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Bolivia is battling internal politics, poor infrastructure and a restless labor force in a drive to diversify its mining base

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SAO PAULO, Brazil: Bolivia has been famous for its rich mineral resources since the time of Spanish colonization, but it has always been mainly dependent on a single metal: first on silver for roughly three centuries, and then on tin for much of the 20th Century.

Such dependence proved dangerous, especially when tin prices collapsed in the 1980s, impacting several Bolivian companies and thousands of miners and their families. Since then the government has been trying to stimulate the exploration and commercial production of other metals, such as zinc and lead.

The going has been tough from the outset, but with big projects under way in the country the diversification attempts look as they may finally be closing in on a reward. There are still great difficulties on the way to this El Dorado, however.

Bolivian newspapers have been reporting behind-the-scenes details of negotiations between the government and India's Jindal Steel & Power Ltd. over the El Mutun iron ore and steel project. In 2007, the Indian enterprise signed a memorandum of understanding with the government for a 50-50 joint venture worth $2.1 billion, of which $1.5 billion would be disbursed over five years—$300 million per year—followed by $600 million in the following three years.

But Jindal wants to slow down the speed of these investments and to downsize some of the project's plants—reducing direct-reduced iron output to 4 million tonnes per year from 6 million tonnes, for example, and trimming crude steel production to around 1 million tonnes per year instead of the originally planned 1.7 million tonnes.

Jindal representatives have justified those requests by saying that iron ore at the Mutun deposit—where reserves are estimated at some 40 billion tonnes with a 50-percent iron content—turned out to have a higher-than-expected phosphor content.

Sergio Alandia Pantoja, president of state-owned Empresa Siderúrgica Mutun, which holds the 50-percent Bolivian stake in the joint venture, told AMM in March that nothing had been decided and Jindal's revised investment plan was being studied.

Other good options exist in the Latin American country. The 51,100-tonne-per-year Karachipampa lead and silver smelter, which was built in the 1980s but never operated because of a lack of local ore concentrates, was expected to finally come on-stream last year. Bolivia's national mining company, Corporación Minera de Bolivia (Comibol), handed over a 65-percent controlling stake in the smelter to Canada's Atlas Precious Metals Inc. (APM) at the beginning of 2008, with production expected to start in 2009.

The startup was postponed to January of this year, since APM needed approval to install a 500,000-tonne-per-year sulfuric acid plant; in February, Comibol president Hugo Miranda told AMM that there were still "some issues to be solved" and the sulfuric acid plant was still in the United States, waiting to be shipped; in March, APM's legal representative in Bolivia did not reply to calls and e-mails on the subject. Bolivian newspapers have suggested that the same old problem—a lack of appropriate and constant supply of concentrates—could affect the project

Despite these problems—attributed to the fact that the country lacks infrastructure, is poor, landlocked and has historically suffered from labor conflicts—Bolivia is moving ahead on other fronts.

South Korea's state-owned Korea Resources Corp. has already started drilling at the Corocoro copper deposit, which is expected to produce between 30,000 and 50,000 tonnes of electrolytic copper annually, probably starting in 2012.

And Bolivia's state-owned tin mine, Empresa Minera Huanuni (EMH), has been increasing output over the past few years; production of only 3,000 tonnes per year before its nationalization in 2006 jumped to 7,875 tonnes in 2008 and 9,960 tonnes last year, and is expected to reach 10,500 tonnes this year. EMH's general manager, Roberto Guillermo Montaño Araoz, said a new plant capable of processing some 3,000 tonnes of ore per day will replace the existing one, which can process no more than 1,500 tonnes per day. "This way tin output will increase to around 12,000 tonnes per year," he said.

There is more good news. State-owned tin smelter Vinto this year will complete an expansion to increase its output to 18,000 tonnes annually from 10,000 tonnes, and Comibol will soon launch a public bid for two zinc concentration plants each with a capacity of 80,000 to 100,000 tonnes per year.

The Bolivian ministry of mining and metallurgy told AMM that investments in the sector will more than double this year to $457 million from $175 million in 2009, and likely will keep increasing over the next few years. Particularly encouraging is that about $386 million of this year's investments will come from private companies, compared with $127 million last year.

It is a good signal, given that Bolivia's leftist president, Evo Morales, nationalized a few companies over the past few years—apart from EMH in 2006, Vinto was taken from Glencore International AG in 2007—and that a new mining code has just started to be prepared, spreading rumors about possible still-to-be-confirmed tax increases.

JUAN WEIK


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