#Bolivia faces struggle to revitalise image among #mining community

If Evo Morales continues like this, there won't be anyone left mining in Bolivia.

Bolivia faces struggle to revitalise image among mining community

In recent months, Bolivia has witnessed a spate of mining disputes, moves to nationalise and renationalise projects, and violence among protesting miners. Populist sloganeering and radical language has often been used to excuse instability and mask deeper-rooted problems.

The first significant incident occurred on June 22, when Bolivia cancelled commodities trader Glencore’s operational rights to the Colquiri tin mine, the second-largest in the country. Unsurprisingly, the company opposed the decision. “[Glencore] reserves its rights to seek fair compensation pursuant to all available domestic and international remedies,” the company said.

“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,” it added.

On July 17, Jindal Steel & Power also hit the Bolivian buffers. The group announced the withdrawal of its interest in the El Mutún iron-ore project, arguing that difficulties surrounding legal issues, land rights and power supply had proven insurmountable. In response, Bolivia accused Jindal of failing to make necessary investments.

In September, Colquiri was back in the news; workers from Bolivia’s State mining company Comibol and miners who belong to cooperatives struggled against each other over ownership rights. When they clashed, protestors from both sides threw sticks of dynamite and hurled rocks at one another. At least one man was reported killed.

On October 2, an agreement, under government auspices, was reached between the opposing camps. On October 8, Reuters reported that workers had returned to Colquiri and were bringing the property fully back on stream. Military units and police squads were on hand to ensure security.

“I don’t think this agreement will last that long; I’m sure there will be more disputes,” Apogee Minerals Bolivia country manager Gustavo Miranda Pinaya told Mining Weekly Online. “The government has been using band aids to solve problems that have been ongoing for years.”

Pinaya underlined the central paradox faced by the Bolivian government, led by President Evo Morales. It has to appease both State mine workers and cooperative miners, as each are vital government supporters. However, any perceived sign of favouritism for one side over the other holds the potential for violent reaction. “The government is trying to make two masters happy, but that’s impossible,” Pinaya said.

The pressure is undoubtedly set to rise as the number of cooperative miners grows and their expectations of Morales’ government increases. Current levels are estimated at 120 000, the Financial Times reported on September 25.

FURTHER COMPLICATIONS

From a junior or midtier mining perspective, perhaps the most worrying events surround the Malku Khota silver and pollymetallic project that, until recently, was being developed by South American Silver (SAS).

The company’s exploratory work on the project started in 2007, with millions of dollars subsequently spent delineating the property.

Malku Khota has a National Instrument 43-101-compliant indicated resource comprising 230.3-million ounces of silver, 1 481 t of indium and 1 082 t of gallium grading 28.7 g/t silver, 5.8 g/t indium and 4.3 g/t gallium. Inferred resources contained 140-million ounces of silver, 935 t of indium and 1 001 t gallium, grading 18.9 g/t silver, 4.1 g/t indium and 4.3 g/t gallium.

“We’d [also] negotiated with the area’s communities, signing agreements that allowed us to explore their lands,” SAS’s CEO Philip Brodie-Hall told Mining Weekly Online. “In return, local people secured jobs with us and benefited from education, community and livestock enhancement programmes. There was other social support as well.”

Yet the company met some resistance, most notably from illegal artisan miners. “But they were a small group [and] we had the support of 43 out of 46 communities in the surrounding area,” Brodie-Hall said.

Matters became increasingly worrying in early May, when police officers were taken hostage by the project’s opponents.

“The government realised there was a problem and a meeting was called on May 9 to resolve the issue,” Brodie-Hall said. “Both supporters and opponents attended. After a lengthy debate, it was decided further discussions would have to take place.”

“The Minister of Mines then concluded [the first meeting] by signing a resolution to say that the company’s leases were valid; that the company was entitled to explore; and that the company should be left free to explore. The second part of the resolution ruled that the illegal miners should leave the property,” he said.

The second meeting took place on May 18, but quickly became unruly. “There were 1 000 or so people attending, with the project’s opponents bringing in paid-for supporters. The end result was chaos and our supporters were chased out,” Brodie-Hall said.

“The situation then deteriorated further in the space of a few weeks… The project site was occupied in early June and access was blocked,” he added.

The opposition again resorted to kidnapping. “Two of our local employees were taken hostage towards the end of June. They were badly mistreated, but thankfully were able to get out after 11 days of detention,” Brodie-Hall said.

“The hostage takers demanded Evo Morales meet with them. They called for SAS’s leases to be revoked and for the company to leave Bolivia,” he added. 

Morales proved sympathetic to their views.

“The president persuaded our supporters that [the opposition’s demands] were in the best interests of the Bolivian people… A resolution was collectively signed on July 10 that there would be a presidential and supreme decree issued to take away our leases and concessions. This became law on August 1,” Brodie-Hall said.

Brodie-Hall believes the seeds of discontent were first sown when SAS announced its preliminary economic assessment in 2011. “When our opponents realised the value of the project, that’s when they wanted it back. But they were perfectly happy for us to spend all the risk money, of course.”

The company is now carefully considering its options, including international arbitration.

Fortunately, SAS has another property to now centre its attentions on: the Escalones copper/gold/silver project in Chile.

DAMAGE CONTROL

Many commentators now wonder how the Bolivian government can resuscitate its reputation with the international mining community. The country needs to attract foreign investment and know-how to continue developing a vibrant, modern mining sector.

One of the solutions will be the passing of revised mining legislation to codify and clarify the law, according to Pinaya.

“The government acknowledges the need for foreign mining investment. I believe that once the new mining legislation is finally approved, then the rules will become clearer and attract investors,” he said. “Knowing the rules will mean investors feel more secure when risking capital.”

But progress has been sluggish so far. “Work on the latest draft for the new mining law has been under way for about a year now… The draft needs to be passed by congress and then signed into law by the Morales government. We believed the draft would have been finished by end-September, but with the confusion it’s been delayed,” he said.

“Although this cannot be assured, I’m hoping that the new mining draft will come into law by the end of the year,” he added.

Taxation levels might prove a stumbling block with the new legislation.

Away from legislation, Pinaya underlined the importance of dealing carefully with all elements of the Bolivian mining equation: the government, Comibol and the cooperatives. This is the only model that will ensure stability, he argued.

Over the longer-term, Pinaya is bullish and he highlighted the enormous resource opportunities that still lie untapped in Bolivia. “Most of the country remains unexplored and many of the operational mines are old… the government needs fresh capital. [In this situation], there is excellent first-mover advantage,” he said.

No doubt, Bolivia will also want to convey this optimistic message, although given recent events, it will undoubtedly face an uphill struggle. However, there is still time for the government to revisit and rectify previous mistakes. The danger is that nothing is done and Bolivia continues on its current path, setting its current reputation in stone.

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