency of Regulation and Control, an officer who is not under
investigation in the event there is a claim in written from an affected party or
by a legal processing, and it is proved that the concessionaire did not comply
with the legal provisions and other statutes that regulate the mining sector,
and that these violations might generate prejudice to the partners, shareholders
or third parties.

     

    The
Agency of Regulation and Control, in the administrative act which appoints the
intervener, shall establish the operations and documents that require his
approval and signing. Unless otherwise agreed, the functions of the intervener
shall be confined to making an exact account of the products, machinery and
expenses of the concessionaire in order to present it timely and duly supported;
he shall be in charge of the effective supervision of the works; and he shall
enforce the accomplishments of the duties to all the personnel, administrative
and in the field.

     

    The wages
earned by the intervener, shall be determined by the Agency of Regulation and
Control, the payment shall be in charge of the title holder of mining rights
through this Regulating Organ.

     

    If the
claim of the intervener were groundless, the Agency of Regulation and Control
shall reject it and it shall administratively and civilly punish determined in
this Law, without prejudice of penal sanctions set forth in its respective legal
body.

    

    
      
        
        

      

      
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    Chapter
VI

     

    SPECIAL
MINING ZONES AND FAVORABLE ADMINISTRATIVE ACTS

     

    Art. 24. - Special Mining Zones. - The President of the
Republic has the authority to declare Special Mining Areas, subject to Art. 407
of the Constitution of the Republic, to those which show a mining development
potential and are not under concession, with the purpose that the relevant
Ministry through their agencies perform inventories, geological-mining research
or other type of activities with scientific interest, within their respective
competence. The declaration of a Special Mining Area shall be expressly
established during the term of its valid life, which cannot be of over four
years; once this term is expired it shall be rescinded, without a special
disposition that declares it. In any case, the declaration shall respect the
legally established rights or those stemmed from them. No mining concession
shall be assigned on said areas during the term of their validity.

     

    During
the following four years starting on the date of expiration of the valid life of
a Special Mining Area, the National Mining Company shall have a preferential
right to request mining concessions in said area. Likewise, if during said four
year term, a third party requests a mining concession which comprises totally or
partially lands that have comprised said Special Mining Area, the National
Mining Company shall have a preferential right to grant mining concessions in
said area. The Agency of Mining Regulation and Control shall work on the
proceeding for the exercise of the preferential right in the terms, conditions
and time set forth in the General Regulation under this Law.

     

    Mining
areas and projects where the Ecuadorian State has performed a prospection and
exploration and studies of pre-feasibility or feasibility, shall be restituted
to it.

     

    Art. 25. - Protected areas. - Extracting activities of
non renewable resources in protected areas is forbidden. Exceptionally, said
resources shall be exploited under a fair grounding petition of the Presidency
of the Republic, and after a declaration of national interest by the National
Assembly in accordance to Art. 407 of the Constitution of the Republic of
Ecuador

     

    Art. 26.- Previous Administrative
Acts.- To carry on mining activities mentioned in the following chapter,
in the places set forth as follows, previously delivered favorable
administrative acts with a fair grounding are obligatorily required by the
following authorities and institutions, as the case may be:

     

    
      	
              a)

            	
              In
      all these cases, the approval of the Study of Environmental Impact by the
      Ministry of Environment and the report of the damage to environmental
      areas is required.

            

    

     

    
      	
              b)

            	
              From
      the Municipal Council, within urban zones and according to the territorial
      regulation and the plan of economic social cantonal
      development;

            

    

     

    
      	
              c)

            	
              From
      the Ministry of Transport and Public Work, with relation to buildings,
      public roads, railways, lifts and, provincial councils in case of bridle
      paths;

            

    

     

    
      	
              d)

            	
              From
      the National Secretary ́s Office of broadcasting with relation to radio
      stations, antennas and broadcasting
  installations;

            

    

     

    
      	
              e)

            	
              From
      the Ministry of Defense, within areas or military installations or in
      adjoining lands, of places used as magazines for explosive or inflammable
      material; and within zones located on the official borderlines of the
      country and in licensed seaports, sea beaches or ocean
      bottoms;

            

    

     

    
      	
              f)

            	
              From
      relevant Authority of Water in any body of water, such as lakes, lagoons,
      rivers or dams or in adjoining areas to those reserved for the capture of
      water for human consumption or irrigation, in conformity with the Law that
      regulates hydric resources. The present administrative act shall be done
      in compliance of the Political Constitution of Ecuador regarding the order
      of prevalence over the Right of access to
Water;

            

    

     

    
      	
              g)

            	
              From
      the National Directorate of Hydrocarbons with relation to oil, gas and
      petroleum product pipelines, refineries and other oil
      installations;

            

    

     

    
      	
              h)

            	
              From
      the Directorate of Civil Aviation, with relation to airports or runways or
      on their adjoining lands;

            

    

     

    
      
        
        

      

      
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              i)

            	
              From
      the Ministry of Electricity and Renewable Sources, in areas in which there
      are power stations, pylons and main lines of the National Network;
      and,

            

    

     

    
      	
              j)

            	
              Mandatorily, From
      the National Institute of Cultural Heritage in case the zone of mining
      prospection may have archaeological traces or of natural and cultural
      heritage.

            

    

     

    Distances
and other technical and environmental requirements for said Administrative Acts
shall be established in accordance with the criterion set forth in the
respective regulations issued by relevant administrative authorities in each
case.

     

    These
administrative acts shall be issued within a maximum period of sixty days from
the date of the petition, they shall be under the responsibility of the official
in charge of issuing administrative acts, and they shall contain conditions that
protect the interest of each institution and the rights and guarantees of the
citizens. Authorities and institutions in charge of issuing administrative acts,
shall not issue additional administrative acts to extend the deadline for their
pronouncement.

     

    In case
the authorities and institutions before mentioned issue non favorable
administrative acts, the mining concession holder has the option to appeal said
resolution before the relevant Minister, who shall issue his resolution in a
motivated way, except in the case of the provision set forth in item f) which
shall be appealed judicially.

     

    Chapter
VII

     

    STAGES
OF MINING ACTIVITY

     

    Art. 27. -  Phases of Mining
Activity. -  For the purpose of
applying this Law, the phases of mining activity are:

     

    
      	
               
      

            	
              a)

            	
              Prospecting,
      which consists of the search of traces of new mineralized
      areas;

            

    

     

    
      	
               
      

            	
              b)

            	
              Exploration,
      which consists of determining the size and form of the deposit, as well as
      the content and quality of the mineral present in it. The exploration can
      be initial or advanced, and it also includes the economic evaluation of
      the deposit, its technical feasibility and the design of its
      exploitation;

            

    

     

    
      	
               
      

            	
              c)

            	
              Exploitation,
      which comprises the group of operations, works and mining labor devoted to
      the preparation and development of the deposit and the extraction and
      transport of minerals;

            

    

     

    
      	
               
      

            	
              d)

            	
              Ore
      processing, which consists in a set of physic, chemical and/or metallurgic
      processes that the ore mineral  product of the exploitation go
      through with the purpose to raise the ore
grade;

            

    

     

    
      	
               
      

            	
              e)

            	
              Smelting,
      which consists in the process of fusion of minerals, concentrate or
      precipitated from them, with the purpose to separate the ore metal wished,
      from other minerals that come
along;

            

    

     

    
      	
               
      

            	
              f)

            	
              Refining,
      which consists in technical procedures aimed to convert the metallic
      products into metals of high
purity;

            

    

     

    
      	
               
      

            	
              g)

            	
              Trading,
      which consists of the buying and selling of minerals or the celebration of
      other contracts whose object is the negotiation of any product resulting
      from mining activity; and,

            

    

     

    
      	
               
      

            	
              h)

            	
              Mine
      Closure, which consists of the end of mining activities and the subsequent
      dismantling of the installations used in any of the previously referred
      stages, including environmental repair in accordance to the plan of
      closure duly approved by the relevant environmental
    authority.

            

    

     

    The State
shall foment the industrialization of ore minerals product of the activities of
exploitation, promoting the incorporation of the added value with maximum
efficiency, respecting the biophysics limits of nature.

     

    All
stages of mining activity imply the obligation to apply a process of
environmental reparation and remedy in accordance to the Constitution of the
Republic of Ecuador and its regulations.

     

    
      
        
        

      

      
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    Title
II

     

    MINING
RIGHTS

     

    Chapter
I

     

    PROSPECTING

     

    Art. 28.- Freedom of prospecting.-
Any natural person or legal body, national or foreign, public, of mixed
or private economy, communitarian and of self management, except those
pronounced forbidden by the Constitution of the Republic and this Law, have the
right to prospect freely, with the purpose to find mineral substances, except in
those areas comprised within the boundaries of mining concessions, in urban
zones, populated areas, archaeological sites, goods declared of public service
and Special Mining Areas. When the case presents itself, they must obtain the
favorable administrative acts referred to in Article 26 of this
Law.

     

    Chapter
II

     

    MINING
CONCESSION

     

    Art. 29. - Auction sale and public sale for
the delivery of mining
concession.- The
relevant Ministry shall notice to a public auction for the delivery of any
metallic mining concession. Likewise, it shall present a notice for a public
auction for the granting of any mining areas of expired concessions or those
returned or reverted to the State, where applicants shall participate and
present their respective offers according to the proceeding established by the
General Regulation of this Law.

     

    In the
annual and multiannual planning by the relevant Ministry, it must contain
differentiated susceptible areas of metal mining concessions for small mining,
artisan mining and on the other side, large scale mining.

     

    At the
public auction for small scale mining only and exclusively natural persons or
legal bodies placed in these categories, according to the proceedings and
requisites established in this Law and its General Regulation.

     

    Natural
persons and legal bodies placed in the category of small mining or artisan
miners under no circumstance shall have foreign companies as business partners
or shareholders.

     

    Those
auctions for mining concessions shall only be performed in those areas defined
in the National Plan of Development, in the section of Territorial
Organization.

     

    The
General Regulation of this Law shall establish the procedure for the auction
sale and public sale as well as the requisites and conditions for their
participation.

     

    Art. 30. - Mining concessions. -
The State may exceptionally delegate its participation in the mining
sector through the concessions. A mining concession is an administrative act
which grants a mining title, over which the title holder owes a personal
transferable right, that needs the mandatory qualification of the suitability of
the assignee of said mining rights by the relevant Ministry, and said concession
can be subject to pledge, assignments and other guaranties foreseen by Law, in
accordance to the requisites under the Law hereto and its General
Regulation.

     

    The
registration of the transference of the mining title shall be done by means of
the Agency of Mining Regulation and Control after having received the respective
notice from the concessionaire informing of the assignment of his mining rights,
in accordance to the proceeding and requisites set forth in the General
Regulation under this Law.  Said act shall be authenticated with the
registration at the Mining Registry including a payment fee equivalent to one
per cent of the transaction.

     

    The
State, with the corresponding legal reports shall authorize the assignment of
the mining title after at least two years of its granting.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Constructions,
installations and other objects affected permanently linked to mining research,
extraction and processing of ore minerals are considered accessory property of
the concession.

     

    Legal
domicile for tax and company purposes of title holders of mining rights shall be
in the region where the mining concession is located or the one with larger
deposits in case of concessionaires with mining titles in different Provinces or
the main project of exploitation or industrialization. This obligation has to be
paid at the moment of requesting a mining concession and it shall not be
modified without an express authorization of the Agency of Mining
Regulation and Control.

     

    Art. 31.- Delivery of mining
concessions.- Exceptionally, the State shall deliver mining concessions
by means of an administrative act in favor of natural persons or legal entities,
local or foreign, public of mixed or private economy, communitarian and of
self-management, according to the prescriptions of the Constitution of the
Republic, this Law and its General Regulation.

     

    The
mining title confers to its holder the exclusive right to prospect,
explore, exploit, benefit, smelt, refine and trade all the ore mineral
substances which exist and can be obtained within the area of said concession,
becoming a beneficiary of the economic profit obtained from said process, within
the limits set forth in the regulation hereto and as long as the title is in
good standing, the mining concessionaire can only perform the activities
conferred by these titles after having complied with the requisites set forth in
Art. 26.

     

    The
mining title shall constitute a title value according to regulations stipulated
by Superintendence of Companies and the Superintendence of Banks, once the
mining deposits found in the concession are duly valued by the Agency of Mining
Regulation and Control within the terms of the Regulation of Qualification of
Mining Resources and Reserves.

     

    The
granting of non metallic and quarry mining concessions shall not be subject to
auction or public sale referred to in this Law, the General Regulation shall
establish the proceeding for this purpose, said proceeding must include
requirements of technical capacity, economic solvency, amounts of investment,
location, area, deadlines for the development of activities of exploration and
exploitation, processing, social responsibility, and destination.

     

    Business
cover or laundering shall be penalized pursuant to the Penal Code in
force.

     

    Art. 32. - Unit of measure. - For the purpose of
applying this Law, the unit of measure for concessions shall be denominated
"mining hectare." This unit of measurement constitutes a volume of pyramidal
shape whose vertex is at the center of the earth; its outside limit is the
surface of the earth and it corresponds planimetrically to a square of 100
meters on each side, measured and oriented according to the Mercator Transverse
Projection system of ruling used by the National Topographic Map.

     

    An
exception to the above mentioned rules constitutes the side of a concession
placed at international borders and/or bordering upon beach areas, in whose case
the concession limit shall be the border line, sea beaches or the protected area
limit, as the case may be.

     

    The
mining title is susceptible of material division or accumulation within the
limit of one mining hectare at least and five thousand mining hectares at most,
per concession.

     

    Technical
aspects corresponding to shape, size, relation between minimum and maximum size
of the concessions, orientation, limits, graphics, verifications, positioning,
measures, cadastral systems, and other required by issuance, conservation and
extinction of mining rights will be set forth in the General Regulation under
this Law.

     

    Art. 33. - Rights of administrative proceeding
for concession.- Those interested in obtaining mining concessions shall
pay the amount of five unified basic salaries on account of fees for each mining
concession application. Such payment will be made only once. Such payment shall
not be reimbursable and it will be deposited in accordance to the provisions of
the General Regulation under this Law.

     

    No
application procedure shall be done unless the respective payment receipt is
enclosed.

     

    The
procedures which demand further obligatory administrative acts shall included in
the General Regulation under this Law.

     

    Art. 34. - Patent of preservation of
concession.- Only and exclusively, until March of each year, mining
concessionaires shall pay an annual patent of preservation for each mining
hectare, which shall be valid for one calendar year starting on the effective
date of the payment and the amount shall be fixed according to the scale shown
on the next paragraph. Under no circumstance an administrative or judicial
deferral for the payment of such patents shall be granted.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    The
patent of conservation from the date of delivery of the concession until
December 31 of the year in which the period of validity of initial exploration
expires, it shall be equivalent to 2.5 per cent of a unified basic salary for
each mining hectare assigned. This patent of preservation shall rise in a
percentage of 5 per cent of a unified basic salary for each mining hectare
assigned for the period of advanced exploration and the period of economic
evaluation of the deposit. During the exploitation stage the concessionaire
shall pay a patent fee of conservation equivalent to 10 per cent of a unified
basic salary for each mining hectare assigned.

     

    The first
payment of the total amount for the preservation patent fee shall be made during
the first thirty days starting from the date of subscription of the mining title
and it shall correspond to the period of time elapsed between the date of
delivery of the concession and December 31st of said year.

     

    An annual
patent of preservation for small scale mining of two USD (2) American dollars
per mining hectare is established during the stage of initial
exploration.  On the stage of advanced exploration and evaluation, the
fee is equivalent to four USD (4) American dollars per mining hectare, and in
the period of exploitation, for the area declared in commercial production, it
shall pay ten USD (10) American dollars per mining hectare.

     

    Art. 35. - Dimension of Concession and Excess.-
Each mining concession shall not cover an area of more than five thousand
adjoining mining hectares.

     

    If there
is a free space between two or more concessions that does not comprise a “mining
hectare”, such free space shall be called an "excess". This excess will be
granted to the adjacent concessionaire who first requests it.

     

    The
General Regulation of this Law shall establish the procedure for the procedure
for the application and the issuance of an "excess."

     

    Art. 36. - Term of validity and stages of mining
concession. - The mining title shall have a valid term of up to twenty
five years; to be renewed for a similar term of time in the event of a petition
in written by the concession holder submitted to the relevant Ministry, before
the date of expiration, and after having obtained a favorable report from the
Agency of Mining Regulation and Control and the Ministry of
Environment.

     

    In case
the relevant Ministry does not issue a corresponding resolution in a term of 90
work days from the presentation of said petition, positive administrative
silence shall be produced, in this case the mining title shall be renewed for
ten years whenever warranted by the circumstances of the contract. Those
officials whose omission produced the administrative silence shall be held
administratively, civilly or criminally responsible.

     

    The
mining concession shall be divided into a stage of exploration and a stage of
exploitation. In turn, during the stage of exploration the period of initial
exploration, the period of advanced exploration and the period of economic
evaluation of the deposit shall be distinguished.

     

    Art. 37. - Stage of exploration of the mining
concession.- Once the mining concession is delivered, the respective
title holder shall perform exploration labor in the area of the concession
during a term of four years, which shall constitute the period of initial
exploration.

     

    Nevertheless,
before the expiration of said period of initial exploration, the mining
concessionaire shall have the right to request to the relevant Ministry a
renewal period of up to four years to carry out the period of advanced
exploration, in this case the request shall contain the express relinquishment
to a surface of not less than half the total extension of the originally
delivered concession.

     

    The
relevant Ministry shall work on said application processing, provided the mining
concessionaire has complied with the minimum activities and investments in the
area of the mining concession during the period of initial exploration. Once
said application is submitted within the terms previously provided, the relevant
Ministry shall issue an administrative resolution declaring the beginning of the
period of advanced exploration. However, in case the relevant Ministry does not
issue the corresponding resolution in a term of 60 work days from the
presentation of the petition, positive administrative silence shall be produced.
Those officials whose omission produced the administrative silence shall be held
administratively, civilly or criminally responsible.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    When said
period of initial exploration or the period of advanced exploration ends, as the
case may be, the mining concessionaire shall have a period of up to two years to
perform the economic evaluation of the deposit and apply for, before the date of
its expiry, the beginning of the stage of exploitation and the corresponding
celebration of the Contract of Mining Exploitation, in the terms set forth in
this Law. The mining title holder has the right to request to the relevant
Ministry an extension of the period of economic evaluation of the deposit for a
term of up to two years starting from the date of the administrative act of the
reception of said petition, the concessionaire has to pay an annual patent
of preservation for the period of economic evaluation of the deposit, raised in
50 per cent.

     

    In case
the mining concessionaire does not apply for the beginning of the stage of
exploitation in these terms, the mining concession shall be pronounced
terminated by the relevant Ministry.

     

    Art. 38. - Presentation of exploration
reports. Until March 31 of each year and during the valid life of the
stage of exploration of the mining concession, the concessionaire shall submit
to the relevant Ministry an annual report of the activities and investments on
exploration performed on the area of the mining concession during the last year
and a plan of investments for the current year. These reports shall be submitted
duly audited by a qualified professional certified by the Agency of Control and
Regulation within the terms of the Regulation of Qualification of Mining
Resources and Reserves.

     

    In the
event the concession holder does not comply with said plan of investment, he
shall be able to avoid the lapsing of his mining concession by means of the
payment of an economic compensation equivalent to the amount of the investments
not performed, in the event he has performed investments equivalent to eighty
per cent of said minimum investments. The payment of this compensation shall be
registered in the annual report of activities and investments on exploration
referred to in this article. These amounts have to be duly reflected in the
general balance and the forms presented to Internal Revenue Service (Servicio de
Rentas Internas).

     

    The
payment of the compensation referred to in the previous paragraph does not
release the concession holder from the obligation to submit that
report.

     

    Art. 39.- Stage of exploration of the
mining concession.- The mining concession holder has the right to request
at the relevant Ministry, during the period of validity of the economic
evaluation of the deposit, the advance to the stage of exploitation and the
subsequent celebration of the Contract of Mining Exploitation or a Service
Contract depending on the rights he is entitled inherent to the preparation and
development of the deposit, as well as the extraction, transport, ore reduction
and trade of its minerals.

     

    No mining
concessionaire shall be authorized to hold one or more titles which totalize an
area of more than five thousand mining hectares at the start of the stage of
exploitation. Notwithstanding the previous clause, the General Regulation under
this Law shall establish technical criterion for the establishment of areas of
protection of mining projects in a stage of exploitation.

     

    Said
request shall have the minimum requisites provided in the General Regulation
under this law and it must be attached to a report duly audited by a qualified
professional within the terms of the respective Regulation. Said report has to
include the payment of rights of administrative proceeding and the corresponding
patents of preservation, as well as the activities and minimum investments on
exploration demanded by Law.

     

    The
relevant Ministry shall request the mining concession holder that within a term
of thirty days, amplify or supplement the information enclosed to the request.
The information delivered by the mining concession holder shall be classified as
confidential and it shall not be used or revealed to third parties unless
an authorization in written is presented by the title holder.

     

    Once said
request is submitted within the terms previously provided, the relevant Ministry
shall issue an administrative resolution declaring the beginning of the period
of exploitation. In case the relevant Ministry does not issue the corresponding
resolution in a term of 60 work days from the presentation of the petition or 30
days from the presentation of the documents that amplify or supplement the
information delivered, positive administrative silence shall be produced. Those
officials whose omission produced the administrative silence shall be held
administratively, civilly or criminally responsible. In this case, the mining
concessionaire shall have free access to the stage of exploitation directly
under the terms of his own request and the template of the Contract of Mining
Exploitation referred to in articles 40 or 41 of this Law, where the terms for
this contract shall be agreed.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
the previous clause, in case that as a result of the economic evaluation of the
deposit the mining concessionaire decides not to initiate its construction and
installation, he has the right to request, alternatively, to suspend the
beginning of the stage of exploitation. This suspension shall not last more than
two years from the date of the administrative act that contains said request and
it shall grant right to the State to receive an economic compensation equivalent
to one (1) annual unified basic salary for each mining hectare assigned, during
the valid period of the suspension.

     

    In case
the mining concessionaire does not request to start the stage of exploitation or
its suspension under these terms, the mining concession shall be
terminated.

     

    Chapter
III

     

    CONTRACTING
MODALITIES

     

    Art. 40.- Service Contract.-
The State, through the relevant Ministry, can celebrate a Service Contract
within the terms and conditions set forth by the relevant Ministry and those
offered by the contracting party or the concessionaire at the moment of the
allocation.

     

    Similarly,
the Service Contracts have to contain the remuneration of the mining concession
holder, and also his obligations on subjects of environmental management,
presentation of guarantees, relation with the communities, and activities of
partial or total closure of the mine. The template of these contracts shall be
approved by the relevant Ministry by means of a Ministerial
Agreement.

     

    In this
case, mining concession holder is not obliged to pay the royalties established
in this Law or the taxes derived from windfall gains. Notwithstanding the
previous clause, the Government shall destine the corresponding economic
resources equivalent to 3% of the sale of ore minerals exploited, to local
sustainable projects of development, through regional governments parochial
boards and, if that is the case, to the offices of the government of indigenous
communities, in accordance to the respective regulation.

     

    In
general, the mining concession holder has the same rights and duties established
in the case of the contracts of mining exploitation individualized in the
following article.

     

    Art. 41.- Contract of Mining
Exploitation.- Within the term of six months from the resolution that
declares the beginning of the stage of exploitation, the mining concession
holder shall celebrate with the State, through the relevant Minister a Contract
of Mining Exploitation, which shall contain the provisions, conditions and terms
for the stages of construction and installation, extraction, transport, and
trade of the minerals obtained within the limits of the mining
concession.

     

    The
template of these contracts shall be approved by the relevant Ministry by means
of a Ministerial Agreement.

     

    Similarly,
the contracts have to contain the obligations of the mining concession holder on
subjects of environmental management, presentation of guarantees, good
relationship with the communities, payment of royalties and activities of
partial or total closure of the mine including the payment for all environmental
assets corresponding to a period equivalent to the one of the
concession.

     

    The
Contract of Mining Exploitation shall contain the Base Price for the application
of the standards determined by the Tax Law in force.

     

    The
contract shall establish the right of the concession holder to suspend the
mining activities subject to the payment of an economic compensation in favor of
the State, in case the technical conditions or of the market bar them to comply
with the terms of time established for each stage and the activities previously
set forth.

     

    A mining
concession holder shall not be authorized to perform works of exploitation
without the celebration of the respective contract. Notwithstanding the previous
clause, the owner of a mining concession may take possession of those minerals
he may obtain as a result of exploration works.

     

    During
the development of activities of the exploitation stage, the mining concession
holder shall comply with the valid environmental regulations and shall not
perform these activities without the corresponding Environmental Permit. The
resolution of differences and/or controversies subject matter of these contracts
shall only submit to the judges of the Judicial Department of Ecuador or an
authority of arbitration in Latin America.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    Art. 42. - Half yearly reports of production.
- At the start of the exploitation stage of the deposit, title holders of mining
concessions have to present at the relevant Ministry, on a half yearly basis,
audited reports regarding their production in the previous calendar semester,
according to technical guidelines prepared by the Agency of Mining Regulation
and Control, on January 15 and July 15 of each year. These
reports shall be subscribed by the mining concession holders or their legal
representative and their technical consultant who shall accredit his
professional capacity in the fields of Geology and/or Mining.

     

    Audits
and technical verifications of said reports shall be performed by Universities
or Polytechnic Schools with Departments or Schools majoring in Geology, Mines,
Science of Earth and /or the Environment with a sufficient technical capacity to
prepare such report, evaluation or trial; or professionals and/or firms
certified by the Agency of Mining Regulation and Control.

     

    The costs
that demand the intervention of the entities that practice said evaluations
shall be exclusively for account of the concessionaire.

     

    Art. 43.- Mining or metallurgical
residues .- It is understood as those residues and tailings, discarded
ore or rock, rubble, debris, washings, sweepings, scoria, slag, and waste
resulting from mining or metallurgical activities.

     

    Mining or
metallurgical tailings or residues become an accessory part of the concession,
processing plant, or smelter to which they belong even though they may be
located out of their boundaries. The concession holder can make free use of
them.

     

    Art. 44.- Concession of abandoned
residues.- The right to process ore mineral, smelt, refine or trade
abandoned mining or metallurgical residues is granted along with the rights
delivered to the mining concession title holder over any other mineral
substances that may be found in them within the limits of the concession
solicited according to the prescriptions of this Law.

     

    The
mineral-metallurgic residues are considered to be abandoned:

     

    a) When
they come from a terminated mining title;

     

    b) They
belong to a plant of processing or smelter whose permit is expired or it has not
been in operation for a term of 2 years, except in cases of a force majeure or
accident duly justified in the available time period; and,

     

    c) When
it is not possible to determine their ownership status.

     

    Previous
to the issuance of a requested mining concession, the Agency of Mining
Regulation and Control shall certify the existence of any of the previously
referred cases.

     

    Chapter
IV

     

    PROCESSING
PLANTS, SMELTERS AND REFINERIES

     

    Art. 45.-  Authorization
for the installation and operation of plants.- The relevant Ministry is
empowered to authorize the installation and operation of plants of processing,
smelting and refining mineral ore to any natural person or legal entity, local
or foreign, public, of mixed economy or private, communitarian and of self
management who requests it under this Law and its General Regulation. To be a
mining concession title holder is not a requirement to file said
petition.

     

    For small
scale mining, the State shall authorize the operation of processing plants of
ore minerals, constituted exclusively by crushing and milling, with an installed
capacity of 10 tons a day and processing plants; that include crushing, milling,
flotation and/or cyanidation with a minimum capacity of 50 tons a
day.

     

    Natural
or juridical persons who request the permit of installation and operation of
processing plants, smelter or refining, need to obtain the respective
Environmental Permit, even if they are concession holders.

     

    In order
to obtain the permit, according to the environmental legislation in force and
the General Regulation to this Law the following requisites are
established.

     

    Art. 46. - Rights of mining concessionaire for the installation of plants. -
Title holders of mining concessions are authorized to install and operate
plants of processing, smelting and refining, under the agreement of their
concessions, without the necessity to request the permit set forth in the
previous clause, as long as said plants be destined to process their own ore
minerals. Processing of mineral ores not extracted in their concession shall
require the respective authorization.

     

    
      
        
        

      

      
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    Art. 47. - Half-yearly reports.
-  Title holders of plants of processing, smelting and refining
shall submit to the relevant Regional Technical Agency of Mining Regulation and
Control half-yearly reports about works done, jointly with a summary of
investments and works done, the production obtained and the technological
results of the operation.

     

    Art. 48. - Rights and Obligations.
-  The title holders of ore reduction plants, smelters and
refineries enjoy the rights referred to in Title III, Chapters I & II, and
are subject to compliance with the obligations referred to in Title IV of this
Law in the extent considered applicable.

     

    Chapter
V

     

    TRADE
OF MINERAL SUBSTANCES

     

    Art. 49. - Right of Free trade. - Mining
concession holders may freely commercialize their production either locally or
abroad.

     

    Art. 50. - License of trade.-Natural persons or
legal bodies who are not title holders of mining concession and trade or export
metallic minerals or export non-metallic minerals should obtain the
corresponding permit at the relevant Ministry according to the Regulation under
this Law. Any concessionaire who trades in metallic minerals or exports
non-metallic minerals, originated from another concession must also obtain said
license or permit.

     

    This
permit is not necessary for those natural persons or legal bodies trading in
non-metallic mineral substances within the country, as well as jewelry
artisans.

     

    Art. 51. - Term of validity of the permit and
renewal. - Trading permits given to natural persons or legal entities
engaged in the activities mentioned in the preceding Article will be valid for a
period of three years. These permits are non-transferable and can be renewed for
similar periods in accordance with the Regulation under this Law.

     

    Art. 52. - Register of Traders. - The Agency of
Mining Regulation and Control shall keep a register of all those involved in the
trade of metallic minerals and of those involved in the export of metallic and
non-metallic minerals with the purpose to keep statistical data of local trade
as well as the export of these mineral substances and also as a measure to
ensure the compliance of the obligations established in this Law.

     

    Art. 53. - Duties of traders. -  Those legally
authorized to trade in mineral substances must:

     

    
      	
               
      

            	
              a)

            	
              Become
      withholding agents according to the tax code in
  force;

            

    

     

    
      	
               
      

            	
              b)

            	
              File
      detailed declaration forms indicating all withholdings and deductions
      made; and,

            

    

     

    
      	
               
      

            	
              c)

            	
              Send
      half-yearly reports to the Relevant Ministry in regards to the origin,
      volume and value of their purchase; destination, volume and value of
      sales; any taxes withheld of any other statistical information required by
      said authority. These reports shall be filed in simplified forms issued
      for this purpose by the Agency of Mining Regulation and
      Control.

            

    

     

    Art. 54. - Revocation of License. -  Failure to
comply with of any of the obligations mentioned in the previous Article shall
result in the cancellation of the trading permit without prejudice to the
corresponding liabilities.

     

    Art. 55. - Illegal trade of ore minerals. -  The following is
considered illegal trade of mineral substances:

     

    
      	
               
      

            	
              a)

            	
              Mining
      concession holders that trade domestically in metallic minerals or export
      metallic or non-metallic minerals all originated from other concessions,
      without the license required in Art. 50;
and;

            

    

     

    
      	
               
      

            	
              b)

            	
              Miners
      who sell metallic minerals to people or entities not authorized to trade
      in them.

            

    

     

    Art. 56. - Illegal Exploitation of Mineral
Substances.–- Those activities of people
who exploit illegally mineral substances operate, work and perform mining
activities in any phase without a mining concession title, including artisan
miners who do not have the legal corresponding permit are defined as illegal
exploitation.

     

    
      
        
        

      

      
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    Art. 57.-  Legal
Penalties.-  Illegal exploitation or trade of mineral
substances shall be punished by the administrative authority through the
confiscation of the machinery, equipment and mineral substances involved in the
act, and a fine equivalent to the total cost of the minerals extracted
illegally, without prejudice to legal actions derived from these violations.
These penalties are to be applied to any mining subject. A due process is
guaranteed.

     

    Damage to
the environment and the ecosystem and biodiversity produced as a consequence of
illegal exploitation or invasions, they shall be considered an aggravation at
the moment of the dictation of the resolutions in connection with the
administrative assistance process.

     

    TITLE
III

     

    RIGHTS
OF TITLE HOLDERS OF MINING CONCESSIONS

     

    Chapter
I

     

    RIGHTS
IN GENERAL

     

    Art. 58. - Continuity of Work. - Mining activities
can be suspended in the case of land invasion, or when the security of the
health and life of mining workers demand it, or of those communities located
near the perimeter of the area where mining activity is being performed,
according to the General Regulation under this Law, or in the event
the Civil Defense demands it, or when noncompliance of Environmental Permit
be verified by the relevant environmental authority. In any case, the provision
of suspension of mining activities shall be issued, exclusively, by the relevant
Minister, by means of a motivated resolution.

     

    The
mining concessionaire obstructed to normally carry out his mining works because
of duly proved Force Majeure or Act of God shall request to the relevant
Ministry, the suspension of the concession term during the period of said
impediment. For this purpose, the relevant Ministry, through a motivated
resolution shall admit or deny that request.

     

    Art. 59. - Construction and Complementary Installations. -
The title holders of mining concessions may build and install within
their concessions: plants of processing, smelting and refining, tailings ponds,
buildings, camps, storage areas, pipelines, pumping stations, conveyors,
maintenance shops, electric lines, reservoirs, communication systems, roads,
railroads, and any other local transportation systems or installations, ditches,
piers, and other shipping systems, as well as to perform necessary activities
for the development of their operations and other installations, subject to the
provisions under this Law, the valid environmental regulations and other
relevant legal provisions, after a mutual agreement with the owner of the
surface estate or, after having been granted the necessary easements, according
to the Constitution, this Law and its General Regulation.

     

    Art. 60. - Water management and incorporation of
easements.
-  The granting of mining concessions in general and the
authorization to install treatment plants, smelters, and refineries require the
authorization of the National Secretary ́s Office of Water and it has the
implicit right to the use of water and the right to benefit from any easements
that are necessary, in accordance with the proceedings established in the
Law.

     

    Art. 61. - Permit for the use of waters. -
Mining concessionaires who obtain the authorization of the relevant
authority of Water shall submit before the relevant Ministry the technical study
that justifies the feasibility of the works to be done approved by the relevant
authority of Water.

     

    The water
fountains used during mining works can be used by the mining concessionaire,
with the authorization of the Authority of Water, with the obligation to remove
them, observing the requisites, permissible limits and technical parameters
established in the applicable environmental legislation.

     

    Chapter
II

     

    ILLEGAL
INTRUSION, ADMINISTRATIVE PROTECTION, INVASION OF MINING AREAS AND

     OPPOSITIONS

     

    Art. 62. - Claim of Intrusion. -The holders of mining
concessions or artisan mining permits are forbidden to intrude with their works
into another concession without permission of their owner. The claim of
intrusion into mining works should be submitted to the relevant Ministry,
accompanied by the concession title as well as the updated certification of
payment of patent fees. The General Regulation under this Law shall determine
the proceeding to follow.

     

    
      
        
        

      

      
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    Art. 63. - Administrative Assistance. - The title
holder or legal owner of a mining right may request through the Public Ministry
the restraint of illegal mining activities, whether in process or imminent,
according to the rights of assistance granted under this Chapter.

     

    The
State, by means of the Agency of Mining Regulation and Control, shall give
assistance to mining title holders under the law for reasons of intrusion,
illegal occupancy, dispossession, or any other act that may impede the free
exercise of their mining activities.

     

    Art. 64. -  Eviction
warrant.- The
Agency of Mining Regulation and Control, on fair grounding of the petition filed
by the complainant shall issue an warrant of eviction to the illegal occupant of
the mining area which is the object of the case . The illegal occupant has 3
days to comply voluntarily, at which point removal by force is
authorized.

     

    If in
spite of the previous warning, the illegal occupant does not leave the area, The
Agency of Mining Regulation and Control, at request of the complainant, shall
order eviction by force. This dislodgement will be the responsibility of the
relevant Police authority in the province.

     

    Art. 65.- Legal penalties to invaders
of mining areas.- Those persons with the intention of obtaining benefit
for themselves or for third parties, individually or collectively, by illegally
occupying mining concessions, or by violating the rights of the State or of the
holders of mining titles, shall be penalized with a fine of two hundred unified
basic salaries, the confiscation of tools, equipment and production obtained,
without prejudice to the request of administrative protection and penal
sanctions required by the case.

     

    Art. 66. -  Formulation of
oppositions.- Title holders of mining concessions may oppose the granting
of concessions when the requests for said concessions are allegedly superimposed
on their own existing concessions.

     

    Title
IV

     

    OBLIGATIONS
OF MINING TITLE HOLDERS

     

    Chapter
I

     

    OBLIGATIONS
IN GENERAL

     

    Art. 67. -  Labor obligations.- Labor force obligations
contracted by the title holders of mining rights with their workers shall be of
their exclusive responsibility and under no circumstance they shall become
responsibility of the State.

     

    On the
other hand, in case of those workers involved in mining activities, they shall
receive only 3 per cent of the shares as established in this Law. The amount
left shall be paid to the State, to be destined, only and exclusively, on
projects of social investment of health, education and housing, through their
regional departments in the area of the mining project. Said projects have to be
harmonized with the National Plan of Development.

     

    In the
case of small scale mining workers, they shall receive 10% of the profits, and
5% left shall be destined for the State.

     

    Any form
of illegal practice related to workers of mining activity is
prohibited.

     

    Art.
68.-  Industrial-mining security and hygiene.- Mining rights
title holders have the obligation to preserve the physical and mental health and
the life of their technical personnel and their workers by applying industrial
and mining security and hygiene regulations set forth in the legal provisions
and regulations, providing, in addition, hygienic and comfortable conditions of
lodging, at the work camps, according to the plans and specifications approved
by the Agency of Mining Regulation and Control and the Ministry of
Labor.

     

    Mining
concessionaires must have a valid and approved Bylaw of Mining Security and
Health, according to the regulation that in this purpose shall be issued by the
relevant Ministry and the Ministry of Labor and other pertinent Regulations
dictated for this purpose by the corresponding institutions.

     

    Art. 69. - Prohibition of child labor.-
Labor of children or adolescents in any position, in any mining activity
is banned, pursuant to item 2 of Art. 46 of the Constitution of the Republic.
Noncompliance of this disposition shall be considered an aggravated infraction
and it shall be penalized with a fine set forth in the General Regulation under
this Law; and, in case of recurrence, the relevant Ministry shall declare the
lapsing of the concession, the termination of the contract or artisan permits.
In case of women labor, they shall receive a special treatment in accordance to
the Regulation under this Law.

     

    
      
        
        

      

      
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    Art. 70. -  Compensations.-
The holders of mining concessions  are obliged to perform their
work by means of methods and techniques that minimize damage to the soil, the
environment, natural or cultural heritage and adjacent concessions and, in any
case, compensate any damage or harm they may be caused in the course of their
work.

     

    Noncompliance
of the methods and techniques referred to in the previous item shall be
considered as a cause of suspension of mining activities; in addition to the
corresponding penalties.

     

    Art. 71. - Conservation of benchmarks. -The holders
of mining concessions are under the obligation to preserve the benchmarks;
failure to comply shall result in a fine to be established by the relevant
Ministry in accordance with provisions set forth in the General Regulation under
this Law.

     

    Art. 72. - -Alteration of benchmarks. -
The holders of mining concessions may not alter or move the benchmarks
denoting the limits of their concessions; failure to comply shall result in a
fine to be established by the relevant Ministry without prejudice to the penal
liability arising in the event they have acted maliciously, according to the
dispositions of Article 580 of Penal Code, any person who tear down, alter or
move benchmarks of mining concessions shall also be punished by
law.

     

    Art. 73. - Maintenance of and access to registrar`s
offices.  -The holders of mining rights must:

     

    
      	
              a)

            	
              Keep
      accounting records, financial records, technical registers, employment
      registers, production statistics, records of materials consumed and energy
      used and others which adequately reflect the progress of their operations;
      and,

            

    

     

    
      	
              b)

            	
              Facilitate
      the access of functionaries duly authorized by the Relevant Ministry to
      the records and registers referred to above, so as to evaluate the mining
      activity performed.

            

    

     

    After
this information is submitted to the relevant Ministry it shall be declared
public, within the legal framework established by the Law in force.

     

    Art. 74. -  Inspection of
Installations -  The holders of mining rights are obliged to
permit the inspection of their installations and operations by officials duly
authorized by the relevant Ministry, the Ministry of Environment and its
agencies. Said inspections shall not interfere in any circumstance the normal
performance of the mining works.  In the event of refusal or
obstruction to the inspection, the official in charge shall inform to the
relevant Ministry`s local agency, which is able to suspend the mining
activities.

     

    Art. 75.-  Employment of
local
personnel  The holders of mining rights are obliged to use
Ecuadorian personnel in a proportion of not less than 80% for the development of
their mining works. In the percentage left the specialized Ecuadorian technical
staff shall be preferred, if there are no local professionals who meet this
requirement, foreign personnel shall be hired, and they have to comply with the
Ecuadorian legislation in force.

     

    Art. 76. -  Training of
Personnel.-  The holders of mining rights are obliged to have
training and permanent preparation programs for their personnel at all levels.
Said programs have to be periodically reported to the relevant
Ministry.

     

    Art. 77. -  Support to local
employment and training of technicians and
professionals.-  Mining concession holders shall preferentially
hire those workers who live in the surrounding localities and zones of the
mining projects and they shall maintain a policy of human resources and social
well-being to integrate the families of the workers.

     

    Likewise,
in their operation plans and in coordination with the Agency of Mining
Regulation and Control they should also admit into their mining operations
students of secondary schools and colleges in order to do practical work in the
field of mining and related disciplines, providing them with the necessary
facilities.

     

    
      
        
        

      

      
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    Chapter
II

     

    PRESERVATION
OF THE ENVIRONMENT

     

    Art. 78.-  Environmental
Impact Studies and audits.- The holders of mining concessions and plants
for processing, smelting and refining before the start of mining activities in
the different stages must prepare and submit environmental impact studies and
environmental management plans to prevent, mitigate, control, rehabilitate and
compensate environmental and social impacts derived from their activities; such
studies should be approved by the Ministry of Environment, in order to be
receive the respective Environmental Permit.

     

    No mining
activities of advanced exploration, exploitation, ore reduction, smelting,
refining and mine closure shall be authorized unless they have the respective
Environmental Permit issued by the Ministry of Environment.

     

    In order
to process the presentation and qualification of the studies of environmental
impact and the plans of environmental management and the granting of
environmental permits, and any other administrative aspects, permissible limits
and demandable technical parameters shall be those established in the
environmental regulation in force.

     

    All of
the stages of mining activity and their reports demand the submittal of economic
guarantees as set forth in the environmental legislation in force.

     

    The terms
of reference and the contests for the elaboration of studies of environmental
impact, plans of environmental management and environmental audits shall be
prepared, mandatorily by the Ministry of Environment and other relevant public
institutions, these attributions shall not be delegated to private
institutions.

     

    Expenses
incurred by the Ministry of the Environment under these terms of reference and
contests shall be afforded by the concessionaire.

     

    The
holders of mining rights are obliged to submit an annual environmental audit
that allows the controlling entity the monitoring, surveillance and verification
of the accomplishment of environmental management plans.

     

    Art. 79. - Treatment of Water. -After having
obtained the authorization from the National Secretary ́s Office of Water the
holders of mining rights can use water in their work and processing, and they
have to return it to its original course, lake or pond from which it was taken,
free from contamination or complying with the environmental and Water ́s
regulations in force, so as not to affect the constitutionally recognized rights
of the people and those of the nature.

     

    The water
treatment to be applied must guarantee its quality and the compliance of the
parameters of environmental quality; it must be set forth in the respective
environmental impact study in accordance to the relevant Laws and their
regulations.

     

    Reutilization
of water, through systems of recirculation is a permanent obligation of the
concession holders.

     

    Failure
to comply this provision shall result in penalties that may lead to the lapsing
of the concession or revocation of the permit.

     

    Art. 80. - Reforestation. - If the
mining activity requires performing works that demand the clearing and lumbering
of trees, the holder of the mining right will be obliged to proceed to reforest
with native species the area according to the environmental regulation and the
environmental management plan.

     

    Art. 81.- Accumulation of Residues
and prohibition of waste
dumping.- Title holders of mining rights and artisan miners in order to
accumulate mining-metallurgic residues they have to adopt strict measures of
caution that avoid the contamination of the soil, water, air and/or biota of
the  places where they are deposited, in all their stages including
the stage of closure, building installations such as waste dumps, waste
fillings, tailings ponds or dams or other infrastructures technically designed
and build that guarantee a safe and  long term
management.

     

    Dumping
of debris, tailings or any other not treated waste, from any mining activity, on
rivers, gulches, lagoons or other places where risks of contamination are
present is prohibited.

     

    Failure
to comply this provision shall result in penalties that may lead to the lapsing
of the concession or revocation of the permit.

     

    Art. 82. - Preservation of Flora and Fauna.
- Environmental impact studies and the plans of environmental management
shall contain information about the species of flora or fauna existing in the
zone, as well as the respective measures of impact mitigation.

     

    Art. 83. - Waste Management.
-  The management of waste, solid, liquid residue, and gaseous
emissions produced by mining activity within the national territory must comply
with the Constitution and the environmental regulation in force.

     

    
      
        
        

      

      
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    Art. 84. - Protection of the Ecosystem.
-Mining activities in all their stages have to contain environmental
protective measures, in compliance with the Political Constitution of the
Republic of Ecuador and the environmental regulation in force.

     

    Art. 85.-Closure of mining operations
- Title holders
of mining concessions should include in their annual programs of activities with
regard to the plan of environmental management, information of investments and
activities for the partial or total closure of operations and for the
rehabilitation of the area affected by mining activities of exploitation,
processing, refining or smelting.

     

    Likewise,
in a term of not less than two years after the total closure of operations for
mining activities of exploitation, processing, refining or smelting, the mining
concession holder must submit before the Ministry of the Environment, for its
approval, a Plan of Closure of Operations that includes the recovery of the
area, a plan of verification of its accomplishment, social impacts and the
guarantees set forth in the environmental regulation in force; as well as a plan
of incorporating to new ways of economic development.

     

    Art. 86. - Environmental Damages. -For
all those legal effects derived from the application of dispositions of this
article and especially those of the valid environmental regulation the relevant
environmental authority is the Ministry of Environment.

     

    Environmental
violations against the cultural heritage and damage to third parties shall be
penalized in accordance to the Political Constitution of Ecuador and the penal
and civil law in force.

     

    Failure
to comply with any of the obligations mentioned in this Chapter shall result in
administrative sanctions to mining concession holders and bearers of the
respective permits by the relevant Ministry, without prejudice to civil and
penal actions brought. These administrative sanctions may include the suspension
of mining activities of said operation or their lapsing.

     

    The
proceeding and requisites for the application of said penalties is set forth in
the General Regulation under this Law.

     

    Chapter
III

     

    SOCIAL
MANAGEMENT AND PARTICIPATION OF THE COMMUNITY

     

    Art. 87. - Right to information, participation
and consultation.-
The State is the authority in charge of the execution of the processes of
participation and social consultation through the corresponding public
institutions and the regulation in force. Said competence is not transferable to
any other private authority.

     

    These
processes aim to promote the sustainable development of mining activity, respect
for the environment, the social participation in environmental affairs and the
development of communities located in the surrounding areas of influence of a
mining project.

     

    In case a
process of consultation results in a majoritarian opposition from the respective
community, the decision to develop the project shall be adopted by a resolution
motivated by the relevant Ministry.

     

    Any
mining concession holder must respect the right of people to the access to
information processes, participation and consultation in environmental
management of mining activities.

     

    For any
process of consultation, the Ministry of Finance shall provide the respective
budget through the relevant Ministry.

     

    Art. 88. - Process of Information. -
From the moment a mining concession is issued and during all of its stages, the
concession holder, through the State, shall inform with accuracy to the relevant
authorities, local governments, communities and entities that represent social
or labor interests, regarding the possible impacts, not only positive but also
negative, of mining activity.

     

    The
environmental authority shall give free access to environmental and social
studies, formally filed, as well as the reports and technical resolutions issued
by the relevant authority, as determined by the Law.

     

    Art. 89. - Process of Participation and
Consultation.- Citizen participation is a process whose final purpose is
to consider and incorporate the criterion of the community to social and
environmental management of a mining project, said process shall be performed in
all the stages of mining activity, within the framework of proceedings and
mechanisms set forth in the Constitution and the Law.

     

    
      
        
        

      

      
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    Art. 90. - Special Procedure of Consultation to
the Peoples. -
The processes of citizen participation or consultation have to consider a
special procedure of consultation to indigenous communities, people and their
nationalities, beginning with the principle of legitimacy and representation
through their institutions, for those cases in which mining exploration or
exploitation be performed in their own land and ancestors` territories and when
said labors may affect their interests. In compliance with Art. 398 of the
Constitution of the Republic.

     

     Art. 91. - Claims of Environmental and Social
Damage and Threats. - Any mining activities that generate social or
environmental impacts shall be subject of legal proceeding by means of any
natural person or legal body before the Ministry of Environment, after the
accomplishment of the formalities of a claim, such as signature and rubrics
recognition.

     

    The
Ministry of Environment shall adopt timely measures that avoid environmental
damages when there is a scientific certainty that they are a result of mining
activities.

     

    In case
of doubt about the environmental damage as a result of any action or omission,
the Ministry of Environment in coordination with the Agency of Regulation and
Control shall adopt protective, efficient and timely measures that shall
simultaneously and in the same providence order the practice of actions in
order to prove the damage.

     

    Chapter
IV

     

    PAYMENT
OF ROYALTIES

     

    Art. 92. - Royalties of Mining
Activity.- The State, is the owner of non-renewable natural resources,
and it has the right to receive the payment of royalties from the mining
concession holders who perform labors of exploitation, in accordance to this
Chapter.

     

    Royalties
paid by mining concessionaires shall be established based on a percentage of the
production and shall be paid half-yearly in the months of March and September of
each year. The amounts from royalties have to be duly reflected in the
half-yearly reports of production and the general balance submitted to (Servicio
de Rentas Internas) Internal Revenue Service.

     

    Art. 93. - Royalties on exploitation of
minerals. - The mining concessionaire has to pay a royalty to the State,
which shall participate in an amount not smaller than the concessionaire who
exploits it, the amount of royalties cannot be less than 5% of the total value
of the sales, in addition, they shall contribute with 12% of the profits of the
workers, 25% of income tax, 12% of the tax to added value and 70% of windfall
gains.  In the Contract of Mining Exploitation, the Concession Holder
and the State shall agree the percentage of royalties taking into account the
technical and economic background of the project, and the standard references of
the international market.

     

    60% of
these royalties shall be destined for productive projects and of local
sustainable development through municipal government offices and parochial
boards and, if required, to authorities of the Government of indigenous
communities and /or local surrounding territories. These resources shall be
allocated prioritizing the needs of the communities located in areas of
influence affected directly by the mining activity.

     

    Holders
of small scale mining rights shall pay for royalties 3% of the sales of the main
and secondary minerals, taking into account standard references of the
international market.

     

    The
amounts of royalties, plus legal benefits such as income tax, value added tax,
patents and other taxes, shall justify the implementation of Art. 408 of the
Constitution of the Republic. Evasion of the payment of royalties shall
constitute a cause of lapsing, without prejudice to civil and penal effects
stemmed.

     

    The
percentage of royalties for the exploitation of non metallic minerals shall be
estimated based on the costs of production.

     

    The
regulation under this Law and the contract of Mining Exploitation shall
establish the parameter for the payment of royalties, as well as the requisites
for its distribution.

     

    
      
        
        

      

      
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    Title
V

     

    RELATIONS
OF THE HOLDERS OF MINING RIGHTS AMONG THEMSELVES AND THE OWNERS OF

    THE
LAND

     

    Chapter
I

     

    PERMITS
AND EMERGENCY OPERATIONS

     

    Art. 94. -  Permission to
Neighbors.- The holders of mining concessions and processing, smelting
and refining plants shall permit neighboring holders access to their adjoining
parcels installations, galleries or pits in the following
circumstances:

     

    
      	
              a)

            	
              When
      there is a well-founded danger that the work being performed could give
      rise to any damage to the adjacent
mine;

            

    

     

    
      	
              b)

            	
              When
      cave-ins or weakening in the galleries, pits and other installations can
      be repaired more easily and quickly from the neighboring galleries, pits,
      or installations, even if it is necessary to open temporary means of
      access. In every case the costs shall be for the exclusive account of the
      beneficiary; and

            

    

     

    
      	
              c)

            	
              When
      there is a suspicion of intrusion.

            

    

     

    If this
permission is denied, the interested party can have recourse to the relevant
Ministry to obtain it.

     

    Art. 95. - Damage Due to Accumulation of Water.
- When damage or harm is being done by the accumulation of water on a
nearby or adjacent concession, the injured party should require in writing that
the one that is causing the damage drain this accumulation out fully within 48
hours, without prejudice to any indemnity for damages.

     

    The cost
of draining out this accumulation shall be for the exclusive account of the one
causing damage but the injured party may cover the cost, with right to
reimbursement.

     

    The
injured party may have recourse to the relevant Ministry to have this item be
applied, as well as to inform about it to the National Secretary ́s Office of
Water.

     

    Art. 96.- Use of Underground Water in
adjacent mining concessions.- The holders of mining rights may use
underground water discovered in an adjacent mining concession if the discoverer
is not making use of it, in compliance with the Law of Water which regulates
hydric resources and environmental control guidelines.

     

    Chapter
II

     

    INTRUSION

     

    Art. 97. - Prohibition of Intrusion. -The holders of mining
concessions are forbidden to intrude with their works into or onto another
concession without permission of their neighbor. Any unauthorized intrusion
obliges the party doing it to stop work and pay the value of the minerals he has
extracted, deducting the cost of their extraction and pay an indemnity for any
harm caused.

     

    Art. 98. - Suspension of Work. -  In the
event of a report of intrusion, the relevant authority, and the Agency of Mining
Regulation and Control shall order the suspension of labors in the zone de
litigation and dictate the corresponding resolution for said
controversy.

     

    Art. 99. - Criminal intrusion. -Intrusion which exceeds
20 meters, measured from the boundary of the concession, shall be presumed
criminal. Similarly, the intrusion shall be considered criminal in case those
works suspended are restarted after the suspension warrant issued by the Agency
of mining Regulation and Control In these cases, the amount to be paid for the
minerals extracted or their return shall be done with no deduction and without
prejudice to the penal responsibility of those who intrude.

     

    
      
        
        

      

      
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    Chapter
III

     

    EASEMENTS

     

    Art. 100. - Classes of
easements.-  From the moment a mining concession is
incorporated or a plant for processing, smelting and refining is authorized, the
surface lands are subject to the following easements:

     

    
      	
               
      

            	
              a)

            	
              To
      be occupied to the full extent required by the installations and
      construction belonging to the mining activity.  The mining
      concession holder shall mandatorily pay to the owner of the land an amount
      for the use of easements, as well as the corresponding payment for the
      damages and prejudice they cause. In case the parties do not agree,
      the Agency of Mining Regulation and Control shall determine the
      amount;

            

    

     

    
      	
               
      

            	
              b)

            	
              Transit,
      water conduit, rail lines, landing strips, ferries, ramps, conveyor belts
      and all other systems of transport and
  communication;

            

    

     

    
      	
               
      

            	
              c)

            	
              Those
      established in the Electric Regime Law for the case of installations of
      electrical service; and,

            

    

     

    
      	
               
      

            	
              d)

            	
              Others
      necessary for the carrying out of mining
  activities.

            

    

     

    
      	
               
      

            	
              e)

            

    

     

    Art. 101. - Voluntary Easements and Agreements.
- The holders of mining rights may agree with the owners of the land on
the extent of terrain they need for their constructions and installations for
the adequate exercise of their mining rights, either in the stages of
exploration or exploitation, as well as for their installations and buildings,
exclusively destined to mining activities.

     

    In case
of zones belonging to Cultural Heritage, for the granting of easements they need
to have the authorization of the National Institute of Cultural Heritage in
accordance to the conditions established in the administrative act issued by
said Institute.

     

    Art. 102. - Easements of Neighboring
Concessions. - To give or provide ventilation, drainage or access to
other mining concessions or to processing plants, smelters or refineries,
easements may be constituted on adjacent concessions or on free
areas.

     

    Art. 103.-Constitution and Extinction
of Easements. -  The incorporation of an easement on lands,
free areas or concessions is essentially transitory; its exercise and the
indemnities to which it gives rise shall be established by mutual agreement
between the parties, celebrated in a Public Deed and recorded in the Mining
Register kept by resolution of the Agency of Mining Regulation and Control.
These attributions are set out Mining Register.

     

    These
easements expire with the mining rights and cannot be utilized for purposes
different from those belonging to the respective concession or plant; they may
be extended or reduced according to the activities or requirements of the
concession or the plant.

     

    Art. 104. - Indemnity for Damage. -Easements are
constituted after determination of the amount of indemnity for any harm they
cause to the owner of the land, building or concession on which they are set and
may not be exercised until the value thereof is agreed.

     

    Art. 105. - Expenses of incorporation of
easements. - The costs involved in the incorporation of these easements
shall be of the exclusive account of the concessionaire benefited or the owner
of the plant.

     

    Title
VI

     

    EXTINCTION
OF MINING RIGHTS

     

    Chapter
I

     

    EXPIRATION
OF THE TERM OF THE CONCESSION

     

    Art. 106. - Expiration of the term - The mining concession and
the permits shall be considered terminated for the expiration of the term
established or its deferral.

     

    The
Agency of Mining Regulation and Control shall order the annulment of the
respective registers once the term of valid life of a mining concession expires,
if the mining concessionaire has not requested to begin the stage of
exploitation or the renewal of the term of concession in the framework of an
Agreement of Mining Exploitation, in the terms provided in the terms of this
Law.

     

    
      
        
        

      

      
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    Chapter
II

     

    REDUCTION
AND RELINQUISHMENT OF THE CONCESSION Art.

     

    Art. 107. - Faculty of Concessionaires. -
At any time during the valid life of a mining concession, its title
holders may reduce or relinquish them totally according to the established
proceeding of this Law AND ITS GENERAL REGULATION,, provided such
relinquishments or reductions do not affect the rights of third
parties.

     

    The
relinquishment shall result in the cancellation of the respective registers,
leaving the mining area of said concession free. In case of a reduction, the
registry of the area which remains in possession of the mining concessionaire
shall be recorded.

     

    Chapter
III

     

    EXPIRATION
OF CONCESSIONS AND PERMITS

     

    Art. 108. - Lapsing of Concessions. - The
relevant Ministry is authorized to declare the lapsing of mining concessions and
permits in case their title holders have not complied with the duties set forth
expressly in this Chapter.

     

    The
process of lapsing might be legally initiated by the relevant Ministry through
the request of the Ministries related to mining activity, and it shall be
subject to the provisions, requisites and proceedings determined for this
purpose by the General Regulation under this Law.

     

    The
technical and legal decision shall be considered the base for the declaration of
lapsing by the Agency of Mining Regulation and Control.

     

    Once the
mining concessionaire is notified, the mining concessionaire shall be given, for
only one time, a term of 30 days to discharge the cause of lapsing or to
accomplish with the pending obligation, with the payment of a fine equivalent to
twenty five unified basic wages. This right to resolve the noncompliance that
constitutes a cause of lapsing shall not be applied in the cases set forth in
articles110, 115, 116 and 117.

     

    Art. 109. - Effects of lapsing - Lapsing
terminates the mining rights. With exception of the cause established in article
117, it is not necessary to have a previous legal sentence for the declaration
of lapsing, and it shall produce its effects on the effective date of its
notice. 

     

    Art. 110.-Lapsing for debt service
default Mining concessions lapse when their owners have ceased to pay the
patent fees, royalties and other rights or taxes established in this
Law.

     

    Art. 111. - Lapsing for failure to present
exploration reports or failure to comply with the minimum investment
requisite.- It is a cause of lapsing the failure to submit exploration
reports to the relevant Ministry of the annual report of the activities and
investments on exploration performed in the area of the mining
concession.

     

    Art. 112. - Lapsing for failure of presentation
of production reports.-The mining concession shall lapse in the event
their title holders fail to present within the term set forth in Art. 42, the
audited reports on their production.

     

    Art. 113. - Lapsing for exploitation without
title and for presentation of false information.- A mining concession
shall lapse in case their title holder performs labors of exploitation, directly
or indirectly, before the celebration of the respective Contract of Mining
Exploitation.

     

    Likewise,
a mining concession shall lapse in case their reports under this Law contain
forged information or if they intentionally alter their technical and economic
conclusions.

     

    The
technical and legal decision shall be considered the base for the declaration of
lapsing by the Agency of Mining Regulation and Control.

     

    Art.  114. - Intentional
alteration of benchmarks.-Malicious alteration of benchmarks duly proved,
shall constitute a reason of lapsing of the mining concession.

     

    Art. 115. - Lapsing for Declaration of
Environmental Damage. - The relevant Ministry is duly authorized to
declare the lapsing of mining concessions in case their activities produce a
serious and permanent environmental damage, without prejudice to the liability
of the concession holder to repair the environmental damage caused.

     

    
      
        
        

      

      
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    The
declaration of environmental damage in the technical and legal aspects, shall be
given by means of a resolution issued by the Ministry of Environment, in
accordance with Art. 78 of this Law. In the event of damage to hydric resources
because of mining activities, the declaration of environmental damage shall be
the attribution of the National Water ́s Office.

     

    The
proceeding and requisites for the declaration of environmental damage shall be
set out in the General Regulation under this Law.

     

    Art. 116. - Lapsing for Damage of Cultural
Heritage of the State.
-  The relevant Ministry, after a favorable technical report
from the National Institute of Cultural and Natural Heritage, is authorized to
declare the lapsing of mining concessions in case their activities produced a
serious and permanent damage to the cultural heritage of the State, in
accordance with the Constitution of the Republic and the Law of Cultural
Heritage.

     

    The
proceeding and requisites for the declaration of cultural heritage damage shall
be set forth in the General Regulation under this Law.

     

    Art. 117. - Lapsing for Human Rights
Violations.
-  The relevant Ministry, after a sentence or resolution issued
by a relevant judge who determines human rights violations, either by the
concession holder or his representative, as well as his subcontractors and
specially the security guard companies who act on behalf of the concession
holder or his representative, and it is needed a sentence dictated by a
competent judge who determines violation of human rights.

     

    Art. 118. - Ineligibility to request mining
concessions. - Any natural person or legal body who had loses their
status of mining concessionaires due to failure in the accomplishment of one or
more legal or contracting duties derived from the mining concession, shall not
be able to obtain a concession in those areas covered, totally or partially, for
the original concession, for a term of three years starting on the issue of the
corresponding administrative act of lapsing of said concession.

     

    Art. 119. - Responsibilities and Penalties.
- Public workers who fail to comply with one or more of the legal duties
established in this Law, shall respond administratively, civilly and criminally
of said noncompliance.

     

    Likewise,
those professionals in charge of providing legal, technical, economic or
environmental information to relevant authorities shall be civilly and
criminally responsible for the presentation of forged or malicious
information.

     

    Chapter
IV

     

    NULLITY
OF MINING RIGHTS

     

    Art. 120. -  Revocation of mining
concessions.-  Those mining titles of concessions assigned
under violation of the terms set forth in this Law shall be revoked. In addition
those concessions assigned superimposed on another that is legally valid and
registered, shall be null in the extent of the superimposed section, providing
that the effects of lapsing are not produced.

     

    Art. 121. -  Declaration of nullity.- The relevant
Ministry shall be informed of and resolve the nullity of a mining concession for
a complaint of affected holders of mining rights or third parties. The nullity
produces the return of the mining to the mining concessionaire who has a
preferential right, or as the case may be to the State, leaving it
free.

     

    Art. 122.-  Right of
property on mining goods.-  In the event of termination of
mining rights, the former title holder shall not lose his right on buildings,
machinery, installations and other elements of work, which can be withdrawn at
his own expense.

     

    
      
         

      

      
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    Title
VII

     

    MINING
CONTRACTS

     

    Chapter
I

     

    APPLICABLE
STANDARDS AND REQUISITES OF CONTRACTS

     

    Art. 123.- Applicable
regulations.-  Contracts entered between concession holders, or
by and between them with third parties, related to mining rights and activities,
are ruled by Art. 125 of this Law and also by regulations of private right, in
the extension they are not opposed to the Law.

     

    Art.
124.-Requisites.-  Mining contracts, in order to be considered
valid, must be executed by means of a public instrument and record it at the
Mining Register in charge of the Agency of Mining Regulation and Control and
comply with all the requisites set forth in this Law. All contracts have to be
published on the web page of the Mining Register.

     

    Chapter
II

     

    ASSIGNMENT,
TRANSFER, AND IRREVOCABLE PROMISE OF SALE

     

    Art. 125. - Nontransferable rights.- Mining rights, in
general, may be assigned or transmitted among living parties or by reason of
death, in the same way as real estate, with the authorization of the Agency of
Mining Regulation and Control. Said transfer is perfected by the registration in
the corresponding book of the Mining Registry governed by the Agency of Mining
Regulation and Control; the registration rights shall be set forth in the
General Regulation of this Law.

     

    The
assignment and transfer of rights of a mining concession shall be declared
void and it shall not have any value if there is no authorization from the
Agency of Mining Regulation and Control, without prejudice to the declaration of
lapsing in accordance with this Law.

     

    Art. 126.-Irrevocable Promise. -
It is permitted to celebrate contracts of irrevocable promise of cession
or transfer of rights and shares in a mining concession or, in general, in
relation to any other mining rights, complying with the requisites and duties
set forth in the previous article.

     

    In this
type of contract it is facultative for the promising assignee to celebrate the
definitive contract or not, but is mandatory for the promisor to celebrate said
definitive contract.

     

    Art. 127. - Non-Rescindable Contracts for gross
loss. -  Contracts of cession, transfer or exchange of rights
and shares on mining titles and other mining rights cannot be rescinded on
grounds of excessive injustice.

     

    Chapter
III

     

    CESSION,
TRANSFER, AND PLEDGE

     

    Art. 128.-   Assignment in Guaranty - .-  The universally
valid rights which derive from mining concession and the plants for processing,
smelting, and refining may be mortgaged in the same manner as any other real
estate.

     

    Assignment
contracts in guaranty over the above mentioned buildings shall be recorded by
means of a public instrument in the Mining Registry in custody of the Agency of
Mining Regulation and Control.

     

    Art. 129. - The Pledge. - It is permissible to
constitute liens on the personal property destined for the operation of the
concession and on the mineral substances extracted from the
deposit.

     

    Pledge
Contracts have to be recorded within the provisions of the registration of
concessions in the Mining Registry kept by the Agency of Mining Regulation and
Control.

     

    Art. 130. - Legal actions.-The creditor
may take legal action that lead to the auction of the encumbered estate
according to articles 128 and 129.  Judicial authorities shall not be
empowered to interrupt mining work.

    

    
      
        
        

      

      
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    TITLE VIII

     

    JOINT
OWNERSHIP, MINING COOPERATIVES AND ASSOCIATIONS DEDICATED TOMINING

    ACTIVITIES

     

    Chapter
I

     

    JOINT
OWNERSHIP, MINING COOPERATIVES AND ASSOCIATIONS DEDICATED TO MINING

    ACTIVITIES

     

    Art. 131.-Incorporation of Joint ownership on a
mining concession.
-  Presents itself when the State grants a mining title to
various natural persons who have requested it in a single document, subject to
the pertinent provisions of the Law herein.

     

    Art. 132. - Responsibility of Joint owners. -  Joint ownership
does not imply the existence of a legally incorporated company.  Joint
owners are jointly liable for the obligations derived from their condition of
mining title holders.

     

    Joint
owners shall appoint a common solicitor by means of a public instrument
registered at the Mining Registry. Should it not be possible, the notice
delivered to one of them shall take effect as legal notice to each.

     

    Art. 133. - Rights and duties of
cooperatives, micro companies and associations.
-  .-Cooperatives micro companies and associations dedicated to
performing mining activities enjoy the same rights and have the same obligations
as this Law establishes for the holders of mining rights and may enter into
association with, and celebrate all types of mining contracts with, natural
persons or legal bodies, local or foreign.

     

    Title
IX

     

    SPECIAL
REGIMES

     

    CHAPTER
I

     

      ARTISAN
AND SUSTAINABLE MINING

     

    Art. 134.-Artisan mining It is
the activity considered the product of individual, familial or associative
mining work as a sustaining activity authorized by the State as it is set forth
in the Law and its Regulation, it is characterized by the use of tools, hand
devices or portable machines destined to the obtaining of minerals whose
commercialization en general hardly allows to afford the basic needs of the
person or family group that performs it, and when it has not required an
investment of over fifty basic unified wages.

     

    In the
event of the association of three or more artisan miners, their investment shall
be of three hundreds unified basic wages with a previous technical, economic,
social and environmental report by the Agency of Mining Regulation and
Control.

     

    The
relevant Ministry shall issue permits for a valid term of up to ten years in
order to perform artisan mining; to be renewed for a similar term of time in the
event of a petition in written by the concession holder submitted to the
relevant Ministry, before the date of expiration, and after having obtained a
favorable report from the Agency of Mining Regulation and Control and the
Ministry of Environment. Artisan mining permits shall not affect the rights of a
mining concession holder with a valid title; notwithstanding the foregoing,
mining concession holders shall be able to authorize the performance of artisan
mining works within the area of their concession by means of mining agreements
that comply with the environmental and mining regulations and in accordance to
the special regulation to be issued for this purpose.

     

    The
Agency of Mining Regulation and Control is empowered to regulate the
exploitation of minerals and applicable mining safety standards, and it shall
create a detailed register of the people who perform this
activity.  For the verification and compliance of environmental
protective regulation, the relevant environmental authority is the Ministry of
Environment.

     

    Artisan
miners are exempted to pay royalties.

     

    
      
        
        

      

      
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    Failure
to comply with this law and its Regulation shall result in the revocation of the
permits. The assignee shall operate the negative administrative
silence.

     

    Art. 135. Revocation of artisan mining rights.
- The permits of artisan miners shall be revoked, in the form and
conditions set forth in title VI, chapters I and III of this Law.

     

    Art. 136. - The relevant
Ministry shall promote special programs of technical assistance, environmental
management, mining security, training and professional training to small scale
mining, for this purpose they can count on the support of Universities and
Polytechnic Schools that have the corresponding majors on those
areas.

     

    Chapter
II

     

    SMALL
SCALE MINING

     

    Art.- 137.- Incentive to national
mining production.- In order to foment employment, the elimination of
sub-employment and unemployment, and promote the productivity and
competitiveness, the accumulation of scientific and technological knowledge, the
State through the delegation of private initiative, cooperatives and
associations of popular and joint economy, shall promote the development of
national mining under the special regime of small mining, guaranteeing the right
to perform said activity individually and collectively under principles of
solidarity and social responsibility.

     

    Art. 138. - Small scale mining .- Small
scale mining consists in the activity which in reason of the area of
concessions, volume of processing and production, amount of investments, capital
and technological conditions, must have:

     

    
      	
              a)

            	
              A
      capacity installed of exploitation and/or processing of up to 300 metric
      tons a day.

            

    

     

    
      	
              b)

            	
              A
      capacity installed of production of up to 800 cubic meters a day, with
      relation to mining of non metallic material or
  quarry.

            

    

     

    Natural
persons or legal bodies that perform small scale mining works have to be tile
holders of a mining concession for small scale mining and they shall comply with
the special provisions of Chapter II. In any extension not regulated by special
rules, the general contents of this Law and its General Regulations shall be
applied.

     

    The
relevant Ministry shall promote special programs of technical assistance,
environmental management, mining security, training and professional training
for small scale miners. The Ministry of Environment shall promote special
programs of environmental handling in small scale mining.

     

    Art. 139.-Concessions for Small Scale
Mining -The State shall issue small mining concessions in favor of
natural persons or legal entities according to the prescriptions of this Law and
its General Regulation, which shall establish a special regime for small scale
mining.

     

    Small
scale mining concessions shall be granted by the relevant Ministry in accordance
to the established proceeding in the Regulation and confers to its holder the
personal and exclusive right to prospect, explore, exploit, benefit, smelt,
refine and trade all the mineral substances which exist and can be obtained
within the area, with no more limits than those stated in this Law.

     

    Art. 140. - Register.- In order to have
access to the rights and benefits set forth in this chapter to mining title
holders, they must register their status of small scale miners, before the
mining administrative authority of the relevant Ministry.  The
proceeding and requisites shall be set forth in the General Regulation under
this Law.

     

    Art. 141. - Obligations. - Mining concessionaires
that perform small scale mining activities have to comply with the obligations
of mining concessionaires contained in the Title IV of this Law.

     

    Small
scale mining title holders are subject to the accomplishment of the
environmental regulations in force and to the approval of the training programs
promoted by the National Institute of Geological Research.

     

    
      
        
        

      

      
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    Chapter
III

     

    CONSTRUCTION
MATERIALS

     

    Art. 142. - Construction material concessions. - The
State, through the relevant Ministry, shall assign concessions for the
exploitation of surface clays, sands, rocks and other materials of direct use in
the construction industry, with the exception of river basins, lagoons, sea
beaches and quarries which shall be governed by the limitations set forth in the
General Regulation of this Law, and it shall also define what is understood as
construction materials and their amounts of exploitation.

     

    According
to Art. 264 of the Constitution in force, each Municipal Government shall assume
the jurisdiction to regulate, authorize and control the exploitation of arid and
petrified materials, found at the bottom of  rivers, lakes lagoons,
sea beaches and quarries, which in accordance with the General Regulation that
shall establish the requisites, limits and proceedings for the effect. The
exercise of the competence shall be done according to the principles, rights and
obligations set forth in Municipal Ordinances issued in this regard. No
conditions or obligations other than those set forth under this Law shall be
established.

     

    Art. 143. - Rights and Obligations of the concessionaire of
construction materials. - The concessionaire shall be authorized to
explore said materials without the celebration of a Mining Exploitation
Contract; the exploration shall be done after the celebration of said Contract
and it shall include the easements required for a suitable exercise of the
rights of his concession.

     

    Notwithstanding
the previous clause, the owner of the surface land shall have the first option
to purchase the requested concession that coincides with the area he owns. If
the owner of the estate, as a free and voluntary act, assigns the authorization
for a concession on the land he owns, this authorization implies the waiver to
the first option to be assigned a concession on said estate.

     

    On the
other hand, the construction material concessionaires have to comply with the
obligations derived from Articles 38, 41 and 42 Chapter I of Title III and
Chapters I, II, III and Title IV of this Law. They also have to pay for the
royalties stipulated in this Law for small scale mining.

     

    Art. 144. - The free exploitation of
construction materials for public works. - The State in a direct
way or through its contractors can freely exploit the construction materials
destined for public works in non assigned or assigned areas.

     

    In
consideration of the public and social benefit, these exploitation works shall
be authorized by the relevant Ministry. The valid term for this exploitation
shall be issued only and exclusively based on the technical requirements of
production and in the term that these public works take.

     

    Said
material shall be exploited only and exclusively in benefit of those public
works target of the free exploitation. Their use in other purposes shall
constitute an unlawful act which shall be submitted to the stipulations of this
Law.

     

    The State
contractor shall not include in his costs the amounts corresponding to the
materials of construction freely exploited.  In the event of proving
the free exploitation for other purposes, he shall be sanctioned with a fine
equivalent to 200 basic unified wages and in case of recurrence with the
termination of the contract for said public work.

     

    Free
exploitation concessions, are subject to the accomplishment of all the
provisions of this Law, especially those of environmental nature.

     

    Those
contractors who exploit free exploitation areas are required to the
accomplishment of the Plan of Environmental Management.

     

    Chapter
IV

     

    NON METALLIC MINERALSArt.
145. - Exploitation of Non Metallic
Minerals. - The exploration and exploitation of non metallic mining have
to comply with the general regulations applicable to mining concessions in the
terms set forth by this Law, including the payment of royalties.

     

    The
General Regulation of this Law shall define the characteristics of non metallic
substances and the method of participation of the State in the profits, pursuant
to item 2 of Art. 408 of the Constitution of the Republic.

     

    
      
        
        

      

      
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    The
interest of the State shall be taken into account in regard of the use of said
non metallic minerals in the construction of works of infrastructure of national
benefit.

     

     Chapter V

     

    MINING
ACTIVITIES ON THE SEA BED

     

    Art. 146.-Research and operations on
the sea bed .- The exploitation of mineral substances of any kind in
marine waters and on the sea bed is in charge of the National Institute of
Geological, Mining and Metallurgical Research, and the National Mining Company
which may celebrate special agreements of research and service contracts,
respectively with natural persons or legal entities, local or foreign
companies subject to the requisites and conditions established in the
Special Regulation which shall be dictated by the President of the Republic for
these purposes.

     

    Title
X

     

    TAXATION
AND ECONOMIC DISPOSITIONS

     

    Art. 147.-  Accelerated
depreciation.- Title holders of mining rights who have celebrated a
Mining Exploitation Contract, are authorized to request Internal Revenue Service
(S.R.I) a special treatment of accelerated depreciation for those fixed assets
which have a shorter useful life as a consequence of the larger wearing away
produced in the operation of a mining project. Internal Revenue Service (S.R.I)
after a previous report presented by the Agency of Control shall approve or
reject the petition.

     

    Assets
susceptible of accelerated depreciation are those listed in the General
Regulation under this Law.

     

    Art. 148. - Simplified Tax Regime for small scale artisan
miners. -Small scale artisan miners can adopt the Simplified Tax Regime
for the Income Tax and the Value Added Tax in the conditions, terms and
requisites set forth in the Internal Tax Law.

     

    Art. 149. -Gold purchase. -
Gold purchase by Banco Central del Ecuador has a zero taxed
rate.

     

    Title
XI

     

    ADMINISTRATIVE,
CONTENTIOUS ADMINISTRATIVE AND COACTIVE JURISDICTION

     

    Art. 150. - Jurisdiction and venue.- The
Agency of Mining Regulation and Control shall exercise jurisdiction and
competence on mining with the functions and attributions conferred on them by
the present Law and its General Regulation.

     

    Any
controversies that may arise between those subject to mining law and
administrative authorities on mining matters shall be resolved by the District
Tribunals of Contentious Administrative Affairs.

     

    In any
case the provisions in regard with the jurisdictional guarantees shall be
observed, jointly with the action of protection, of access to public information
and rights of protection set forth in the Constitution of the
Republic.

     

    Art. 151.-Coactive
jurisdiction.
- Internal
Revenue Service (Servicio de Rentas Internas) shall exercise coactive power for
the collection of patent fees, taxes, overdue payment surcharges, fines and
other charges such as processing costs derived from collection.

     

    Title
XII

     

    PROCEDURES
FOR WAIVER AND RELINQUISHMENT OF MINING RIGHTS

     

    Art. 152. - Waiver and relinquishment of mining
rights.- Rights to one or more mining hectares contained within a mining
concession may be waived and relinquished only when this waiver does not
prejudice the rights of third parties. Total or partial waive and relinquishment
shall be subject to the General Regulation.

     

    Art. 153. - Voluntary or contentious
venue- Relinquishment constitutes a process of voluntary jurisdiction,
which can become conflictive if such act is appealed by third persons claiming
damage.

     

    Art. 154. - Request of waiver.
-  The petition for the waiver shall be presented to the relevant
Ministry in the corresponding jurisdiction and contain an express request to
order the cancellation or modification of the respective registrations,
depending if the waiver is total or partial. The General Regulation
shall also set forth the requisites and proceedings for its proceeding and
resolution.

     

    
      
        
        

      

      
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    Art.
155.-Authentication.-  After the approval of the waiver, it
shall be registered in a Notary ́s Office and it shall be recorded in the Mining
Register kept in custody of the Agency of Mining Regulation and
Control.

     

    Art. 156. - Rights of third parties.- If
it appears from the initial papers that the waiver affects or might affect the
rights of third parties, the relevant authority shall order the wavering party
to evidence by public instrument their consent to the waiver.

     

    If there
is no consent from third parties, the relevant Ministry ́s official shall order
that third parties be noticed by publication, one time only, in a newspaper of
national circulation, and if there is any, of local circulation.

     

    Art. 157. - Opposition. -  Legal
means for objecting to an attempt to resign shall include the following:
promissory sale contracts, mortgage, financing, lease, exploitation, contracts
of sale of minerals, and embargoes in regard with the concession which includes
the mining hectares waived.

     

    In the
submittal of a claim of opposition, the administrative proceeding shall be
performed before the relevant Ministry; their decision may be appealed to the
superior authority within 5 days of the notification of the parties
involved.

     

    Art. 158. - Approval of waiver.- Once the
resolution approving the modification of the area is approved and recorded in
the Mining Register, the waiving party shall provide a certified copy to the
Regional Ministry ́s Office of Mining for the modification of the National
Concession Map.

     

    GENERAL
DISPOSITIONS

     

    FIRST.- In the event that
radioactive minerals or substances are found in economically exploitable
concentrations as a result of any activity described in this law, the owner of
the mining right has to report the finding immediately to relevant
Ministry.

     

    SECOND. - The failure to comply
these provisions established by Law shall be punishable by the relevant Ministry
with the imposition of a fine of no less than 20 minimum monthly salaries and no
more than 500 plus 0.1% of investment depending to the gravity of the
infraction. Without prejudice to any other legal or penal action that could
result from these actions.

     

    The right
to defense of the alleged violators shall be respected in every case. Fines will
be deposited in legally established agencies to receive such funds.

     

    THIRD. - The Internal Revenue
Service (Servicio de Rentas Internas) shall collect the values corresponding to
Patents and Royalties referred to in this Law, and it is invested with all the
faculties and attributions granted by the Law of Creation and the Tax Code for
the collection of taxes, including the coercive jurisdiction ruled in the Tax
Code.

    in
Ecuador and this Law.

     

    FOURTH. - Those administrative acts
that were terminated or expired, as effect of Mandate No. 6, are
executed.

     

    FIFTH. - Any environmental damage
shall generate objective responsibility.

     

    SIXTH. - Any and all kind of
mining activity in zones declared ancestral territories of the people in
freewill isolation is banned, in accordance to the provisions set forth in the
Constitution of the Republic.

     

    SEVENTH. - Public officials and
workers who are responsible of administrative silence shall be administratively
and civilly penalized, depending on the gravity of their violation. If the
assumptions of criminal responsibility of the official whose omission generated
administrative silence are proved, legal action can be brought against the
official involved.

     

    In case
the relevant Ministry does not issue a corresponding resolution in the terms set
forth in this Law, positive administrative silence shall be produced, which
shall be substantiated judicially at the relevant Contentious Administrative
Tribunal.

     

    EIGHTH. -  In the
Province of Galápagos no mining activity shall be performed with exception of
the free exploitation of construction materials.

     

    
      
        
        

      

      
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    TRANSITORY
DISPOSITIONS

     

    FIRST. - Mining concession title
holder who preserved their concessions under Art. 8 of the constituent Mandate
No. 6 shall keep their mining rights and are authorized to restart their
activities.  In the term of 120 days, starting on the effective date
of the respective regulations all mining concessionaires have to regularize and
harmonize their proceedings in accordance with the regulation
hereof.

     

    In the
case of owners of processing plants presently in operation, they have to adapt
them to the regulation in force within a year starting on the effective date of
this Law.

     

    The
failure to comply with this disposition shall terminate the mining title, and
consequently the lapsing of the mining concession or a processing plant granted
before the present Law.

     

    SECOND.- After
publishing  this Law in the Official Register, the President of the
Republic through an executive decree shall dispose the practice of the
administrative acts for the integration, organization, regulation and control of
the organisms created in it, in the meantime the National Directorate of Mining,
Regional Directorates of Mining and  the Directorate of Mining
Environmental Protection shall exercise temporarily the attributions and
functions of the Agency of Mining Regulation and the National Directorate of
Geology the functions of the National Institute of Geological, Mining and
Metallurgic Research, as long as  they do not oppose to the
regulations of this Law.

     

    THIRD.-In the term of 90 days,
Land Registrars starting on the effective date of the respective regulations
have to submit to the Agency of mining Regulation and Control all the
information and original files of mining concessions registered and any other
proceedings concerning mining activities. Acts and proceedings to be performed
at the Mining Register shall be subject to the regulations of the Law of
Registry, in the extent they are considered applicable.

     

    FOURTH. - In the term of 120 days,
starting on the effective date of the passing of the new Law, the respective
regulations shall be promulgated.

     

    FIFTH. - In the term of 90 days,
starting on the effective date of the passing of the new Law, the Ministerial
Agreement shall be issued by the relevant Ministry containing the conditions and
terms of time for the restitution of the mining areas and projects referred to
in Art. 25, final item.

     

    SIXTH. - In a term of time of 180
days starting on the effective date of this Law, the Executive shall send to the
National Assembly the Project of Law of Fomentation, Participation and Training
to Small Scale and Artisan Mining.

     

    SEVENTH. - In a term of time of 180
days the Executive shall send the independent regulations to guarantee safety,
health and the environment in the zones of Josefina, Portovelo and
Nambija.

     

    EIGHTH. - In the term of 180
days starting on
the effective date of the passing of the new Law, the relevant Ministry shall
conduct a census of artisan miners who lack of the authorizations to perform
mining activities and who can prove that they worked at least two years before
the conduction of said census in order to be regularized.

     

    NINTH.- Processing plants
that on the effective date of this Law have the permits and are in operational
status with the capacity installed below to the one provided above shall be
authorized to continue with their operations after obtaining the environmental
permit in the terms determined by this Law and its Regulations.

     

    FINAL
DISPOSITIONS

     

    FIRST.- Derogations: Abolish
the Mining Law 126 published in the Official Register Oficial No. 695,
supplement of May 31, 1991 and its regulations and the Law Decree 2000 of the
Law for the Promotion of Investment and Citizen Participation, published in the
Supplement of the Official Registry No. 690 of August 18, 2000 and all legal
provisions that oppose to the present Law.

     

    SECOND.- Termof Validity.-
This law will  become effective upon its publication in the Official
Register. Its provisions shall prevail over other general and specific laws
until such time that another law is passed to change or repeal this Law. In
consequence, laws or decrees that contradict this precept or those established
in the Constitution shall not be applicable.

     

    
      
        
        

      

      
        32Unassociated Document

    Exhibit
10.19

     

    STOCKERYALE,
INC.

    AMENDMENT
NO. 1 TO THE

    2007
STOCK INCENTIVE PLAN

    

    This
AMENDMENT NO. 1 dated as of December 16, 2008 (this “Amendment”) to the
StockerYale, Inc. 2007 Stock Incentive Plan (the “Plan”), is adopted by the
Board of Directors on the date hereof. All capitalized terms used and not
defined herein shall have the meanings ascribed to such terms in the
Plan.

    

    Pursuant
to Section 10(d) of the Plan, the Board of Directors hereby amends
Section 5(c) of the Plan by deleting it in its entirety and replacing it
with the following:

    

    (c) Exercise Price. The
exercise price per share of each Option shall not be less than the closing price
per share of the Common Stock as reported on the Nasdaq Global Market on the
date of grant (or other market or exchange on which the Company’s securities are
listed or quoted for trading).

    

    Except as
so amended, the Plan in all other respects is confirmed and ratified and shall
remain and continue in full force and effect.

    

    Adopted
by the Board of Directors: December 16, 2008

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