Bolivia mining exports seen falling 20%

Bolivia’s mining exports will likely decline by 20% this year, partly as a result of reduced private investments amidst regulatory uncertainty, experts say.

“The value of Bolivian mining exports will probably fall around 20% in 2012,” says Henry Oporto, a leading expert on Bolivian mining and the co-author of a new book Los dilemas de la minería (The dilemmas of mining). The mining sector as a whole fell 6.7% during the first half of the year.

“The decrease is due to a fall in production by private mining companies, small mining companies and state mining companies,” Oporto says. The decrease in each sector ranges from 8% to 10%.

At the same time, the international prices of most of the mining products exported by Bolivia have declined, with gold being the exception.

Another worrisome trend is that the share of private companies is falling – from 60% of total mining exports in 2011 to 48.7% during the first half of the year and a further decline expected, Oporto says. “The prospects are bleak,” he says.

Apart from the falling prices on key minerals, the sector is seeing reduced investments owing to the constrictions imposed on the private mining companies through nationalisation and expropriation; occupation of mines; the unilateral cancellation of exploration and exploitation contracts and, the uncertainty and lack of guarantees for mining investors, Oporto argues.

Mining officials also complain about the tax system. “The actual tax regime in Bolivia is the highest in the region compared with Peru, Chile and Argentina,” Minera San Cristobal spokesperson Javier Diez de Medina said. Minera San Cristobal is the largest mining company in Bolivia and a unit of Japan-based Sumitomo Corporation.

“That takes out some competitiveness of the mining sector in Bolivia.”

The government of President Evo Morales is planning to implement a new mining law, which could improve the outlook for the sector if it can abolish the constitutional mandates such as the required transfer of concessions for contracts, the ban on listing awarded mining deposits on stock exchanges, the required prior consultation with local indigenous populations, the tax regime and other restrictions on the private sector, Oporto says.

However, the signals from the government are not positive, he points out. They include possible plans to increase taxes further, increasing royalty fees from today’s level of 6% and doubling the dividend tax from today’s level of 12.5%. All in all, the government takes a whopping 67%, according to estimates by Oporto.

“If taxes rise above this level, you put at risk the continuity of the mining operations and it will be very difficult to attract new investments for mining projects,” he says.

The new mining law and a separate one on investment that also will impact the mining sector are still under discussion and it is unclear how they will end up and when they will be implemented.  “Without the new rules, it’s difficult to be thinking about the future,” Diez de Medina says. “We expect a year of plenty of challenges.”

Edited by: Creamer Media Reporter

Bolivia cancels mining concession

Bolivia's government issued a decree Thursday formally revoking a mining concession held by the private firm Compania Minera Malku Khota and rejected claims for compensation by Canadian parent South American Silver, saying no contract was signed with the Vancouver-based company.

Mining Minister Mario Virreira said the decree returns the concession for the mining project - located in Malku Khota, a town 350 km south of La Paz - to the government.

A faction of Indians who had kidnapped seven people in that region in late June - including five Malku Khota employees - had secured a pledge from the government to cancel the concession and had threatened more violence if the government did not keep its promise.

Compania Minera Malku Khota, a unit of SAS, said in June that a majority of the Indian clans in the area supported the firm's project, but that one faction of the indigenous people saw the operations as an obstacle to their own efforts to mine gold.

The concession area, located in the southern province of Potosi, which borders Argentina and Chile, had been explored by that private company since 2007 and will now be turned over to state-owned mining firm Comibol.

SAS executives said in July that the deposit had no concrete economic value prior to the exploration work, but after years of studies on its silver and indium reserves it now is estimated to be worth $2 billion.

They have indicated they want to negotiate a favorable settlement with Bolivia's leftist government, but Virreira said Thursday authorities did not sign any contract with SAS but only with Malku Khota, whose shareholders are Bolivian and Chilean.

He acknowledged that Canadian diplomats and officials have expressed concern over the company's investments in the country, but insisted that no official document or records exist in Bolivia indicating the concession belongs to SAS.

Virreira said he plans to meet in the coming days with SAS executives and Canadian government officials to convey the "reality" that no relationship officially exists between the Bolivian government and that company.

Jindal Steel sets Aug 10 deadline for Bolivian govt to resolve issues

Jindal Steel and Power has set an August 10 deadline for Bolivian government to resolve the issues related to its $ 2.1 billion venture in Bolivia, or it will pull out of the Latin American country.

“If they (Bolivian government) resolve those issues to our satisfaction, we will stay. Otherwise we will get out of there. By August 10, we will decide for sure,” the JSPL Chairman and Managing Director, Mr Naveen Jindal, told PTI in an interview.

Jindal’s contract, signed in 2007, was considered as the largest foreign direct investment for Bolivia and consisted of 40-years mining rights of El-Mutun mines, one of the largest untapped iron ore mines in the world, and setting up of iron and steel plants in the country.

In June, the Indian steel major had sent a termination notice to the Bolivian government, while alleging that contractual obligations related to gas supplies for the venture had not been met.

The notice sought to terminate the contract in a month, if the issues were not resolved. The deadline had ended on July 8.

However, Mr Jindal said that JSPL officials are still in discussions with the Bolivian government to revive the project.

He, however, made it clear that revival of the project would depend on gas allocation and scaling down the project capacity.

“What they are giving us is one-fourth of the (required) gas and are saying that you don’t scale down the capacity, we will give you gas later. Is it possible? How can we plan our investment on such assurances?

“Cost of gas there is USD 8/mBtu (million British thermal unit), while in US it is USD 2-2.5/mBtu. Okay, we will pay higher prices but how can we plan bigger without the gas being committed? We have to scale down (the capacity),” he said.

According to the contract, JSPL’s $2.1 billion project requires gas supply of 10 million standard cubic metres per day (MSCMD).

However, the Bolivian government is willing to commit only 2.5 MSCMD gas from 2014 due to non-availability of gas in the country, the company had said earlier.

The mining and steel project consists of setting up of a 10 million tonnes per annum iron ore pellet plant, six MTPA DRI (direct-reduced iron) plant and 1.7 MTPA steel plant, besides mining of El—Mutum mines for 40 years.

So far, the Naveen Jindal—led firm has invested $90 million in the venture and made investment commitments exceeding $600 million till March 2012 for purchase of technology, machinery, equipment and advances to vendors.

Source: Thehindubusinessline.com

Jindal Steel, Bolivian government resume talks to revise deadlines for project milestones

Talks between Naveen Jindal's Jindal Steel Bolivia and the Bolivian government continued on Wednesday, with the latter offering to revise deadlines for project milestones.

The $ 2.1 billion mining and steel project, the largest foreign investment into the country, has been threatened by a fallout between the two parties over commitments.

Jindal won rights to the El Mutun iron ore mines in 2007. It was to develop the mines and build a downstream steel plant, on guaranteed energy supplies from the state.

Bolivia's state gas company Yacimientos PetrolAferos Fiscales Bolivianos (YPFB) is now willing to promise only 2.5 million per day as against Jindal's initial requirement of 4.5 mcmd (million cubic metres of gas per day) leading up to

Declining to comment on the specifics, a senior company official who didn't want to be named, only confirmed, ""Discussions were on yesterday (Wednesday) but no resolution has been reached at this stage.""

Jindal Steel Bolivia has asked for the government to accordingly scale down project which includes a pellet and DRI plant as per the actual gas availability. Bolivia with 50mcmd daily gas output is South America's largest producer with export commitments to Brazil and Argentina.

According to reports from La Paz, quoting the country's mines minister, Minister of Mining, Mario Virreira, the Bolivian government is willing to reconsider timeline and commitments, but not scale down original plan for the El Mutun mines.

On June 8, JSB had notified the government of its intention to terminate the contract if energy guarantees on the part of the state could not be met. The notice called for a termination of the contract in thirty days.

Bolivia seizes South American Silver's assets

Bolivian President Evo Morales has seized and nationalized the assets of Vancouver-based South American Silver Corp. (TSX:SAC), accusing the miner of causing a conflict that saw violence erupt among communities around the silver-indium-gallium project it was developing there.

Following a five-hour meeting held Tuesday, Morales and the local leaders of the Andean community of Malku Khota, where the Canadian miner was developing a silver-indium mine, decided against South American Silver.

The agreement comes only three days after Labour Minister, Daniel Santalla, committed to cancel and later reverse SAC’s mining concession in exchange for three of the five SAC-related professionals that had been kidnapped the previous week.

The Vancouver-based miner said early Wednesday that it has not received any formal notice from the Bolivian government about the cancellation.

"We strongly object to the government's stated course of actions and we will pursue all legal, constitutional and diplomatic options," said Greg Johnson, president and CEO of South American Silver.

The company described the Bolivian government's move as "surprising in light of the fact the company continues to receive the support from 43 out of 46 indigenous communities in the project area."

"South American Silver has worked closely with these local indigenous communities over the past several years providing significant direct employment on project related jobs, as well as jointly developing programs with the communities to facilitate job training, education, agricultural enhancement and water management for long-term sustainable development," it said.

The company has invested more than $50 million in the mining project since 2007, which was set to be one of the world's largest silver and indium mine.

The stock, which closed at $1.02 on Friday, has collapsed losing more than half of its value to close at $0.32 on Wednesday.

Though rich in mineral and energy resources, data from the Unicef shows that Bolivia is one of the poorest countries in Latin America and the weakest economy in all of South America.

Bolivia plans to nationalise Malku Khota project

Mine developer South American Silver’s (SAS’s) share price nosedived by 20.4% on Wednesday on the TSX, following an announcement that the Bolivian government intended to nationalise the development-stage Malku Khota silver/indium/gallium project.

In a dramatic turn of events, the company said that to its “extreme disappointment”, the Bolivian government affirmed its intention to nationalise the project. This came after two of its employees were held hostage by project saboteurs and released on Monday, as part of a spate of aggressive attacks by a faction of dissident locals, supported by groups outside the Malku Khota project area, and government reassuring its support for the project.

SAS said it had not received any formal notice from the Bolivian government about the cancellation of its concession and was “actively” seeking clarification about the government's intentions.

“We strongly object to the government's stated course of actions and we will pursue all legal, constitutional and diplomatic options," SAS CEO Greg Johnson said in a statement.

The company said government’s action was “surprising”, owing to the company having the proven support from 43 out of 46 indigenous communities in the project area. This was achieved following close work with the communities over several years, during which it had provided direct employment on project-related jobs, as well as jointly developed programmes with the communities to facilitate job training, education, agricultural enhancement and water management for long-term sustainable development.

SAS added that since 2007 the company had invested more than $16-million in the discovery and exploration of the Malku Khota site. The company’s proprietary leach technology, developed over the past four years on the project, is key to develop the project to its full potential. Ongoing exploration and any future mine development would result in up to 1 000 jobs for local workers in the community.

“Mining is a key industry in Bolivia and this proposed action by the state sends a strongly negative message to potential investors and developers about the security of title for their investment in the developing country,” SAS said.

The company continued development work at its Escalones copper/gold project, in Chile, and said it had more than $38-million in cash in the bank as at the endof the first quarter.

Edited by: Creamer Media Reporter

Bolivian silver project rocked by kidnappings, property destruction

A long-simmering dispute involving indigenous communities, illegal mining, and the Malku Khota mining project in the Andean Potosí region has erupted into kidnapping and property destruction.

News media reports say up to 10 persons working for a subsidiary of Canadian junior, South American Silver, are being held hostage by Bolivian indigenous community members in the Andean Potosí zone.

On June 28, mining engineers Fernando Fernandez and Agustin Cardenas, employees of Bolivian South American Silver subsidiary, Compañia Minera Malku Khota (CMMK), were seized by residents of Malku Khota, a town 217 miles south of La Paz, Bolivia's Minister of Mining and Metallurgy, Mario Virreira, said Tuesday.

"They will be punished for kidnapping, laws are very clear in our country, there can be very drastic sanctions and they will be punished," he told official state news agency, Agencia Boliviana de Información.

La Razón Digital reported three other technicians employed by a private contractor working for Malku Khota were kidnapped Monday afternoon along with 15 other employees who were released Monday because they were Obejería community members.

El País reported a group of between 70 and 100 community members who oppose the mining project attacked a second camp of Malku Khota Monday night where they destroyed all equipment and kidnapped 18. The governor of Potosí, Félix González, said he is unable to confirm El Pais' story.

Interior Minister Carlos Romero told Cadena A Television that the leader the captors want released is Cancio Rojas, "accused of kidnapping, torture and other offenses." Spanish news agency EFE reported the governor of Potosí region said the Potosí indigenous took the hostages to demand the government free their leader, Cancio Rojas. The kidnappers also commanded the government reject the Malku Khota project.

One faction of the indigenous people living in the area has been trying to force out Minera Malku Khota whose operations the illegal miners see as an obstacle to their own gold mining efforts, according to reports by EFE.

Virreira claimed that he found among the community members a guidance document entitled, "Protecting Your Community Against Mining Companies and Other Extractive Industries." The mining minister asked Bolivia's attorney general to lead a thorough investigation on the origin and the authors of the document.

As of early Wednesday morning, South American Silver had not posted a comment regarding the kidnapping on its English language website. However, in a June 15 news release, South American Silver said, "Officials from the Bolivian Ministry of Mines recently met with the local indigenous communities near the Malku Khota project and confirmed that a small group of people carrying out illegal artisanal mining on exploration concessions owned by South American Silver have been encouraging confrontations between communities and attempting to interfere with work on the projects."

"Groups associated with this illegal artisanal mining activity have joined with activists from outside the local community and have recently held protests in La Paz and are now protesting near the project site," South American Silver observed.

Greg Johnson, CEO of South American Silver, said, "We have been working hard for years to build the trust and support of local indigenous communities, and we're proud of the fact that the vast majority recognize the social and economic benefits this project will bring to their families and their communities."

"These protests by outside activists and groups associated with illegal artisanal mining are acting against the state wishes and best interests of the local indigenous communities," he asserted. "In addition to the local communities, the provincial government of Potosí and the national government of Bolivia have sown their consistent support for this project and to private investment generally in the country's mining sector, the second most important economic driver after oil and gas."

South American Silver says its Malku Khota project is "one of the world's largest silver-indium-gallium resources." A Preliminary Economic Assessment says Malku Khota has the potential to mine more than 13.2 million ounces of silver, 80 tonnes of indium and 15 tonnes of gallium annually for the first five years of production.

With an estimated 15-year mine life, the operation would also produce several million pounds of by-product lead, copper and zinc, according to the PEA.

Glencore protests at Bolivia mine nationalisation

Angered by the nationalisation of a tin and zinc mine in Bolivia, global commodities firm Glencore said on Friday it may seek compensation domestically or abroad.

Bolivia's leftist government, headed by Evo Morales, took over operations at the Colquiri mine on Wednesday after weeks of violent protests.

Morales, who has already nationalised the Andean country's natural gas and electricity industries, said the decree brought the local operating company Sinchi Wayra - which has been owned by Glencore since 2005 - back into state hands, resolving the dispute between employees and independent miners that has left 18 injured.

Glencore said on Friday that it would seek an orderly handover of control of the mine but condemned the government's action.

"Glencore strongly protests the action taken by the government of Bolivia and reserves its rights to seek fair compensation pursuant to all available domestic and international remedies," the company said in a statement.

Liberum Capital analyst Dominic O'Kane said the mine was "tiny" in the context of Glencore's international operations.

"It's a tiny, tiny mine. It's not particularly significant. It's a small negative," he said.

However, Glencore queried the effect the move would have on foreign investment in Bolivia, where Morales is seeking to capitalise on high metals prices with sweeping mining reforms.

"The action taken by the government of Bolivia will pose a number of serious questions relating to the government's future policy towards foreign investment in the mining sector," Glencore said.

It said it had paid over $300-million in fees to Bolivia, including over $70-million for Colquiri, and would have invested over $160-million over the next five years in the country.

Glencore shares were down 2.4% to 315 pence at 11:54 GMT, compared to a European mining index down 1.7%.

Source: Reuters

India's Jindal moves to shut Bolivia iron mine as talks continue

India's Jindal Steel & Powerhas taken the first steps toward shutting down its iron-ore mine in Bolivia even as it holds 11th-hour talks with the Bolivian government to rescue a joint venture aimed at developing a local steel industry.

"We have sent out letters to employees and suppliers notifying them of the termination of their contracts," said a senior Jindal executive at the mine who asked not to be named. "The decision has been taken because the government has not given the necessary assurances to make us decide to stay."

A copy of Jindal's letter shown on news channel Gigavision earlier this week said workers would be laid off Sept. 9.

In 2006, Jindal and the administration of President Evo Morales signed a $2.1 billion contract to develop the El Mutun mine and build a steel mill near the river port of Puerto Suarez to export finished steel.

Located in a remote area of southeastern Bolivia near the border with Brazil, El Mutun is considered to hold one of the world's largest iron ore deposits with an estimated 40 billion tons.

Today, the mine is little more than a quarry nestled in a jungle-covered mountain. Mutun Steel Corporation, or ESM, the state company that holds a 50% stake in the joint venture, is now on its fourth president since it was founded in 2007.

The ambitious project that Mr. Morales frequently showcased as an example of how his left-wing government could attract foreign investment has become mired in bickering and mutual recriminations.

Bolivia accuses Jindal of not investing enough, while the Indian company says the government has failed to provide the energy and infrastructure needed to move the project ahead.

The government has seized $36 million in cash guarantees that Jindal had deposited at a local bank and demanded that Jindal post a bond of at least $27 million to show its commitment to the project.

Jindal has been trying to convince Bolivia to scale back El Mutun because state-run energy company YPFB can't provide the 10 million cubic meters of gas per day the Indian company says it needs for the steel mill.

The government can provide only 2.5 million cubic meters of gas per day, according to Bolivian officials and Jindal executives.

In what might have been his first public criticism of Jindal, Mr. Morales said Wednesday the company had violated its contractual obligations with Bolivia and was lying about not getting gas.

"It's totally false when Jindal says that we can't guarantee gas," he said in a televised press conference. "It is subject to the contract which also holds Jindal responsible for its commitment to invest. We will supply 2-3 million cubic meters of gas per day and increase the supply in relation to how much Jindal increases its investment."

Mr. Morales said the government was right to seize Jindal's cash guarantee because the company had fallen short of its investment targets.

Earlier this week, Bolivia's Vice President, Alvaro Garcia, said in televised comments that the Morales administration was prepared to consider "modifications" to the joint-venture agreement.

The latest clash between the El Mutun partners came after the government asked to audit the books of Jindal's local subsidiary.

A former ESM executive told The Wall Street Journal Jindal's move to fire staff and contractors is probably a negotiating strategy. Carlos Gallardo, Jindal's chief negotiator and legal counsel in Bolivia, said he expects talks to continue for another 30 days.

Jindal executives have said leaving Bolivia wouldn't represent a major loss to the company, though it would affect its plans to establish a strategic presence in South America.

Source: Fox Business

20-billion-tonne iron ore mine in Bolivia in jeopardy

Malaysian News Agency Bernama.com reports that a huge iron ore mine in Bolivia may be doomed as a result of conflicts between the proponent and the Bolivian government.
 
The plan by India’s Jindal Steel & Power to mine the 20-billion tonne deposit has run into trouble after the Bolivian government asked the company for another $18 million in bank guarantees for not meeting contractual obligations. A similar amount was demanded in 2010 for not meeting commitments.
 
Bernama.com reports a source close to the development saying the project may now be unsalvageable:
 
“The writing is on the wall. It is hard to see how we can make this relationship work from here,” said a company official close to the negotiations.
 
The mine would be the largest foreign investment in Bolivia under President Evo Morales.
 
Wall Street Journal (sub required) reported yesterday that Jindal is scouting around for iron-ore and coking coal projects. The company expects to spend up to $6 billion over the next four years in order to achieve a five-fold increase in steel production, according to WSJ.
 
Clearances for new mines in India often take years and steel companies need to look far ahead to plan their supplies.