Decree 273 Introduces Sliding Mining Royalties: 3%-5%-8% Scale Plus 100% Self-Power Mandate

The Decree

Presidential Decree 273, signed by President Daniel Noboa on December 31, 2025 and effective January 1, 2026, introduces a comprehensive overhaul of Ecuador's mining fiscal and regulatory framework. The decree establishes a sliding royalty scale, mandates 100% self-generated power for mining operations, and compresses exploration timelines — collectively reshaping the economics of every large-scale mining project in the country.

Royalty Structure

The centerpiece of Decree 273 is a three-tier sliding royalty linked to the trailing three-year London Metal Exchange (LME) average for each commodity:

Metal Price vs. 3-Year LME Average	Royalty Rate
Below reference price	3%
At reference price (±10%)	5%
Above reference price	8%

This mechanism replaces the previous flat-rate royalty regime and is designed to capture a larger share of windfall revenue during commodity price booms while maintaining competitive rates during downturns. The trailing three-year average provides built-in smoothing — sudden price spikes do not immediately trigger the top rate, as the reference adjusts gradually.

Practical Impact by Commodity

Metal	Current Price	3-Year LME Avg (est.)	Current Tier	Royalty Rate
Gold	~$2,200/oz	~$1,900/oz	Above	8%
Copper	~$4.50/lb	~$4.00/lb	Above	8%
Silver	~$25/oz	~$23/oz	Above	8%

With gold and copper both trading well above their trailing averages, virtually all current and near-term projects face the top 8% royalty tier — a meaningful increase from prior rates of approximately 5% for most operations.

100% Self-Power Mandate

Perhaps the most impactful provision is the requirement that all mining operations generate 100% of their own electricity — a dramatic departure from the current model where mines draw power from the national grid.

The self-power mandate is driven by Ecuador's ongoing energy crisis. Coca Codo Sinclair's erosion vulnerability, declining reservoir levels, and growing demand have created a system where mining's electricity consumption is viewed as competing with residential and commercial users. By requiring mines to self-generate, the government shifts the energy burden entirely onto operators.

Cost Implications

Project	Est. Power Demand	Self-Gen Capital Cost	Annual Operating Cost
Cascabel (SolGold)	250-350 MW	$300-400M	$80-120M
Cangrejos (CMOC)	150-200 MW	$200-300M	$50-80M
Fruta del Norte (Lundin)	50-70 MW	$80-150M	$20-40M
Warintza (Solaris)	100-150 MW	$150-250M	$40-60M

For Cascabel, the largest undeveloped project, the self-power mandate could add $300-400 million in capital expenditure for dedicated gas or diesel generation facilities — approximately 10-12% of the total project budget of $3.2 billion. This is a material cost escalation that may require project redesign.

Exploration Timeline Compression

Decree 273 compresses the maximum exploration period from approximately 8 years under the previous framework to 3.5-5 years:

Phase	Previous Timeline	Decree 273 Timeline
Initial exploration	Up to 4 years	2-3 years
Advanced exploration	Up to 4 years	1.5-2 years
Total maximum	~8 years	3.5-5 years

The compression is intended to force exploration companies to either advance projects to the feasibility stage or relinquish concessions — preventing the "land banking" practice where companies hold concessions for extended periods without meaningful development. While the intent is to accelerate the pipeline, the practical effect may force premature investment decisions or cause companies to drop projects that need more geological work.

Affected Projects

Project	Operator	Est. Value	Key Impact
Cascabel	SolGold	$3.2B	8% royalty + $300-400M self-power
Cangrejos	CMOC	$2.5B	8% royalty + $200-300M self-power
Warintza	Solaris Copper	$1.4B	Exploration timeline pressure
Loma Larga	Dundee Precious	$312M	8% gold royalty; permitting interactions
Fruta del Norte	Lundin Gold	Operating	+$150/oz AISC from royalties
Mirador	ECSA	Operating	8% copper royalty at current prices

Regional Comparison

Ecuador's revised royalty regime positions it in the upper-middle range of Andean mining jurisdictions:

Country	Base Royalty	Sliding?	Self-Power Mandate?
Ecuador (Decree 273)	3-5-8%	Yes	Yes
Chile	5% + windfall tax	Yes	No
Peru	1-12% (progressive)	Yes	No
Colombia	4-5%	No	No
Argentina	3% (provincial)	No	No

The self-power mandate is unique among major mining jurisdictions and represents the single most differentiated — and potentially most burdensome — feature of Ecuador's regime.

Industry Response

The mining industry's response has been mixed:

• Lundin Gold acknowledged the royalty impact (~$150/oz cost increase) but maintains Fruta del Norte's economics remain robust at current gold prices
• SolGold has not publicly commented on the self-power mandate's impact on Cascabel's feasibility study timeline
• The Cámara de Minería described the decree as "a step toward fiscal clarity" while expressing concern about the self-power requirement's feasibility for remote operations

What to Watch

• SolGold Cascabel feasibility update — whether the $3.2B project incorporates self-power costs and maintains its development timeline
• LME price trends — a sustained pullback in gold or copper prices toward their three-year averages would shift projects from the 8% tier to the 5% tier, materially improving economics
• Self-power implementation guidance — ARCOM has yet to publish detailed regulations on what qualifies as "self-generated" power (e.g., whether renewable PPAs count)
• Exploration concession surrenders — the compressed timeline may force smaller exploration companies to drop concessions they cannot advance quickly enough
• Fiscal revenue projections — the government expects the new regime to generate significantly higher mining revenue once the pipeline projects reach production

Sources: Mining.com, ARCOM