August 01, 2007

Optimism Reigns in the Bolivian Mining Idustry

MABB © ®

After all the talk about the nationalization of the mining industry in Bolivia, to my surprise, most of the companies doing business there choose to have optimism. We just saw the signing of the contract between the Indian Jindal company and the Bolivian government. This is supposed to be one of the biggest and most important deals the government has made to date. As for the already operating companies, they also have a positive attitude.

Eaglecresst Explorations, for example, describes in its website that the situation in Bolivia "continues to be challenging, particularly regarding the latest headlines regarding the “nationalization” of mineral assets. But according to the Bolivian government, they will not expropriate mines that are being actively worked and that are following all laws and tax rules. Eaglecrest was inspected this Fall and found to be “in complete compliance with all Bolivian laws and regulations, including mining and environmental regulations and tax laws.”
The Minister of Mining has said that there will be an increase in the royalty tax on the production of metals (currently 4%). But Eaglecrest does not anticipate the government’s new proposed laws will jeopardized the exploration or development of San Simon. Our good neighbors seem to agree. Several international mining companies have announced investments of US$35M to US$700M along with their plans to move forward with projects in Bolivia. The largest foreign investment is coming from the joint Apex/Sumitomo development of the world-class San Cristobal silver-lead-zinc deposit."

It is striking with what optimism these companies are continuing to operate in Bolivia. I guess they don't have choice. Once they are committed, they have to look forward and hope for the best. Or are they so sure the government will not expropriate anything?