foreign mining investment bolivia’s door creaks open to · 2019-02-18 · a view of new pacic...
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2/14/2019 Bolivia’s door creaks open to foreign mining investment – The Northern Miner
https://www.northernminer.com/news/bolivias-door-creaks-open-to-foreign-mining-investment/1003804067/ 1/8
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Bolivia’s door creaks open toforeign mining investment
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2/14/2019 Bolivia’s door creaks open to foreign mining investment – The Northern Miner
https://www.northernminer.com/news/bolivias-door-creaks-open-to-foreign-mining-investment/1003804067/ 2/8
A view of New Paci�c Metals' Silver Sand silver deposit in Bolivia.Credit: New Paci�c Metals.
BY: TOM AZZOPARDI, SPECIAL TO THE NORTHERN MINER FEBRUARY 14,2019
SANTIAGO, CHILE — A �rst-of-its kind deal betweenBolivia’s state mining company Comibol and Vancouver-based explorer New Paci�c Metals (TSXV: NUAG; US-OTC: NUPMF) promises to usher in a new period offoreign investment into Bolivia’s mining industry.
Under the deal signed in January, New Paci�c Metals willhave a 45-year contract at its Silver Sands silver project toexplore and produce minerals over a 57 sq. km area inBolivia’s mineral-rich Potosi department. In exchange,the company has committed to spend at least US$6million on exploration during the �rst �ve years and pay a4% royalty on all minerals produced in the area.
The deal is the �rst to be signed between Comibol and aprivate company under Bolivia’s new mining legislation.
“It is a benchmark achievement that shows that Bolivia isopen to foreign investment,” said New Paci�c’s presidentGordon Neal when the deal was announced.
The �rst signs from Silver Sands are promising, with 94out of 98 holes in a recent drilling campaign interceptingnear-surface silver mineralization, including 77 metresgrading 383 grams silver per tonne.
The hope now is that similar deals will follow, says PabloOrdoñez of law �rm Ferrere who helped New Paci�c in itsnegotiations with Comibol. Since the deal wasannounced, interest among international miningcompanies in Bolivia has picked up, he said.
The deal is evidence of a policy shift in the Boliviangovernment which until was recently better known fornationalizing natural resources than courting foreigninvestors.
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2/14/2019 Bolivia’s door creaks open to foreign mining investment – The Northern Miner
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Bolivian President Evo Morales in 2012.
First elected in2005, BolivianPresident EvoMorales is oftenlumped togetherwith other 21stcentury leftistleaders in theregion, such asArgentina’sCristinaFernandez,Brazil’s Lula daSilva andVenezuela’sHugo Chavez.
But while thoseregimes ended inhuge corruption cases, �nancial chaos and economicdisaster, Morales has presided over a decade ofunprecedented political stability and growth thanks tocanny management of the economy and booming gasexports to neighbouring Argentina and Brazil.
After nationalizing the oil and gas industry in 2006,Morales’ left-wing administration funneled the foreignrevenues to infrastructure projects and welfare spending,which has driven growth ever since. This year theeconomy is expected to grow 4.5% making it one of thestrongest in the region.
However, Morales’ sweet patch may be running out. Thedecline in oil prices since 2011 and the rise in domesticgas production in Argentina and Brazil threaten to chokeoff his key source of funding. The value of Bolivia’s gasexports fell from US$5.5 billion in 2014 to US$2.6 billionin 2017, hammering government �nances.
Faced with that economic reality, the government is keento �nd alternative sources of funding with mining seen asthe best bet.
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2/14/2019 Bolivia’s door creaks open to foreign mining investment – The Northern Miner
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The country’s geological potential is huge, with depositsof gold, silver, iron ore, zinc, tin, lead and lithium. It wassilver from the mines of Potosi, still a byword in Spanishfor incalculable wealth, which supercharged Europe’seconomy in the early modern era. Cerro Rico, whichtowers over the city, is still being mined today usingalmost medieval techniques.
“The potential is amongst the best in the region.Everything you could imagine and more,” says AndresMoreno, a mining lawyer in La Paz. Even the tailings leftby centuries of mining are richer than most deposits inneighbouring Chile, Peru and Argentina.
But decades of political instability mean that little of thecountry has been subject to modern mineral exploration.The country’s only large-scale mine is the San Cristobalmine, the world’s fourth largest producer of zinc,operated by Japan’s Sumitomo.
Leading the search for foreign investors is Mines andMetallurgy Minister Cesar Navarro, in the post since2014, during which time he has attended the last threeannual conventions of the Prospectors and DevelopersAssociation of Canada in Toronto.
However, convincing mining companies to return toBolivia will be dif�cult, given the administration’s pastrecord. Soon after taking of�ce, Morales sent troops toseize the Vinto tin smelter, then owned by Glencore(LON: GLEN), and in 2012, nationalized the Colquiri tinmine.
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From 2012: A protester opposed to South American Silver’s MalkuKhota silver project stands in front of a barrier blocking access to theBolivian presidential palace in the capital La Paz. Photo by AlexisAubin. [email protected]. alexisaubin.blog.com
He has also rebuffed offers from multinationals todevelop the Salar de Uyuni´s huge lithium potential,instead developing a state company YLB to head the task.
The new mining law, approved in 2014, replaced existingmineral claims with production contracts, reducing legalcertainty.
In addition, the sector has a long history of violentprotests and strikes, often led by the powerful miningcooperatives, key allies of the Morales regime. In 2016,cooperative miners, protesting over legal changes,kidnapped, tortured and murdered the country’s DeputyInterior Minister Rodolfo Illanes.
Little wonder that in the Fraser Institute’s latest survey ofmining executives, Bolivia was ranked 102nd out of 112jurisdictions, just behind Venezuela.
“The problem is that the mining industry is taking timegetting over the stories of the past and the president’srhetoric,” says Juan Gavidia, CEO of Toronto-basedOrvana Minerals (TSX: ORV; US-OTC: ORVMF) whichoperates the small Don Mario gold mine in easternBolivia.
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Ordonez agrees, noting that Morales has onlynationalized assets that were previously state-ownedones. But the image persists.
Adding to the uncertainty is next October’s generalelections, in which the president is expected to seek afourth term — despite a 2016 referendum in favourpresidential term limits.
The country’s �nancial dif�culties and the generalpublic’s weariness with his regime mean that this likely tobe the hardest electoral challenge yet faced by the formercoca farmer. Some recent polls give former presidentCarlos Meza a clear lead over the incumbent.
So far none of the candidates has clearly set out theirpolicy for the mining sector but given the country’seconomic challenges, the trend towards greater foreigninvestment is likely to continue, says Moreno.
But uncertainty surrounding the result makes it likelythat most investors will hold back from signing new dealsthis year.
A likely bene�ciary of this delay could be China. TheChinese government has become a key supporter of theMorales government, becoming a major lender andinvestor in the country’s infrastructure push.
In the last �ve years, Chinese companies have picked uproad-building contracts worth a total of US$2.7 billion.
This alliance is now expanding into the natural resourcessector.
While China National Petroleum Corporation andSinopec are among the companies exploring for naturalgas in Bolivia’s lowlands, Sinosteel last year began workon a steel mill that will process iron ore from the 40-billion-tonne El Mutun deposit near the border withBrazil.
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In January state lithium company YLB signed apreliminary agreement with a Chinese consortium toform a joint venture that will invest around US$2.3 billionto extract and process lithium and other minerals fromthe Coipasa and Pastos Grandes salares
China also has an indirect connection to the new SilverSands deal: Vancouver-based Silvercorp Metals, (TSX:SVM; NYSE-AM: SVM) the largest primary silver producerin China, is the largest shareholder in New Paci�c Metalswith 28% of the stock, compared to 16.4% held by RossBeaty’s Pan American Silver (TSX: PAAS; NASDAQ:PAAS). Silvercorp chairman and CEO Rui Feng is also CEOand a director of New Paci�c Metals.
— Based in Santiago, Chile, Tom Azzopardi is freelancejournalist specializing in the resource industries.
COMMODITY: Gold Industrial/Specialty Minerals Silver
REGION: South America
COMPANY: New Paci�c Metals Corp Orvana Minerals Corp
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