UPDATE 2-Ecuador says to present mining bill this week

(Adds analyst comments in paragraphs 11-13)

By Alonso Soto

QUITO, Nov 10 (Reuters) - Ecuadorean President Rafael Correa said he will propose this week a mining bill to overhaul the nascent sector, and warned his allies in the legislature not to make deep changes to the legislation.

Correa, a leftist former economy minister, has said he wants to jump-start mining of precious metals from large deposits to diversify the oil-dependent economy and share its revenues with the poor majority.

"If there are deep changes to the law, I will veto it and put it up for a popular referendum," Correa said during his weekly media address on Saturday. "The government's political decision is to develop the mining sector."

Correa, who enjoys a majority in the legislature, has clashed with more radical factions inside his Alianza Pais party that say large-scale mining will hurt the country's pristine environment and indigenous communities in the jungle.

The legislature power-struggle over the bill will be key for foreign companies deciding whether to do business in Ecuador, which holds huge deposits of gold, copper and silver.

Mining development in Ecuador should raise revenue for the government at a time when its income from oil sales is likely to be lower than in previous years.

Deputy Mining Minister Jose Serrano told Reuters that under the draft law companies could opt to exploit minerals under a service contract with the government, although that would not be obligatory. Companies had lobbied for such flexibility.