China-owned mining firm signs deal in Ecuador

China-backed Ecuadorean miner Ecuacorrientes SA has signed an agreement with the Ecuadorean government to invest $1.72 billion in its Mirador copper project after one year of negotiations, its parent company China Railway Construction Corp announced Wednesday.

Mirador will open next year and will have an ore-processing capacity of 60,000 tons per day and production of about 354,000 tons of copper concentrate a year by the end of 2016, according to a filing to the Hong Kong Stock Exchange Wednesday.

Ecuacorrientes SA - a unit of Vancouver-based Corriente Resources, a 50-50 joint venture between China Railway Construction Corp and Tongling Nonferrous Metals Group - will also build a hydropower station with capacity of 129 megawatts for the mine by the end of 2016, said the filing.

However, the deal is still pending the approval of the Chinese government, Corriente Resources told the Global Times in an e-mail statement Wednesday.

Ecuacorrientes will pay 52 percent of the mine's profits to Ecuador in the form of royalties and taxes as well as $100 million in advance royalty payments, according to the agreement.

The move reflects that investors from the world's second largest economy are showing increasing interest in Latin America, Jiang Shixue, a Latin American studies professor with the Chinese Academy of Social Sciences, told the Global Times.

Chinese investors need to be alert to political, cultural, geographic and market risks, analysts warned.

The Sate-owned enterprises incurred losses overseas mainly due to a lack of experience in operating international projects, a lack of international talents, and that the management are unfamiliar with the legal and business environment in the foreign countries, Shao Ning, deputy director at the State-owned Assets Supervision and Administration Commission, told the media recently.

The deal "is more a political win for President Rafael Correa of Ecuador who has secured extremely favorable terms for the exploitation of Mirador," New York-based Eurasia Group analyst Risa Grais-Targrow wrote in a research note Wednesday.

China has become Latin America's third largest source of investment behind the US and the Netherlands since 2010. Latest figures showed that direct Chinese investment in Latin America and the Caribbean totaled more than $15 billion in 2010.