Identifier
Created
Classification
Origin
09LAPAZ1477
2009-10-21 12:33:00
CONFIDENTIAL
Embassy La Paz
Cable title:  

SUSPENSION OF MINING ACTIVITY ON CERRO RICO

Tags:  ECON EMIN PREL PGOV EINV BL 
pdf how-to read a cable
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RUEAIIA/CIA WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
C O N F I D E N T I A L LA PAZ 001477 

SIPDIS

E.O. 12958: DECL: 09/14/2019
TAGS: ECON EMIN PREL PGOV EINV BL
SUBJECT: SUSPENSION OF MINING ACTIVITY ON CERRO RICO

REF: LA PAZ 1053

Classified By: Charge d'Affaires John Creamer for reasons 1.4 (b, d)

C O N F I D E N T I A L LA PAZ 001477

SIPDIS

E.O. 12958: DECL: 09/14/2019
TAGS: ECON EMIN PREL PGOV EINV BL
SUBJECT: SUSPENSION OF MINING ACTIVITY ON CERRO RICO

REF: LA PAZ 1053

Classified By: Charge d'Affaires John Creamer for reasons 1.4 (b, d)


1. (C) SUMMARY. Pressure from the local community in Potosi
has led to a directive from the government of Bolivia (GOB)
for Manquiri, a subsidiary of U.S. mining company Coeur
d'Alene, to suspend mining activity at their San Bartolome
silver mine at altitudes above 4,400 meters. Although this
is in violation of the existing contract which allows mining
operations up to 4,700 meters, Manquiri hopes to negotiate a
solution amenable to both sides within the next few weeks.
END SUMMARY.


2. (U) Empresa Minera Manquiri, a subsidiary of U.S. mining
company Coeur d'Alene, started operations at San Bartolome
silver mine in June 2008. San Bartolome is located on the
historic Cerro Rico in the southern Bolivian city of Potosi.
The Cerro Rico ("Rich Hill") in Potosi has yielded silver
since the 1500s. Silver from Potosi funded the Spanish
empire, but San Bartolome's silver is the first metallic
silver to be extracted from the Cerro Rico for decades.


3. (C) Manquiri has been concerned for months that the GOB
would alter its mining contract to limit operations to below
4,400 meters, thereby reducing its access to silver deposits.
Donald Gray, Senior Vice-President of South American
Operations, told EconOff that the GOB has been facing
pressure for months from the local civic committee to amend
the contract. The committee asked the government for a new
highway, a new airport, a new cement plant, as well as
increased restrictions on Coeur's operations. Since the GOB
is not in a position to deliver on the first three requests,
it can save face with the local community by fulfilling the
fourth (reftel). Coeur's contract stipulates that it is
allowed to mine up to an altitude of 4,700 meters. On
October 17, the GOB sent Manquiri a letter suspending any
mining above 4,400 meters, following increased protests from
the local civil committee. The civic committee claims they
want to protect the mountain, which is an historic monument.


4. (C) Coeur has already invested $240 million in the
project and expects that at the current tax rate and price of
silver it will take most of the mine's projected 14-year life
span to recoup that investment. This new restriction will
significantly diminish profitability. Manquiri has requested
a meeting with the GOB (the Ministry of Mines and COMIBOL,
the state-run mining company) for the second week of November
to discuss the restriction and to negotiate an agreement that
will be amenable to all sides.


5. (C) COMMENT. Manquiri has over 250 employees at San
Bartolome, who, despite the current protests, have no
concerns for their safety. Manquiri President Humberto Rada
told EconOff that the local community was heavily involved
during the contract negotiations five years ago. He believes
that they are now just playing political games and hopes that
requested negotiations in November will resolve the issue.
EconOff assured Rada that the Embassy stands ready to engage
the GOB if Manquiri believes it could be helpful. END
COMMENT.
CREAMER