Booming small-scale gold mining profits in Ecuador show how criminal groups control the market

By Arturo Torres and Dan Collyns

About a quarter of Ecuador’s gold exports from small-scale mining in 2023 originated from just three companies, Rockgolden, Rocadorada and Soul Metals. Their exports of $268 million in gold just to the United Arab Emirates and India was about 20 times more than the same trade the year before. A months-long investigation of their activities by Mongabay and Codigo Vidrio suggests that the exports were made via a web of falsified certificates and permits from nonexistent mines, abetted by lax governmental oversight.

Police and military raid an illegal gold mine in Camilo Ponce Enriquez canton, Azuay Province, in August.

The last few years have seen booming business for small-scale gold mining in Ecuador. For the first time since 2020, exports from small-scale gold producers reached $1.26 billion in 2023, surpassing the $1.17 billion worth of shipments of Canada’s Aurelian, the only large, formal gold mining company in Ecuador. The boon comes as organized crime has tightened its chokehold on artisanal and illegal gold mining in Ecuador, through violence and extortion; murder rates increased fivefold between 2019 and 2023, affecting in particular Indigenous communities and the resource-rich, fragile ecosystems of Ecuador’s Amazonian regions.

As journalists in this collaboration followed a paper trail of falsified documents, on Sept. 2 Ecuadorian police and prosecutors raided the country’s Mining Regulation and Control Agency (ARCOM), as well as the Ministry of Energy and Mines, as part of an investigation into irregularities in authorizing new mining permits and concessions for small-scale mining. Although the mining registry that ARCOM managed was suspended in early 2018, between 2019 and 2024 the agency still granted more than 650 concessions, according to investigators’ reports.

The documents and evidence we reviewed, as well as the testimonies and interviews gathered for this investigation, point to the fact that these three companies, and at least 15 others and 18 individuals, obtained gold from various sources, mostly illegal, with the complicity of mining regulators. This was corroborated by interviews with current and former officials. The cases of these companies, whose profits have increase by a factor of 10 or more in less than a year, suggest that lax regulation, corruption and organized crime have enabled multimillion-dollar proceeds from drug trafficking to be laundered through illegally mined gold, our investigation found.

Overflight of Yutzupino, one of the main illegal mining sites on the banks of the Jatunyacu River, near Tena, in Napo province.

Since 2020, illegal mining and criminality has doubled. This, according to Fernando Benalcázar, former vice minister of mining, coincides with ARCOM’s shutdown in 2020. President Daniel Noboa only reinstated the agency in August 2024.
“Illegal mining controls fell, everything became laxer, technical verifications and audits decreased, due to the drastic reduction of personnel and resources,” Benalcázar told us. “Companies began to be created without any verification, and could practically export whatever they want without any limits.”

Small-time traders
Despite their astronomical revenues, Rockgolden, Rocadorada and Soul Metals (all founded in 2021, according to Ecuador’ companies’ registry) are not formal companies. Instead, they’re what’s known as simplified joint stock companies (SAS by its Spanish acronym), a special scheme Ecuador introduced in 2020 to support small entrepreneurs through the COVID-19 pandemic.

According to analysts consulted for our investigation, SASs are ideal for money laundering because they make it easier to set up shell companies. They can be created with $1 of capital, a single owner, and no background checks. After the pandemic, family groups, especially from the coastal provinces of El Oro and Guayas, created dozens of companies, including SASs. “We have observed the presence of individuals and legal entities who do not engage in a single activity in the sector, but in several, and camouflage their real operations when applying for licenses and permits from public agencies,” according to a 2021 report by the Organization of American States on illegal gold mining in Ecuador.

Our investigation reviewed 363 companies, partnerships and individuals with mineral commercialization licenses in ARCOM’s records. We found just eight gold exporters under the SAS scheme: the three already mentioned, plus JP-Metals, which exported $2.3 million worth of gold to the UAE in July 2024 alone; Aldemining, which sold $10m to the UAE in the first half of this year; and Dream Rock World D-Rock, which exported $10.8m during the same period, also to the UAE.

National Police and prosecutors raid the ARCOM offices in Quito in early September.

“More than 35% of (Ecuador’s gold) exports come from small-scale mining, and a significant part from illegal mining and laundering. This is how mining criminality exploded, these are not isolated cases,” Benalcázar told us. “There are companies that mushroomed and pay little or no taxes. Others sell through those that have export licenses; anyone can export, with or without a concession,” he said.

Our investigation found no checks carried out by the Internal Revenue Service (SRI) or the Financial Analysis Unit (UAFE) to verify whether these companies had paid taxes or were involved in any financial irregularities.

From 2020 until the first half of 2024, when ARCOM was shut down, the Agency for Regulation and Control of Energy and Non-Renewable Resources (ARCERNNR) took over its responsibilities. During this time, it approved production certificates and export permits for Rocadorada, Soul Metals, Rockgolden and other small mining companies. It did so without checking where the gold was said to have been mined from and processed, according to documents we reviewed.

It was through these documents, as well as the mining registry, export guides and tax payments that we found that export permits and production certificates appeared to follow a fraudulent pattern.

“These companies had a surge of gold shipments that do not correspond to their small mining status,” said a former ARCOM official who asked to remain anonymous for security reasons. “Their exported amounts and the multimillion-dollar payments received do not match their reports of production and processing of the mineral ore either. “When cross-checked with the data reported in 2022 and 2023, it is quite likely that the source of the exported gold was illegal mining,” the former official told us.

The companies’ export certificates contain clear evidence pointing to irregularities. In particular, experts consulted for this investigation found discrepancies between production and export figures. For example, in one export certificate, Rockgolden declared that in August 2022 it had processed 4,588 metric tons of ore across 13 days at the DENIS UNO concession, in Bella María parish, Santa Rosa canton, El Oro province. From this activity, amounting to an average of 353 metric tons of material dug up daily, it obtained 43 kilograms (95 pounds) of pure gold, which it sold to a company in Dubai for $2.2 million.

Although these amounts were accepted by the authorities, a source at a legal mining company in Azuay province said the production figures were outlandish. “Our company has 200 formal employees and is capable of processing 700 tons per month, about 40 tons per day, with which we obtain about 12 kilos (26 lbs) of gold,” the source said, adding that small-scale mining companies are only legally permitted to process up to 300 metric tons per day. “No company in this range has that maximum production capacity.”

More than 100 heavy diggers and backhoes were seized in a joint police and armed forces operation in Yutzupino in February 2022. The heavy machinery is impounded in Tena, Napo province.

Between July and August 2023, Soul Metals exported 59 kg (130 lbs) of gold from a reported 2,500 metric tons of processed ore. “No legal small-scale mining company can produce more than 15 kilos (33 lbs) per month, due to costs, use of machinery and production capacity. Only Aurelian can produce more than 20 kilos (44 lbs),” the source said.

The DENIS UNO concession held by Rockgolden was registered in October 2013. But Rockgolden was created as an SAS only in 2021. According to a real-time map we accessed via ARCOM’s Mining Cadastre Geoportal, there are no mines or mining facilities in that concession. “No SAS can have a mining area, since the last concessions were delivered in 2017 when the (mining) registry was closed, and at that time there were no such firms,” the source in Azuay told us.

This wasn’t an isolated case. Mining concessions declared in the export documents appear to be in places where there’s no mining activity, only rivers and villages. According to maps we review for our investigation, these areas don’t have any mine entrances, tailings dams or waste sites.

“The falsification of certificates of origin, as part of the illegal mining production chain, is one of the most profitable activities in the links of illicit production, since the intermediary buys illegal gold at around 60% of the market value and sells it at around 95%,” Gaston Schulmeister, director of the OAS’s Department against Transnational Organized Crime (DTOC), told us.

Unusually good business
The magnitude of the unusual gold exports started to raise alarm in mid-2023 when Patricio Bonilla, a military colonel, took charge of ARCERNNR, the mining regulator since 2020, after the previous head, Luis Maingón, was removed amid corruption allegations. Under Maingón’s watch, illegal miners were allegedly tipped off by officials ahead of police raids, particularly in Azuay and Napo provinces, while mining regulators allegedly charged fees and demanded bribes from representatives of gold exporting companies to issue permits. Maingón had led ARCERNNR since August 2022 and was a trusted lieutenant of former mining minister Xavier Vera, who was arrested after being accused of bribery.

Under Bonilla, the regulatory agency began to uncover irregularities in the gold exports of many companies. A former official who collected evidence for the investigation confirmed that Rockgolden, Rocadorada and Soul Metals, registered in the ports of Machala and Guayaquil, stood out.

A truck carrying 600 sacks of gold ore coming from illegal mines in Buenos Aires, Imbabura, was seized by the police in August.

In 2023, Rockgolden exported $71 million worth of gold to MHGS Trading DMCC in Dubai, about 70 times more than in 2022. Rockgolden’s general manager is Guillermo Bolaños, a Peruvian national, and Shaheen Daniel Hays, a U.S. national, is a shareholder. Neither responded to emails and phone numbers registered with the company. MHGS Trading DMCC is a subsidiary of multinational gold trader Metals House Inc., where Hays is listed as the managing partner in Peru.

Meanwhile, Rocadorada sold $110 million worth of gold to Dubai in 2023, almost 10 times more than in 2022. The buyer was Al Hamra Overseas Trading Llc. Its sole shareholder is Ecuadorian Christian Quijije. Emails sent to Al Hamra’s email address went unanswered.

Soul Metals didn’t record any gold exports in 2022, yet the following year shipped $81.4 million of gold to India. The buyer was India-based A.J. Refinery Private Limited. Created just in 2022, Soul Metals has changed owners and shareholders four times. We called the two cellphone numbers listed in its corporate registry, but they were in other people’s names. They didn’t respond to our emails.

The way these trades work appears to be a way of laundering money, according to a police intelligence officer we consulted, who requested anonymity for security reasons.

The illicit profits from cocaine trafficking that used to enter the financial system in Ecuador were now leaving the country to be invested in gold purchases from Ecuador, the officer said. The same people were creating companies in the UAE to send money to Ecuador in order to, themselves, create shell companies to export the gold to their own Dubai-based firms, thus laundering the dirty money.

Violence boosts illegal mining
The surge in gold exports came amid a spike in crime and violence in illegal mining zones across nine Ecuadorian provinces, according to the U.S. State Department-funded Ecuadorian Organized Crime Observatory (OECO). In the southern Amazon, where criminal gangs have moved into illegal mining, murder rates have doubled or even tripled.

A police and military raid in Camilo Ponce Enriquez canton, Azuay province, Ecuador, in August 2024, where four dead men were found, allegedly members of Los Lobos gang.

“Illegal gold mining has become the most dominant criminal activity in Ecuador’s Amazon region, said Sofía Jarrín, Amazon Watch’s Western Amazon advocacy adviser and lead author of a recent report on gold gangs.

“Criminal organizations are reinvesting drug trafficking profits into this lucrative trade, fueling a violent struggle for territorial control,” Jarrín said in the report. “This dynamic not only escalates violence, extortion, recruitment, and contract killings but also enables the expansion of other illicit markets, such as the smuggling of mercury, weapons and drugs, further empowering the criminal groups guarding the mining enclaves.”

Although we couldn’t identify a direct link between drug-trafficking organizations and the companies in question, the dominance of illegal groups in mining points to a tainted industry. In provinces such as El Oro, Azuay, Imbabura, Napo and Zamora Chinchipe, Los Lobos, a gang allied with criminal groups from Venezuela, Colombia and Peru, fights for control of illegal mining, using it as a conduit to launder the proceeds of drug trafficking and other crimes.

In just the canton of Ponce Enriquez in Azuay, Los Lobos earns some $3.6 million in profit a month. Operators of trading companies buy gold ore from gang leaders and the illegal miners in their areas of influence, as well as from Peru, according to the intelligence officer.

These middlemen then transport the ore to processing plants in Ponce Enriquez or Portovelo, or in the neighboring province of El Oro, where it’s processed and the gold melted down into ingots that can then be exported.

“Illegal mining is a safer and more lucrative activity in which they can invest money from drug trafficking, and from which they can launder the assets more easily,” Schulmeister from the OAS told us. “It is easier to transport and sell a kilo of gold than a kilo of cocaine.”

Institutional failure
A former official who worked in ARCOM under the previous government told us the regulator “is only there to legalize the illegal.”

ARCERNRR approves about 2,000 export certificates per year. In the second half of 2023, it approved 1,000 permits, the former official said.

They added that upon detecting the surge in exports by Rockgolden, Rocadorada and Soul Metals, ARCENRNRR decided to inspect the locations of the companies’ concessions. “When we arrived … there was no earth movement or extractive operations. We realized that the gold they export was bought from illegal miners in Yutzupino and Punino, in Napo (province), and in Buenos Aires, in Imbabura (province).”

When consulted about the explosive growth of unusual exports, Diego Ocampo, the deputy minister of mining at the time, said the government had planned to detect and correct these anomalies via ARCOM, which was reinstated this August. He added that law enforcement would begin to prosecute crimes in the area.

According to Ocampo, ARCOM had planned to conduct audits of production reports to check if the zonal coordinators were conducting on-site audits.

Ocampo resigned as deputy minister in mid-August 2024. In his final management report, he stated his concern for ARCOM’s situation, adding that it lacked technical, administrative and legal personnel, as well as the budget to do its job and combat illegal mining.

According to an internal ARCOM report we reviewed for our investigation, there are no consolidated reports on the statistics of fines and penalties imposed and collected, nor reports on the distribution of royalties and mining profits. There are no statistical reports on revenues from state mining participation and mineral exports.

According to an evaluation by the government in early 2024, which we saw, there’s also no on-site control of mineral sampling due to lack of personnel. Nor is there any consolidated record or report of technical audits carried out in 2023, much less in past years. There are also no reports on follow-up or compliance measures to ensure mining companies pay their required mining royalties to the state.

In October 2023, authorities gathered solid evidence of unusual exports by Rockgolden and Rocadorada, which were reported for alleged tax evasion to the Internal Revenue Service (SRI) and the Financial Analysis Unit (UAFE).

We asked the SRI about the results of that investigation, it said that the information was being considered and that a response would be issued once the investigation was finished.

UAFE’s director, José Neira, didn’t respond to our requests for interview or information on the progress of the investigation.
_________________

UAFE’s director, José Neira, didn’t respond to our requests for interview or information on the progress of the investigation.
Research funding for this story came from the Pulitzer Center’s Rainforest Journalism Fund.

Credit: Mongabay