Ecuador Increases Power Tariffs for Copper Mines Amid Energy Crisis

Ecuacorriente S.A

In a move to address Ecuador's ongoing energy crisis, the country’s electricity regulatory agency, Arconel, has raised power tariffs for large-scale industries, including the copper mining sector. This change, which took effect on October 30, has significant implications for major mines in the country, notably Mirador, operated by China's Ecsa-Ecuacorriente, and Fruta del Norte, operated by Canadian company Lundin. The revised tariffs will impact electricity consumption during peak hours, further exacerbating the financial pressure on mining operations already grappling with soaring costs.

Key Changes to Power Tariffs

The new electricity tariffs target industries that consume the most power, with particular emphasis on mining operations. The most notable increases are:

• Peak Hours (6-10 pm): Increased from 8.10¢/kWh to 9.86¢/kWh.
• Daytime (8 am-6 pm): Raised from 6.8¢/kWh to 8.5¢/kWh.
• Off-Peak (10 pm-8 am): Increased from 5.4¢/kWh to 7.5¢/kWh.

These price hikes will affect two major mines in Ecuador: the Mirador copper mine, which is one of the country’s largest, and the Fruta del Norte gold mine. The tariff increases are a direct response to the national energy shortage caused by a harsh drought, which has significantly reduced the output from Ecuador’s primary hydroelectric plants.

Impact of Ecuador's Energy Crisis on Mining

Ecuador is currently facing a severe energy crisis, exacerbated by a lack of rainfall, which has hindered the operation of hydroelectric plants. As a result, the country has had to rely heavily on thermoelectric power generation, leading to a 77% increase in thermoelectric fuel consumption in the third quarter of 2024 compared to the same period in 2023, according to Petroecuador, the state-owned oil and energy company.

Despite the increase in energy costs, the Ecuadorian mining chamber, which represents companies like Ecsa-Ecuacorriente and Lundin, has acknowledged that the tariff hike is necessary due to the energy crisis. The increased electricity tariffs are expected to affect the operational costs of these mines, making them less competitive in the global market.

Ecuador's Mining Exports and the Role of Copper

Ecuador's mining sector plays a crucial role in the country’s economy. In the first half of 2024, Ecuador exported $688.8 million in copper concentrate, accounting for 42% of the country's total income from metal exports, which amounted to $1.6 billion. Copper export revenues saw a 12% increase from the previous year, highlighting the growing importance of copper as a key driver of the national economy.

The rise in power tariffs, however, may put the profitability of copper mining operations under strain, particularly for Mirador, one of Ecuador’s largest copper producers. While the mining chamber has voiced support for the tariff increase, it remains to be seen how these changes will affect long-term investment and growth in Ecuador's mining sector.