As Lundin Gold (LUG.to) seems to prefer to keep its shareholders in the dark about the supply chain issues that are about to close operations down, IKN will have to suffice. From last Sunday evening’s edition of The IKN Weekly, IKN589:
Ecuador: An explosive supply chain issue
These pages
have noted that Ecuador is
the mini-Basket Case of South America (Argentina’s crown is undisputed)
and that it’s not as easy to do mining business there as in normal countries.
The last two weeks have provided a case study, thanks to a quasi-State run
company that you’ve almost certainly never heard of called Explocen. This is is
Ecuador’s only national explosives manufacturer and covers around 60% of the
country market, with only two other companies allowed o import explosives into
the country. Explocen also supplies the needs of industry and non-metallic
mining, but its main customers are mining entities large and small, from small
artisan miners to the largest operations in the country, such as ESCA Mirador
copper mine the Holcim cement company or the Lundin Gold Fruta del Norte gold
mine.
At the end
of May and as part of the Covid-19 crisis, Explocen laid off five of its
workers and paid them redundancy of U$1,200 each after 25 years of service.
This pittance of a separation pay detonated (pardon the pun) a strike by its
workforce that continues to this day, as even though Ecuador’s government has
deemed the strike illegal the workers remain out and have even set up a picket
line with camp kitchen outside the factory. Employees haven’t budged an inch
and neither has the company, the result being a worsening of the industrial
action and on July 13th employees began an all-out strike that has
totally shuttered the company factories. Up to now there’s been little heard on
this outside of inner Ecuador mining circles, but that’s now changing and we’re
at the point were on August 27th, Lundin Gold (LUG.to) wrote to
President Lenín Moreno (8) to state that the lack of explosives provision had
caused their stocks to dwindle and supply was tight. LUG went on to warn that
if the Explocen situation were not resolved soon it would have “important
impacts on production and exportation of Fruta del Norte gold. That was 11 days
ago, nothing has changed since then.
The answer,
you might think, would be simply to import a lot more explosives. True for a
normal country, but in the mini Basket Case those who specialize in the field
say it will take around three months to comply with the paperwork and
documentation required for extra explosives imports even to arrive in Ecuador to
cover the shortfall. Moral: Stick to countries that understand mining.