RESOLUTION No. JPRM-2023-009-M

THE MONETARY AND REGULATORY POLICY BOARD

CONSIDERING:

That, the Constitution of the Republic of Ecuador, in its article 226, prescribes that public servants and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the Law;

That, article 227 ibid states that the Public Administration constitutes a service to the community that is governed by the principles of effectiveness, efficiency, quality, hierarchy, coordination, planning, among others;

That, the first paragraph of article 303 of the Constitution of the Republic determines that the formulation of monetary, credit, exchange, and financial policies is the exclusive faculty of the Executive Branch and will be implemented through the Central Bank of Ecuador;

That, numeral 10 of article 36 of the Organic Monetary and Financial Code, as a function of the Central Bank of Ecuador, among others, establishes: "(...) 10. Without prejudice to its primary objectives, acquire non-monetary gold from the extraction of small-scale and artisanal mining in the national market, directly or through public and private economic agents, previously authorized by the Central Bank of Ecuador itself, as well as the purchase, sale, and negotiation of gold prior to the express authorization of the Monetary and Regulatory Policy Board; (...)";

That, article 47.1 of the aforementioned Code created the Monetary and Regulatory Policy Board, as part of the Executive Branch, responsible for the formulation of monetary policy, the highest governing body of the Central Bank of Ecuador, and determines its composition;

That, article 47.6 supra, regarding the functions of the Monetary and Regulatory Policy Board, among others, establishes: "1. Formulate policy in the monetary field and observe its application by the Central Bank of Ecuador, to preserve the integrity and sustainability of the dollarization monetary system and the financial system, in accordance with the provisions of this Code; (...) 7. Formulate the policy of the operations of the Central Bank of Ecuador; (...) 26. Those others conferred by law.";

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That, article 135 of the Code ibid determines: "Without prejudice to the objective specified in article 27, the Central Bank of Ecuador may intervene in the purchase, sale, or negotiation of gold or other precious metals and may carry out financial operations with these metals to obtain liquidity credits in accordance with article 38 of this Code, in the form and conditions authorized by the Monetary and Regulatory Policy Board.

Under no circumstances, this type of operation may be used to finance or back directly or indirectly the entity in charge of public finances or any public entity";

That, article 49 of the Mining Law states that "(...) in the case of gold from small-scale and artisanal mining, the Central Bank of Ecuador will carry out its commercialization directly or through public and private economic agents previously authorized by the Bank (...)".

That, Chapter I "Policies for the Commercialization of Non-Monetary Gold of the Central Bank of Ecuador", of Resolution No. JPRM-2022-008-M, of February 23, 2022, issued by this Monetary and Regulatory Policy Board, contains the provisions related to the purchase of non-monetary gold;

That, the acquisition of Non-Monetary Gold from the extraction of artisanal mining and small-scale mining in the national market seeks to foster and promote the development and promotion of these forms of productive organization in the economy, in accordance with the principles of environmental sustainability, precaution, prevention, efficiency, and traceability. Additionally, this acquisition of gold strengthens the country's International Reserves;

That, with the promotion of mining activities authorized by the State, especially those related to artisanal mining and small-scale mining, these forms of production are incentivized and their rights are sought to be guaranteed, alongside the care of nature, guaranteeing a sustainable model of development and environmentally balanced;

That, it is necessary to adapt and update the regulatory norms applicable to the Commercialization of Non-Monetary Gold of the Central Bank of Ecuador, differentiating the general provisions that apply to commercialization and those specific both for the purchase of Non-Monetary Gold from artisanal and small-scale miners, as well as for the certification and sale of Non-Monetary Gold;

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That, the Monetary and Regulatory Policy Board, in an extraordinary session by mixed modality, on April 06, 2023, reviewed the proposal sent via memorandum No. BCE-BCE-2023-0081-M of April 04, 2023, by the General Manager of the Central Bank of Ecuador to the President of the Monetary and Regulatory Policy Board; as well as, the Reserved Report No. BCE-SGOPE-023-2023 / BCE-DNGR-098-2023, signed by the Operations Sub-Management; as well as, the Legal Report No. BCE-CGJ-006-2023 of April 04, 2023; and,

In exercise of its functions and in attention to articles 47.6 and 47.7 of the Organic Monetary and Financial Code, the Monetary and Regulatory Policy Board resolves to issue the:

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## POLICY FOR THE COMMERCIALIZATION OF GOLD ACQUIRED BY THE CENTRAL BANK OF ECUADOR FROM ARTISANAL AND SMALL-SCALE MINERS

### CHAPTER I: GENERALITIES OF THE COMMERCIALIZATION PROCESS

**Art. 1.- Objective:** The commercialization of Non-Monetary Gold acquired from artisanal and small-scale miners by the Central Bank of Ecuador has as its main objective to contribute to the development and formalization of the small-scale mining and artisanal mining sectors, promoting the adoption of environmentally friendly extraction processes, as well as the sustainable development of these sectors and their supply chain; and, as a consequence, strengthening the country's International Reserves.

**Art. 2.- Definitions:** For the purpose of applying what is established in this resolution, the following definitions will be considered:

1. **Artisanal mining:** as established in the Mining Law, it comprises and applies to popular economic units, sole proprietorships, family, and domestic enterprises that carry out work in free areas, whose activity is characterized by the use of machinery and equipment with limited load and production capacities, in accordance with the instruction approved by the board of directors of the Mining Regulation and Control Agency, or whoever takes its place, destined for the obtaining of minerals, whose general commercialization allows covering the needs of the community, the persons, or the family group that carries them out, solely within the territorial jurisdiction with respect to which the corresponding permit has been granted.

2. **Small-scale mining:** as established in the Mining Law, small-scale mining is considered that which, due to the geological-mining characteristics and conditions of metallic and non-metallic mineral substance deposits and construction materials, as well as their technical and economic parameters, makes its rational exploitation viable directly, without prejudice to preceding exploration work, or that exploration and exploitation work are carried out simultaneously. The geological-mining characteristics and conditions of deposits suitable for the development of small-scale mining activities, and different from larger-scale mining activities, inherently include those corresponding to the area of concessions, the amount of investments, volume of exploitation, installed capacity for benefit or processing, and technological conditions, in accordance with the norms of the Regulation of the Special Regime of Small-Scale and Artisanal Mining.

3. **Doré bars:** are bars of semi-pure alloy of gold, silver, and other metals, unrefined or refined in an artisanal manner.

4. **Smelting process:** is the method used to validate the quality of gold acquired from artisanal and small-scale miners, which consists of changing from solid to liquid state due to the increase in temperature, by smelting, obtaining doré gold bars.

5. **Non-Monetary Gold weighing process:** consists of determining the weight of doré gold bars, using a precision scale, in order to establish a variable to be used for calculating the purity of gold, through the density formula based on Archimedes' principle.

6. **Archimedes' principle:** is a physical law that establishes that a body submerged in a fluid experiences an upward force equal to the weight of the fluid it displaces; it is used to calculate the gold content in a bar, which is determined through the difference in densities between the gold and other metals present in the ingot.

7. **Fine gold:** is the result obtained by applying the formula for determining purity or "Gold Law", which corresponds to the percentage of gold existing in a doré gold bar.

8. **Non-Monetary Gold:** is the gold that the Central Bank of Ecuador buys from artisanal and small-scale miners, by legal provision, in the format of unrefined doré gold bars.

9. **International refining companies:** are companies dedicated to the refining of precious metals, such as gold, silver, platinum, and palladium, among others. Their business is based on the commercialization of raw gold or silver from different

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sources, such as mines, jewelry, coins, and other recycled products, which use refining techniques to separate the precious metal from other metals.

**10. Regulatory bodies of the precious metals market:** include those bodies that issue international standards, supervise and control international precious metals markets; among the main ones are: *London Bullion Market Association* (LBMA), *Commodity Futures Trading Commission* (CFTC), *Shanghai Gold Exchange* (SGE), *Dubai Multi Commodities Centre* (DMCC); and, the National Securities Market Commission (CNMV).

**11. Gold commercialization process:** is the process that the Central Bank of Ecuador executes to purchase Non-Monetary Gold from artisanal and small-scale miners; and, those related to its subsequent refining, sale, or certification in local or international markets.

**12. Fair price:** corresponds to the international price of gold minus a discount that the Central Bank of Ecuador applies to cover its operational costs; and, which seeks to favor the development of the responsible mining sector.

**13. Non-Monetary Gold Refining:** is the process by which a refinery accredited by an international supervision and control body carries out metallurgical processes, both physical and chemical, of fusion and purification of gold, to eliminate impurities and increase the purity of gold to reach a level greater than or equal to 99.5%.

**14. Certification of Non-Monetary Gold to Monetary Gold:** is the process in which an international refining company, duly accredited, certifies the purity and weight of gold in ingot format under "Good Delivery" conditions, in accordance with the standards issued by the "London Bullion Market Association" (LBMA). This process allows converting Non-Monetary Gold, purchased by the Central Bank of Ecuador locally from artisanal and small-scale miners, into Monetary Gold so that it becomes part of the International Reserves.

**15. Monetary Gold:** is refined and certified gold by an international refining company, duly accredited by a regulatory body of the precious metals market, which is in physical state of ingots with a minimum purity of 99.5%, which is part of the International Reserves and which are valued at market prices.

**16. Non-Monetary Gold Position:** is the total amount of gold acquired by the Central Bank of Ecuador from small-scale and artisanal miners, which is stored in the institution's vaults and does not form part of the International Reserves.

**Art. 3.- Uses of Non-Monetary Gold:** The Central Bank of Ecuador may allocate the Non-Monetary Gold acquired from artisanal and small-scale miners for sale in the local market or, once refined, sell it internationally; or, after being certified, become part of the International Reserves.

**Art. 4.- Control and quality standards:** The Central Bank of Ecuador will incorporate into its administrative, technical, and operational processes of gold commercialization management, the standards and principles issued by the main international quality and control bodies of the precious metals market.

**Art. 5.- Due diligence process:** In the commercialization process of Non-Monetary Gold, the Central Bank of Ecuador will comply with the norms and procedures for the prevention, detection, and eradication of the crime of money laundering and financing of crimes.

For this effect, the Central Bank of Ecuador, among other aspects, will carry out the traceability of the origin of the acquired gold through the permanent and periodic execution of visits to gold suppliers to verify their extraction operations and their relationship with the commercialized production.

### CHAPTER II: PURCHASE OF NON-MONETARY GOLD

**Art. 6.- On the purchase of Non-Monetary Gold:** The Central Bank of Ecuador will purchase gold only from artisanal and small-scale miners in Ecuador, duly qualified by the institution as authorized suppliers.

**Art. 7.- Quota:** The Central Bank of Ecuador will establish technical parameters to set the revolving quota for the purchase of Non-Monetary Gold from artisanal and small-scale miners, in order to guarantee its acquisition, in doré bars, at a fair price and in a timely manner.

**Art. 8.- Technical processes:** The Central Bank of Ecuador will purchase Non-Monetary Gold from artisanal and small-scale miners in doré bars, which, prior to their acquisition, will be subjected to technical processes of smelting and weighing, defined by the institution, to determine the purity and quantity of fine gold.

**Art. 9.- Price:** The fair purchase price of Non-Monetary Gold from artisanal and small-scale miners will be defined by the Central Bank of Ecuador, considering international reference prices published in specialized systems contracted by the

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institution, to which a discount will be applied that incorporates costs related to the purchase and sale, as well as, the sensitivity of the gold price.

**Art. 10.- Payments:** Payments to artisanal and small-scale miners, suppliers of Non-Monetary Gold, will be made through the Central Bank of Ecuador's payment system.

### CHAPTER III: SALE OR CERTIFICATION OF NON-MONETARY GOLD

**Art. 11.- On the sale or certification of Non-Monetary Gold:** The Central Bank of Ecuador will sell Non-Monetary Gold in national or international markets; unless, the need to increase the position of Monetary Gold is determined, according to the technical need analyses and reports that the Central Bank of Ecuador carries out, in which case, it will certify it.

**Art. 12.- Counterparties:** The Central Bank of Ecuador will define the contracting process for the refining and subsequent certification or sale of Non-Monetary Gold, which must consider, at least, the principles of transparency, publicity, and participation.

In the defined process, only the participation of internationally renowned refining companies will be considered, which will be qualified annually by the Central Bank of Ecuador, based on quality, security, and price criteria.

**Art. 13.- Price:** The sale price of Non-Monetary Gold will be determined through international market reference prices published in specialized systems contracted by the institution, provided that at the time of sale the price covers the costs of these operations. Exceptionally, during declared liquidity contingency states, the Central Bank of Ecuador may sell Non-Monetary Gold below its purchase price, in order to prioritize liquidity over its cost coverage or profit, for which it must have the respective technical pertinence reports.

**Art. 14.- Settlement and payment:** The settlement of the sale of Non-Monetary Gold will be carried out based on the agreed sale price and the buyer's verification, regarding the quantity and quality of gold received, in accordance with the parameters contained in the documents celebrated for this effect. The payment will be made in favor of the Central Bank of Ecuador through the international financial system.

**SINGLE TRANSITORY PROVISION.-** The General Management of the Central Bank of Ecuador, within a term not exceeding thirty (30) days, will issue the Administrative Resolutions, which will contain the operational technical aspects corresponding to the purchase, sale, or certification processes of Non-Monetary Gold.

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**SINGLE REPEALING PROVISION.-** Chapter I "Policies for the Commercialization of Non-Monetary Gold of the Central Bank of Ecuador", of Resolution No. JPRM-2022-008-M, of February 23, 2022, issued by this Monetary and Regulatory Policy Board, is repealed.

**FINAL PROVISION.-** This resolution will enter into force from its issuance, without prejudice to its publication in the Official Register.

The publication on the institutional website is entrusted to the Document Management and Archive Directorate of the Central Bank of Ecuador.

**COMMUNICATE.-** Given in the Metropolitan District of Quito, on April 06, 2023.

### THE PRESIDENT

*Signature*

**Dr. TATIANA MARIBEL RODRÍGUEZ CERÓN**

The aforementioned resolution was signed by Dr. Tatiana Maribel Rodríguez Cerón - President of the Monetary and Regulatory Policy Board, in the Metropolitan District of Quito, on April 06, 2023.- I CERTIFY.

### ADMINISTRATIVE SECRETARY

*Signature*

**Ab. MARÍA ALEXANDRA GUERRERO DEL POZO**