This remarkably credulous sole-source story ran yesterday on the Financial Post website.
Greg Johnson, President/CEO of South American Silver Corp (TSX:SAC), believes he has committed his company to [corporate social responsibility] in Bolivia and that his commitment was recognized and appreciated by its indigenous people. To no avail… President Evo Morales announced July 10 he would revoke SAC’s massive Malku Khota silver-indium-gallium project…
Three weeks after the pronouncement of President Morales, SAC has received no formal notice of expropriation. Johnson says, “Our understanding is that there is some kind of draft decree that is being worked on. Perhaps because there’s been a lot of negative response, this hasn’t yet been approved. We’ve been attempting to engage various levels of government in an alternative pathway towards negotiation and dialogue.
The publication of Supreme Decree 1308 Thursday formalized the return of Mallku Khota hill, one of the richest silver and indium deposits in north Potosi, control of which will pass into hands of the state Bolivian Mining Corp. (Comibol) without affecting the Canadian South American Silver, the government said.
In a press conference, the Mining and Metallurgy minister, Mario Vierreira, explained that this rule authorizes Comibol, the Potosí government and the Economy and Public Finance Ministry to conduct the transfers necessary for the viability of the prospecting and exploration activities in the deposit…
The riches of Mallku Khota hill, where there is also evidence of illegal gold mining, resulted in recent months in an escalation of social conflict, which put at risk the life of the locals and workers of that company.
Virreirá made it clear that Bolivia as a state has no direct contract signed with South American Silver, in response to letters from the Canadian government, which made clear its concerns over the investments of that company in the Andean-Amazonian country.
The state retook 170 hectares registered in the name of the company Explotaciones Mineras Santa Cruz and 2,019 quadrangles of the Compañía Minera Mallku Khota, but the Canadian miner has no concession, he explained.
“In coming days we will have meetings with South American Silver representatives and Canadian diplomats to help them understand this reality. Investigations have to be conducted into why, in the Toronto Stock Exchange, South American Silver is considered to be related to Mallku Khota. It’s none of our business, as the Bolivian state, to vouch for such a relationship… because there is no official document showing one,” he argued.
The minister added that Comibol will contract with an independent company within 120 working days to evaluate the state of the private investment commitments in Mallku Khota hill, toward the end of establishing fair compensation for the revocation of concessions authorized since 2004.”
Reached by phone, SAC.to investor relations Robert Gill said the company is writing up a response to be released later today.
UPDATE (the next morning): Looks like SAC.to got put out a statement at 11 pm Eastern time. In for a dime, in for a dozen, here it is.
VANCOUVER, BRITISH COLUMBIA–(Marketwire – Aug. 2, 2012) – South American Silver Corp. (TSX:SAC)(PINKSHEETS:SOHAF) (the “Company”) announces an update on its plan of action after receiving today official notice of a Nationalization Decree of its Malku Khota silver-indium project in Bolivia. South American Silver Limited, the Company’s wholly owned Bermuda subsidiary, invested in Malku Khota through its Bolivian subsidiary, Compañía Minera Malku Khota S.A.
“We will continue to pursue all channels available to us,” said Greg Johnson, President and CEO of South American Silver Corp. “This action plan includes the prospect of negotiating a resolution of the situation with the Bolivian government, or, if required, the pursuit of compensation for the full value of the project through international arbitration.”
The Company reported last month that the Bolivian government had stated its intention to nationalize the Malku Khota project despite objections from the great majority of indigenous communities in the vicinity of the project, who had signed numerous resolutions of support for the Company and the Malku Khota project.
Other nationalization cases in Bolivia have been resolved through negotiation or compensation and several Bolivian officials have acknowledged publicly that compensation is due to South American Silver. In the oil and gas sector specifically, past affected companies subsequently negotiated new joint venture agreements with the Bolivian government.
During the months preceding the government’s announced intent to nationalize the Malku Khota project, the Company and the vast majority of indigenous communities in the project area had received numerous assurances, including a signed accord with the Minister of Mines, which stated that the concessions were confirmed to be valid and that the Company should continue its exploration activities.
Accordingly, the Company is very disappointed with the government’s announcements, but has been quick to respond and to take action. Over the past month, management has been pursuing all possible diplomatic options in addition to reaching out to the Bolivian government at all levels. In particular, the Company thanks the Canadian government for its strong support by raising this matter as a priority on a number of diplomatic fronts.
Even with the rising move toward resource nationalism in the region, including nationalizations of Red Electrica Corp’s Bolivian electrical grid assets, Glencore’s Colquiri mine and the cancellation of Jindal Steel’s El Mutun iron project, mining is an important industry for Bolivia and these recent actions by the state send a strongly negative message to potential foreign investors and developers about the security of their investment in the developing country, investment that will be critical for addressing the extreme level of poverty in the long term. Additionally, Bolivian ministers are on record as having recently stated that other nationalizations had been repatriations of previously state-owned assets, unlike Malku Khota, and that foreign private investment would be respected and protected under the constitution.
To reach its full potential, the Malku Khota project will require a significant capital investment and specialized proprietary processing technology, which has been developed by South American Silver over the past four years in coordination with researchers from the University of British Columbia and SGS Lakefield Research, and that has been taken to patent by the Company.
As South American Silver continues to aggressively pursue all options to maximize the value from its Bolivian investments, management is also continuing to advance its promising Escalones project, a high potential copper-gold-silver project in Chile, with an inferred resource of 3.8 billion pounds of copper, 610,000 ounces of gold and 16.8 million ounces of silver. The first round of drilling this year has been completed and assays are anticipated to be available within two months. In addition, management will deliver a first Economic Assessment on Escalones in 2013, and is accelerating the work on this important project.
The Company has several essential components that position it well for the future: seasoned leadership, a healthy balance sheet, a large, attractive development project in a stable, mining-friendly jurisdiction, and proprietary acid chloride leach technology that gives it a competitive advantage for developing bulk mineable deposits that contain both precious and base metals.
The management team members at South American Silver have decades of technical and mining experience, much of it in North and South America, with a track record of successful project development and value creation with a focus on corporate social responsibility.
Mr. Johnson stated, “The Company is proud of its record of working collaboratively with the indigenous communities in Bolivia. South American Silver has worked closely with the 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.”
“These community-inclusive approaches have been developed by our team over the past two decades with other companies in successfully working with indigenous communities in South America, Alaska, Canada and globally. Over the past year in Bolivia, we were focused on completing support agreements with all the local communities that would address how they wanted to see development proceed on their local lands.”
Mr. Johnson continued, “The period ahead will be one of transition for the Company as we adjust our business strategy to advancing our Chilean copper-gold project, realizing value from our Bolivian investments, and focusing on opportunities that create long-term shareholder value.”
I like how they mention the “silver” at Escalones. They did report a hole with a segment with 25 grams of silver per ton of rock. But my guess is the real reason for even mentioning the silver there is that South American Copper, Gold and Molybdenum Corp. doesn’t have quite the same ring to it in the wacky old Toronto Stock Exchange. (Or should it be, South American Copper, Gold, Molybdenum and Bargaining-with-Bolivia Corp?)
Update2 (Friday afternoon): If you haven’t been following this year-old saga, you might click over and see Otto’s periodic coverage of same. It’s a good way to understand some of the issues at play here, including South American Silver’s chronic tardiness in informing the markets about what those of us who read Spanish often know hours or days earlier.
Actually, screw it. You want to see how un-“sudden” this is, go back to this post of Otto’s from February 2009. Since that time, many hypotheses have been disproved. That Obama cares about Hope N Change. That Moammar Gaddhafi would always be protected by his presidential guard. That black holes are mere mathematical constructs, rather than physical objects. One hypothesis yet to be disproved is that South American Silver is a company to avoid.