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Bolivia willing to compensate for silver mine but positions are distant

Saturday, July 14th 2012 - 07:01 UTC
Full article 4 comments
President Morales said he signed a deal with protestors opposed to the mining project  (Photo: Efe) President Morales said he signed a deal with protestors opposed to the mining project (Photo: Efe)

Bolivian government is willing to compensate South American Silver Corp for revoking its concession on the Malku Khota project, but it will be far less than the 16 million dollars the company says it has invested, the country's vice president said on Thursday.

Bolivian President Evo Morales said this week that he signed a deal with protesters opposed to the project stipulating that the government take back all the concessions granted to South American Silver's local subsidiary.

The Canadian company's shares sank on Wednesday after the announcement, and Chief Executive Greg Johnson said the company would seek recourse using any legal and diplomatic means available.

Violent protests over the Malku Khota mining property prompted Morales' decision. The populist leader took similar action last month after clashes broke out at a project operated by commodities giant Glencore.

Malku Khota is a silver-indium-gallium deposit. The exploration-stage project was expected to produce some 13.2 million ounces of silver a year, according to a preliminary assessment.

“The state is predisposed to repay the costs of the exploration's advances up to today, once they are verified,” Vice President Alvaro Garcia told a news conference. “Our calculations indicate 2 million or 3 million dollars.”

South American Silver says it has invested some 16 million in the project since 2007.

The Bolivian government has yet to formally advise the company of the concession's rescission, which will be carried out via decree.

“We don't have any official notification,” said Felipe Malbran, South American Silver's vice president for exploration and head of its Bolivian subsidiary. “We're analyzing what steps to take and we would be open to talks with the government.”

Malbran told reporters in La Paz that the company may also potentially take action to seek “just” compensation, although he was not responding specifically to Garcia's remarks.

The violence flared at Malku Khota last week as authorities negotiated with peasant farmers on the release of five Bolivian employee hostages. One man was killed and at least a dozen were injured.

Mining has played a key role in Bolivia's economy since the colonial era. The country mainly produces tin and silver, but is also home to the world's largest undeveloped lithium and potassium resources.

The government is working on a sweeping reform of mining legislation aimed at bolstering the state's role in the industry and giving it a bigger slice of the sector's profits.

Since taking office in 2006, Morales has nationalized the natural gas industry as well as the telecommunications and electricity sectors, arguing Bolivia's poor should benefit more from the country's rich natural resources.

Top Comments

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  • British_Kirchnerist

    The company should be reasonable and accept Bolivia's generous offer of compensation. Or they could look to international capitalist solidarity, but that was a bit of a flop for Repsol wasn't it?!

    Jul 14th, 2012 - 08:32 am 0
  • The Chilean perspective

    Those stupid Canucks should have known better, you can't trust a cocalero. Morales is a crook and foreign investors deserve what they get for choosing to invest in that cesspit that is Bolivia. Look and learn gringos.

    Jul 14th, 2012 - 10:43 am 0
  • JohnN

    Canadian Radio Broadcasting story on SASC, 12 July, begins 2 minutes into the audio clip:


    Could be that getting something like $3M for $16 invested may in fact turn out to be reasonable and acceptable to SASC, but see how it plays out in and if goes to court.

    Miners work with clean, low-corruption countries (Chile) and not-clean high corruption (Bolivia) and frequently the not-clean regimes hide their intentions to fleece companies behind high-minded motives such as the indigenous communities. No doubt that profits can be made in Chile, but since Chile seen as clean and stable, the competition is higher and resource rent to be paid higher. As SASC's Bolivian problems work their way through politics and courts, if it is seen to be unreasonable compensation, will just have a chilling effect on further investments in Bolivia - and there will be more capital flight from Bolivian investors themselves.

    Jul 14th, 2012 - 02:10 pm 0
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