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.

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