Ecuador and Chile - the world's largest copper producer - will work together in exploration and possible production of minerals, especially cooper, Ecuador's mining undersecretary, Jose Serrano, told Dow Jones Newswires.

Ecuador's Mining and Oil Ministry and the Chilean Corporacion Nacional del Cobre de Chile, or Codelco, are scheduled to sign at midday an agreement for mining exploration in areas in the south of Ecuador.

Serrano said that an initial investment of $10 million will come from Codelco in the first stage of the exploration.

"The advanced exploration stage will demand an investment of $5 million per year and if the results are positive and we can exploit minerals, we should invest between $200 million and $300 million for production facilities, and we will form a joint venture with Codelco," Serrano said.

According to Serrano, Ecuador and Chile will negotiate how much each country should invest in the joint venture.

Codelco is the world's largest copper mining company in terms of output. In the first quarter it reported output of 371,000 metric tons of copper.

Ecuador's government also plans to sign an agreement with Venezuela and Bolivia to form joint ventures to explore and exploit minerals in Ecuador.

In June, the government will create the National Mining Co., a new state company, to develop and control several copper and gold projects, among other metallic and nonmetallic minerals.

Mining output in Ecuador is minimal. Large-scale projects have typically centered on nonmetallic products such as cement.

The government has said the new mining law approved early this year will open the door to a potentially lucrative and underdeveloped industry in the country and that the country's mineral potential could amount around $110 billion.

Local units of Corriente Resources (ETQ), Kinross Gold Corp. (KGC), International Mineral Corp. (IMZ.T), Iamgold Corp. (IAG), Spirit Exploration Inc. (SPXP), Mariana Resources Ltd. (MARL.LN), among others, currently have mining concessions in Ecuador.

Ecuador holds some of the world's largest untapped gold deposits including the Fruta del Norte deposit controlled by Toronto-based Kinross. Fruta del Norte is believed to contain more than 13 million ounces of gold.

-By Mercedes Alvaro, Dow Jones Newswires; 5939-9728-653; mercedes.alvaro@dowjones.com