by Arturo Torres and Dan Collyns

• In 2023, three small gold mining companies in Ecuador exported $268 million worth of gold to the United Arab Emirates and India, 20 times more than in 2022, according to an investigation by Mongabay and Código Vidrio.
• The amount of gold the companies claim to have processed has no technical basis, according to industry experts. Inspections of their concessions show no evidence of formal mining operations.
• More than 35% of Ecuador’s gold exports come from small-scale gold mining companies, but irregularities in their origin, permits and operations, as well as an ongoing crisis in the monitoring capacity of authorities, suggest that most of these actors are trading gold from illegal sources.
• Our investigation shows that authorities approved export permits mostly without on-site verification; and although the country’s mining registry was suspended in 2018, the agency in charge continued to approve mining concessions.

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 $268 million gold exports to the United Arab Emirates and India were roughly 20 times more than similar trade the previous year. An eight-month investigation into their activities by Mongabay and Código Vidrio found that the exports were conducted through a scheme of falsified certificates and permits, with gold extracted from mines that do not actually exist. This operation was facilitated by weak or non-existent government oversight and corruption.

Recent years have seen a boom in small-scale gold mining businesses 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 in shipments from Aurelian, Ecuador’s only large-scale gold mining company, at the exploitation stage. This boom occurred as organized crime has tightened its grip on artisanal and illegal gold mining, through violence and extortion. Homicide rates increased fivefold between 2019 and 2023, particularly affecting indigenous and peasant communities, as well as fragile and resource-rich ecosystems in the Amazonian regions.

While the journalists of this alliance were following the trail of all the anomalies and fraudulent schemes of this phenomenon, on September 2, the Police and the Prosecutor’s Office raided the Mining Regulation and Control Agency (ARCOM), as well as the Ministry of Energy and Mines, as part of an investigation into irregularities in the authorization of new permits and concessions for small-scale mining. Although the mining registry was suspended at the beginning of 2018, between 2019 and 2024, with the Agency’s consent and inaction, more than 650 concessions were granted, according to investigators’ reports.

The documents and evidence we reviewed, as well as testimonies and interviews for this investigation, indicate that Rockgolden, Rocadorada and Soul Metals, and at least 15 other companies and 18 individuals, obtained gold from various sources, most of which are believed to be illegal, with the complicity or silence (for fear of criminal retaliation) of the mining control authorities. This was corroborated in interviews with officials and former officials.

The cases of these companies, whose profits have increased 10-fold or more in less than a year, indicate that weak regulation, corruption and organized crime have allowed multi-million-dollar drug profits to be laundered through illegally mined gold, our investigation revealed.

Since 2020, illegal mining and crime have doubled. This, according to Fernando Benalcázar, former Vice Minister of Mines, coincides with the closure of ARCOM in 2020. President Daniel Noboa reestablished the agency in August 2024, in response to the surge in illegal mining.

“Controls on illegal mining fell, everything became more lax, technical checks and audits decreased due to the drastic reduction of staff and resources,” said Benalcázar. “Companies began to be created without any verification, and they could practically export whatever they wanted, without any limits.”

Small traders

Despite their astronomical revenues, Rockgolden and Rocadorada (founded between 2021 and 2022, according to the Superintendency of Companies’ registry) are not formal companies. They are what are known as Simplified Joint Stock Companies (SAS), a special scheme that Ecuador introduced in 2020 to support small entrepreneurs during the COVID-19 pandemic.

After the pandemic, family groups, especially from the coastal provinces of El Oro and Guayas, created dozens of companies, including SAS. “We have observed the presence of individuals and legal entities that are not dedicated to a single activity in the sector, but to several, and camouflage their real operations by requesting licenses and permits from public agencies,” according to a 2021 report by the Organization of American States on illegal gold mining in Ecuador.

According to the Agency records we reviewed, 363 companies, corporations and individuals have mineral marketing licenses. We found 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 $10 million to the UAE in the first half of this year; and Dream Rock World D-Rock, which exported $10.8 million during the same period, also to the UAE.

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

Our investigation did not find systematic controls by the Internal Revenue Service (SRI) or the Financial and Economic Analysis Unit (UAFE) to verify whether these companies had paid taxes or were involved in any financial irregularities or money laundering. Nor has the Superintendency of Companies intervened to detect and report the irregularities. The information collected by SRI Intelligence is only known by the Strategic Intelligence Center (CIES) and is not formalized in any investigation by the Prosecutor’s Office. There is a total absence of inter-institutional coordination to deal with these cases.

However, this year the SRI detected that there are 150 trading companies that register non-existent addresses, without an updated RUC, so it is presumed that they are paper companies; most do not have employees. This was identified after the agency checked the economic activity of nearly 200 taxpayers dedicated to mining.

Fraudulent pattern

From 2020 until the first half of 2024, when ARCOM was closed, the Agency for the Regulation and Control of Energy and Non-Renewable Natural Resources (ARCERNNR) assumed 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 being able to verify the places of origin of the extracted and processed gold, according to the documents we reviewed. The Law establishes that the authority in charge must only review and approve that the documents are in order and meet the formal requirements.

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

“These companies had an increase in gold shipments that does not correspond to their status as small mining companies,” said a former official of the Agency who asked to remain anonymous for security reasons. “The quantities exported and the multimillion-dollar payments received do not match their reports of production and processing of the mineral.”

“When comparing the data reported in 2022 and 2023, it is very likely that the source of the exported gold comes from illegal mining,” said the former official.

The export certificates of companies with unusual shipments contain clear evidence that points to irregularities. In particular, there are discrepancies between production and export figures, as we were able to detect when reviewing these documents, which was also corroborated by experts consulted for this investigation.

For example, in an export certificate, Rockgolden stated that in August 2022 it had processed 4,588 metric tons of ore in 13 days at the DENIS UNO concession, in the Bella María parish, Santa Rosa canton, El Oro province. From this activity, which amounted to an average of 353 metric tons of material extracted daily, it obtained 43 kilograms (95 pounds) of pure gold, which it sold to a company in Dubai for $2.2 million.

In 2023, the State received royalties of 207.6 million dollars from the mining sector. A significant part of these funds, more than 80 million, came from payments for exports of gold and other minerals.

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

The gold supply chain in Ecuador

(Source: Illicit Financial Flows in the Mining Sector Report. Global Financial Initiative)

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

The DENIS UNO concession, which belongs to Rockgolden, was granted in October 2013. However, Rockgolden was created as a SAS in 2022. Between 2017 and 2022, this area, located in Machala, was in the name of Germán Arias Pauta, with the cadastre 098697480. And in December 2022, the owner made the transfer and assignment of the concession to Rockgolden. “No SAS can have a mining area, since the last concessions were granted in 2017, when the mining registry was closed, and at that time this type of company did not exist,” said the source in Azuay.

Rocadorada has no employees, at least none are registered with the Ecuadorian Social Security Institute (IESS), according to sources from that organization. Soulmetals has two employees registered with the IESS. Both companies, based on the magnitude of their exploitation and production, should have a payroll of at least 1,000 employees each, according to estimates by a representative of a mining company, who requested anonymity.

This is not an isolated case. The mining concessions declared in the export documents are located in places where there is no visible mining activity, only rivers and villages, modest hamlets. According to the maps we reviewed for this investigation, these areas do not have 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 within the links of illicit production, since the intermediary buys illegal gold at approximately 60% of the market value and sells it at around 95%,” Gastón Schulmeister, director of the Department against Transnational Organized Crime (DTOC) of the OAS, told us.

In certain cases, according to an intelligence investigator, transnational criminal organizations with ties to drug trafficking create companies in Dubai, the capital of the United Arab Emirates. They then send their representatives to Ecuador to create or acquire SAS or already established companies, obtain marketing licenses and buy gold from illegal or artisanal miners. For their operations, they have capital of tens of millions of dollars in cash, coming from criminal activities, the investigator indicates.

The dance of millions

The scale of the unusual gold exports began to raise alarm bells in mid-2023. Then Patricio Bonilla, a retired Army colonel, took over as head of ARCERNNR, the mining regulator since 2020, following the dismissal of his predecessor, Luis Maingón, amid corruption allegations. During Maingón’s tenure, officials are suspected of alerting illegal miners ahead of police raids, particularly in Azuay and Napo provinces, while mining regulators in provinces allegedly charged fees and demanded bribes from representatives of gold exporting companies to issue permits. Maingón had headed ARCERNNR since August 2022 and was a close associate of former mining minister Xavier Vera, who was arrested after being accused of alleged bribery.

Under Bonilla’s leadership, the regulatory agency began uncovering irregularities in the gold exports of many companies. A former official confirmed that Rockgolden, Rocadorada and Soul Metals, registered in the ports of Machala and Guayaquil, stood out.

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

For its part, 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 address did not receive a response.

Soul Metals did not record any gold exports in 2022, but the following year it shipped $81.4 million worth of gold to India. The buyer was India-based AJ Refinery Private Limited. Created just two years ago, Soul Metals has changed owners and shareholders four times. We called the two cellphone numbers listed on its corporate registration, but they were in other people’s names. Neither did they respond to our emails.

The way these transactions are carried out appears to be a method of money laundering, according to an intelligence official we consulted who requested anonymity for security reasons.

The illicit profits from cocaine trafficking that previously entered the financial system in Ecuador were now leaving the country to be invested in gold purchases in Ecuador, the official said. The same people were creating companies in the United Arab Emirates to send money to Ecuador and thus creating shell companies that exported the gold to their own firms based in Dubai, thereby laundering the dirty money.

Illegal mining is the most dominant and violent criminal activity

The surge in gold exports came amid a rise in crime and violence in illegal mining areas in nine Ecuadorian provinces, according to the Ecuadorian Observatory of Organized Crime (OECO). In the southern Amazon, where criminal gangs have made inroads into illegal mining, homicide rates have doubled or even tripled.

Between January and June of this year, exports fell by 26%. 23 firms lead the list, including 3 SAS and 8 natural persons.

“Illegal gold mining has become the most dominant criminal activity in Ecuador’s Amazon region, said Sofía Jarrín, Amazon Watch’s advocacy advisor for the Western Amazon 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 increases violence, extortion, recruitment, and contract killings, but also allows for the expansion of other illicit markets, such as mercury, weapons, and drug smuggling, further empowering criminal groups guarding mining enclaves.”

Although we were unable to identify a direct link between drug trafficking organisations and the companies in question, the hegemony of criminal 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, is fighting for control of illegal mining, using it as a conduit to launder proceeds from drug trafficking and other crimes.

In the Ponce Enriquez canton of Azuay alone, Los Lobos generates about $3.6 million in profits a month. Commercial business operators buy gold ore from the gang leaders and illegal miners in their areas of influence, as well as from Peru, according to the intelligence officer.

These intermediaries then transport the mineral to beneficiation (processing) plants in Ponce Enríquez or Portovelo, or in the neighboring province of El Oro, where it is crushed to a powder, then chemically processed and melted into ingots, which can be exported by the traders.

Kidnapping miners has been one of the usual methods used by criminal organizations to pressure formal mining companies to pay extortion fees. Archive photo
“Illegal mining is a safer and more lucrative activity in which they can invest drug money and from which they can launder assets more easily,” Schulmeister of the OAS told us. “It is easier to transport a kilo of gold than a kilo of cocaine.”

A former official who worked at ARCERNRR in the previous government told us that the authorities “are only there to legalize what is illegal.” Some do it out of fear and others because they are collaborators and receive payment for their services. Another problem is the lack of personnel and budget. In Quito there are only 20 officials.

In 2023, the Agency issued 1,984 mineral export certificates, and 910 until June 2024, according to official reports.

On-site inspections

The former official added that, upon detecting the increase in exports from Rockgolden, Rocadorada and Soul Metals, ARCENRNRR decided in 2023 to inspect the sites of the companies’ concessions. “When we arrived… there was no earth movement or significant extractive operations. It was all a setup. We estimate that the gold they export was purchased from illegal miners in Yutzupino and Punino, in the province of Napo, and in Buenos Aires, in Imbabura.”

Asked last August about the explosive growth in unusual exports, Diego Ocampo, the deputy mining minister at the time, said the government had planned to detect and correct these anomalies through ARCOM, which was reinstated this August. He added that authorities would begin pursuing crimes in the area.

According to Ocampo, ARCOM had planned to carry out audits of production reports to verify whether zonal coordinators were carrying out on-site audits and whether the data matched what was stated in the documents. His position at the forefront would come back to bite him.

Ocampo resigned as deputy minister in mid-August 2024, following a standoff with the Minister of Energy. In his final management report, he expressed concern about the situation at ARCOM, adding that it lacked technical, administrative and legal personnel, as well as the budget to carry out its work and combat illegal mining.

According to an internal Agency report we reviewed, another serious indicator is the lack of consolidated reports on statistics of fines and penalties imposed and collected, nor reports on the distribution of royalties and mining profits. There is also no on-site control of mineral sampling, due to lack of personnel. There is no record or consolidated report of technical audits carried out in 2023, let alone in previous years.

Ocampo’s departure was a sign that the current government had serious problems in pushing the operation of the new ARCOM, in the midst of a game of interests of authorities of the Ministry of Energy and Mines related to anomalies in the control of illegal mining, which Ocampo warned about. The last peak of this crisis was the departure of Mauricio Martínez, who was in charge of the Agency for less than a month, and was just replaced by retired colonel Bonilla, at the beginning of September.

In October 2023, mining control authorities gathered strong 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).

They also held meetings with executives of these entities, as well as the Strategic Intelligence Center CIESS, to explain the scope of the phenomenon.

While the SRI is moving forward with its audit of these exporting companies, the acting director of the UAFE, José Neira, did not respond to our requests for an interview and information on the progress of the investigation.

***

*This article was originally published in Mongabay. It has been translated from the original Spanish version.

Featured image: Police and military raid in the Camilo Ponce Enríquez canton, Azuay province, Ecuador, in August 2024. Courtesy of the National Police of Ecuador.

This report was produced in partnership between Código Vidrio and Mongabay, with funding for the investigation from the Pulitzer Center’s Rainforest Journalism Fund.