* Bolivia says to take control of mining project
* South American Silver vows to seek recourse
LA PAZ, July 12 Bolivia is willing to compensate
South American Silver Corp for revoking its concession
on the Malku Khota project, but it will be far less than the $16
million the company says it has invested, the country's vice
president said on Thursday.
Bolivian President Evo Morales said this week that he signed
a deal with protesters opposed to the project stipulating that
the government take back all the concessions granted to South
American Silver's local subsidiary.
The Canadian company's shares sank on Wednesday after the
announcement, and chief executive Greg Johnson said the company
would seek recourse using any legal and diplomatic means
Violent protests over the Malku Khota mining property
prompted Morales' decision. The leftist leader took similar
action last month after clashes broke out at a project operated
by commodities giant Glencore.
Malku Khota is a silver-indium-gallium deposit. The
exploration-stage project was expected to produce some 13.2
million ounces of silver a year, according to a preliminary
"The state is predisposed to repay the costs of the
exploration's advances up to today, once they are verified,"
Vice President Alvaro Garcia told a news conference.
"Our calculations indicate $2 million or $3 million," Garcia
South American Silver says it has invested some $16 million
in the project since 2007.
After sinking nearly 25 percent on Wednesday, its shares
closed up 31 percent at 48.5 Canadian cents on Thursday. The
stock was still down more than 50 percent since Friday's market
Violence flared at Malku Khota last week as authorities
negotiated with peasant farmers on the release of five Bolivian
employee hostages. One man was killed and at least a dozen were
Mining has played a key role in Bolivia's economy since the
colonial era. The Andean nation mainly produces tin and silver,
but is also home to the world's largest undeveloped lithium and
The government is working on a sweeping reform of mining
legislation aimed at bolstering the state's role in the industry
and giving it a bigger slice of the sector's profits.
Since taking office in 2006, Morales has nationalized the
natural gas industry as well as the telecommunications and
electricity sectors, arguing Bolivia's poor should benefit more
from the country's rich natural resources.
(Reporting by Carlos Quiroga; Writing by Hilary Burke; editing
by Jim Marshall)