* Bolivia says to take control of mining project
* South American Silver vows to seek recourse
(Adds comments from company official, details)
LA PAZ, July 12 The Bolivian government 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."
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
The government has yet to formally advise the company of the
concession's rescission, which will be carried out via decree.
"We don't have any official notification," said Felipe
Malbran, South American Silver's vice president for exploration
and head of its Bolivian subsidiary. "We're analyzing what steps
to take and we would be open to talks with the government."
Malbran told reporters in La Paz that the company may also
potentially take action to seek "just" compensation, although he
was not responding specifically to Garcia's remarks.
The 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 country 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.
"If we have to invest $500 million or $700 million or even
$1 billion for a large-scale project at Malku Khota, which
benefits Bolivia, the state is prepared and has the capacity to
do that," Garcia said, referring to an increase in foreign
reserves to nearly $13 billion under Morales' watch.
(Reporting by Carlos Quiroga, Writing by Hilary Burke; editing
by Jim Marshall, Gary Crosse)