Is Ecuador’s Environment Improving at All?

I have visited in recent weeks with the management of several different companies, including BacTech Environmental Corp. (BAC:CSE; BCCEF:OTC; OBT1:FSE) and Salazar Resources Ltd (SRL:TSX.V; SRLZF:OTCQX) (more on each a bit below) we are still in and others we are not in at present.

The overall picture I have painted for me is that by and large, business is able to go on in the country for the most part despite the ongoing gang and drug presence and violence. These days, it is much like Mexico: there are certain places everyone knows not to go. Otherwise — albeit with heightened security — life and business goes on.

The bigger overall monkey wrench that has been thrown into things this past year has been a historic energy crisis in the country. Businesses, key industries, public facilities, and residences alike have had to live for several months now with rolling blackouts, “energy curfews,” and more, even down to airports and — yes — some mining operations.

That latter has hit the national income somewhat. While President Daniel Noboa has, net, won high enough marks in bringing back some security to Ecuadorians, his handling of this energy crisis does seem to have moved a “shoo-in” status for his reelection early in 2025 to more of a toss-up these days. That is not to say he can legitimately be blamed for a historic drought, fires, and the like, but he hasn’t helped things in the eyes of money, including by the (usual in recent times) shuttling in one new energy minister after another, to no avail.

As has been covered, the sense is that Noboa — while good for business generally and especially wanting to strengthen the country’s nascent mining industry — is neglecting the population in general. As the main concerns have shifted from the drug/gang warfare enveloping more of the country to the energy crisis and still-languishing overall economy (also dinged by a drop in tourism these last few years), Noboa will have a bigger challenge staying in office.

And that is even more so as old wounds are reopened where Ecuador’s external relations/foreign policy are concerned; old wounds being exploited by the “Correaistas.” Some have been willing to look the other way as Noboa has embraced America’s help, for example, in combatting the drug cartels. But now that he wants to allow the U.S. military to set up shop anew (and in the Galapagos Islands, no less) in Ecuador, this may work to Noboa’s detriment in the election.

One of the other interesting dynamics going forward is whether these and related moves will help the U.S. and, more broadly, western companies to be more of a “big brother” to Ecuador than China. The latter country is notorious in Ecuador for doing a shoddy job of some past mega-projects that — some argue — have worsened the energy crisis/ I’ve heard this before, and this criticism of Chinese practices there and elsewhere is legitimate, but to be fair, former President Correa’s game plan to use what were (and will be again) plentiful water resources for hydropower generation and the recent moves to shut in oil simply coalesced into a (hopefully) one-off event.

Assuming the freakish weather straightens out (and it recently has some), we’ll be back to looking at Ecuador’s mining sector with, in most instances, that renewed cost advantage from cheap hydropower and with a government that is uber-friendly. While markets continue to punish Ecuadorian stories with a substantial discount compared to peers in “safer” jurisdictions, big players have been all too happy to take new/added stakes in the country where opportunities are available.

President Noboa has made clear that he intends to reopen the national cadaster (mining registry) in 2025 for the first time since 2018; this is to distinguish squatters and illegal miners from legitimate ones. He also has been incrementally more forceful in sending in the national police force to clean out some areas; but much more of that needs to be done. (See here.)

Silvercorp Metals Inc. (SVM:TSX; SVM:NYSE) and Salazar are proceeding toward construction at El Domo. I’ve kept in touch right along the last several months with Silvercorp’s President Lon Shaver and Salazar’s V.P. Freddy Salazar, Jr.,  and both are jazzed at what lies ahead of them. Just after the Christmas/New Year’s break, construction of a camp and road work will begin together with development-related engineering work.

In part due to Silvercorp’s China-based (where they have extensive and very profitable precious metals mining operations) engineering brain trust, together with the company’s other management, I’m told that the initial capex for El Domo is likely to be slashed by as much as a third or so from a prior estimate of $300 million (how often have you heard that lately?)

And I have to say I am quite impressed with Silvercorp’s stewardship of things here (NOTE: I’m told that about 75-80% of the overall headcount will still be “locals,” which will keep the project in good graces with the community.)

Reading between the lines, I half expected the news that just came out right before Christmas, where Salazar now owns 100% again of several projects recently JV’d with Adventus. Salazar, thus, is doing an additional raise in order to augment plans to do some exploration work in its own right in 2025.

Next, it wouldn’t surprise me a bit if Silvercorp buys Salazar’s 25% carried interest in El Domo; that could bring in a slug of dough well beyond the company’s present market cap. If a number can be agreed upon, that would give Fredy, Sr., and crew a nice payday and monetization of the past efforts in finding this obscenely rich asset and put plenty of money in the till to hit numerous other projects much harder.

Salazar Resources, all told, is one you should be doubling up on down here.

Moving on to BacTech: While things have bogged down as far as getting a funding partner definitively on board with the Tenguel Project, that project is still there (and at a far higher gold price than was used to calculate that boffo B.F.S. back when.) C.E.O. Ross Orr holds, though, that the bigger hindrance there has been coming up with/justifying some asset-based lending facility for a company with no significant tangible assets.

To me — and having over the last year especially been close to several conferences and initiatives — the big, long-term story is going to be the inevitable, BIG adoption of technologies like BacTech’s and others’. So, I’m still patient with that confidence.

The U.S. government, especially, is going to be all over “enhanced” recovery of metals, minerals, and more that can work at scale and without traditional smelters and big environmental footprints. (Indeed, Minnesota’s Talon Metals just got a D.O.D. grant for added work on its potential ores, very much like what BacTech is working on!)

And Orr continues to nurture several possibilities outside of Ecuador (though nobody is giving up on that, of course, especially since BAC’s “case” just got that much stronger for the locals as China has further weakened the economics of importing gold and arsenic-bearing materials. (See here.) A particularly big event looms in 2025’s first half: the potential filing of BacTech’s final patent for the process that would remove iron, sulfur, nickel, and cobalt from an estimated 80-100 million tonnes of Sudbury Basin tailings discarded over the years.

The last time I caught up with Orr, he told me that the company’s Dr. Paul Miller will be traveling to Sudbury from Australia in January and presumably overseeing the final steps in the work needed to finalize the patent. Needless to say, if all goes well, this HUGE environmental remediation/economic story in Canada (with applications elsewhere in North America) should finally earn the company some overdue attention.

As Orr put out in one of his recent Sunday Morning Coffee missives, “I came across an article from Reuters that I found very relevant to our work in Sudbury. While I can’t say for certain that they are referring to our specific project, it’s encouraging to see they are focusing on tailings as a potential source of iron. To recap, we are working on pyrrhotite tailings in Sudbury with the goal of reducing 1 tonne of waste to zero through bioleaching. This process allows us to separate and sell the liberated elements, including iron.” You can see that article here.