U.S. MINING COMPANIES UNAFFECTED BY "RESERVE"

UNCLAS LA PAZ 001231 SIPDIS SENSITIVE SIPDIS STATE FOR WHA/AND LPETRONI COMMERCE FOR JANGLIN TREASURY FOR SGOOCH E.O. 12958: N/A TAGS: EMIN EINV ECON PREL PGOV BL SUBJECT: U.S. MINING COMPANIES UNAFFECTED BY "RESERVE" DECLARATION REF: A. LA PAZ 1215 ¶B. LA PAZ 1008 ¶1. (SBU) U.S. mining company executives told the Ambassador May 3 that the GOB's decision to declare Bolivia's national territory a "state mineral reserve" (ref A) would not affect operations. According to Apex Silver Vice President Jerry Danni, the move will leave existing mining concessions untouched, which means the firm can move ahead with its $800 million San Cristobal silver-lead-zinc project, expected to begin production in the third quarter. ¶2. (SBU) Danni speculated that the decree would have negative long-term implications for the mining industry, as the prohibition of new mining concessions will likely drive potential investors away from Bolivia to neighboring countries. According to Danni, Apex Silver will likely cancel several ongoing exploration projects, as the GOB's most recent move "makes it impossible" for the company to pursue additional investments. ¶3. (SBU) Coeur d'Alene Vice President Jim Duff echoed Danni's comments, telling Econoff May 3 that the prohibition of new mining concessions will close Bolivia to new investment. While Coeur d'Alene's San Bartolome silver project will remain unaffected by the GOB's move, the firm has no plans to consider additional projects. ¶4. (SBU) Comment: Executives labeled the GOB's May Day announcements "relatively benign" but reiterated fears of potentially harmful tax hikes (ref B). The possibility of drastic change, together with proposed modifications to exporters' ability to claim certain tax refunds, continues to worry executives. As in the past, we will work closely with mining company representatives and raise their concerns with GOB officials whenever possible. End comment. GOLDBERG