A combination of events increased volatility of exploration and producing mining companies in Bolivia. Labor unions appear increasingly unsatisfied with pay increases and are applying pressure on the government. This contributed to comments by Bolivian leadership for revisiting lease agreements with mining companies and the Corporation of Mining of Bolivia (Comibol) dating back to the mid-1990’s. Broad comments, combined with unsettled revisions to Bolivian Mining law scheduled for completion in the coming months, and investors concerns dating back to the government’s earlier handling of foreign interests in the oil and gas industry, kept investors on edge.
Through the week, certain companies received assurances through public statements by Bolivian authorities that they were not under review. Minister of Mining and Metallurgy, Jose Pimentel, made a statement that the only companies under evaluation were those with “mines that belonged to the state in the past” and those formally requested by workers. He excluded Sumitomo’s San Cristobal, which came after privatization. In addition, Coeur d’Alene Mines (NYSE: CDE) reported that that they were assured, in meetings with the minister, that their San Bartolomé mine had the support of workers and “will not be nationalized.” The evaluation process for revisiting the contracts is unclear, but uniformly, comments by officials make clear that the worker’s input is necessary, and that a decision may be made by May 1, 2011.
South American Silver (TSX: SAC) experienced above average volatility. Its Malku Khota project was discovered in 2003 and acquired from private land owners. Interestingly, comments that lease agreements with Comibol came out about the same time as statements by Pagina Siete, the Bolivian Vice Minister of Mining, supporting the importance of the Malku Khota project and the importance of foreign investment to one of his country’s most important industries. This should play out in the weeks and months ahead.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.