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