Bolivia Becoming More Hostile Towards Mining
By Jon A. Nones
09 Oct 2006 at 02:44 PM EDT
resourceinvestor.com
St. LOUIS (ResourceInvestor.com) -- A weekend of bloody dealings in Bolivia has caused a ripple effect in the international mining community - and may have quickened the pace of a possible nationalization of mining concessions in the country.
Bolivian President Evo Morales said Saturday the government should expropriate mines where private owners have not invested sufficiently.
“Mining concessions where there has not been investment must return to the hands of the Bolivian government,” Morales told sources, following the violence.
On Thursday, clashes between rival bands of miners erupted at the state-owned Huanuni mine, which holds Bolivia's richest tin deposits, when an estimated 4,000 miners from independent cooperatives demanded access to the mine, confronting workers for the state-owned Mines of Bolivia.
The two sides threw sticks of dynamite at each other and fired guns across mountain passes, leaving at least 16 dead and injuring more than 60. To restore order, the government sent in 700 police to the Huanuni mine, located high in the Andes and 500 kilometres south of La Paz.
Morales has since replaced his minister of mines Walter Villarroel, and president of Bolivia's state-owned mining company Comibol, Antonio Rebollo.
Alex Turkeltaub, Managing Director of Frontier Strategy Group, told Resource Investor that “things in Bolivia are clearly getting more chaotic by the minute.”
Nationalization
In May, President Evo Morales announced the nationalization of the country’s oil and gas sector, giving majority control of the industry to state energy company Yacimientos Petroliferos Fiscales Bolivianos. Although this was suspended in September, Morales has hinted about nationalizing the mining sector as well.
Bolivia is currently a CC-rated country on Frontier Strategy Group’s Above Ground Risk (AGR) Report, the second to lowest score possible. Turkeltaub said, “we could see this rating fall further if recent problems continue.”
Turkeltaub said the most troubling aspect of Bolivia’s situation is that it combines the two greatest threats to foreign investment:
The risk of expropriation, “which must be taken seriously given what's happened in the gas sector in the country,” and;
Social and labour unrest amongst the mines themselves, “which makes it difficult to operate in the country even if the government's threats to nationalize do not materialize.”
There is little political risk for Morales in attacking undeveloped concessions - given that these will not yield any tax revenues in the near-term because of the timeframe required to develop new assets, according to Turkeltaub.
“Morales is playing the populist card by expropriating without a direct hit on the bottom line,” said Turkeltaub. “Of course, the long-term consequences of his actions are extremely negative - but this has never stopped him before.”
Foreign Miners
Apex Silver [AMEX:SIL], Coeur d’Alene [NYSE:CDE; TSX:CDM] and Pan American Silver [Nasdaq:PAAS; TSX:PAA] have advanced development projects in Bolivia. Newmont [NYSE:NEM] and Orvana Minerals [TSX:ORV] have producing mines in the country.
Jeff Clevenger, President and CEO of Apex Mining, said at the Denver Gold Forum 2006 last month that he was confident that talks of nationalization in the mining sector did not apply to the company’s San Cristobal silver project.
“There’s been no concrete proposal that has gone anywhere,” he added.
Source: Yahoo! Finance.
Exploration companies in the country include: Apogee Minerals [TSXv:APE], Castillian Resources [TSXv:CT], Chapleau Resources [TSXv:CHI], Delta Mining and Exploration [OTC:DMXP], Eaglecrest Explorations [TSXv:EEL], Esperanza Silver [TSXv:EPZ], Franklin Mining [OTCPK:FMNJ], General Minerals [TSX:GNM], Golden Eagle International [OTC:MYNG], Luzon Minerals [TSXv:LZN], New World Resource Corp. [TSXv:NW], Samex Mining [TSXv:SXG], Solitario Resources [TSX:SLR; AMEX:XPL], Vista Gold [TSX:VGZ; AMEX:VGZ].
Turkeltaub said the upside is that Bolivia will have some cheap properties in the next 6-12 months.
“Companies willing to bear and manage the political risk involved could be quite successful in purchasing quality assets at below-market prices,” he concluded.
Source: www.basemetals.com.
Tin Market
Bolivian mines once produced more than 30% of the world's tin. However, production came to almost a complete halt following the collapse of the global metal market in 1985, and Comibol slashed its work force by about 25,000.
However, the Huanuni still currently produces 5% of the world’s tin, and prices soared 2.3% on Thursday when the violence erupted.
At the end of last week, LME tin stocks stood at 12,150 tonnes, down from the start of 2006 when total inventories were near 17,000 tonnes.
According to Standard Bank, availability and consumption will be closely matched this year, with total offtake reaching 383,000 tonnes, and supply and sales totalling 372,000 tonnes and 10,000 tonnes, respectively.
Tin Price Activity
Three-month tin prices last stood at $9,140 per tonne, up from $9,000 a week earlier. On Friday, three months prices traded at $9,050.
LME prices have largely held close to the $9,000 a tonne level in recent months. |
