- The Washington Times - Monday, May 15, 2006

TORONTO

olivia’s plan to nationalize its natural-gas industry and exert greater state control over all of its natural resources has North American mining companies fretting over their future prospects extracting the nation’s rich resources of gold, silver and tin.

The chairman of one of the world’s largest gold-mining firms told shareholders he would now “put my buck” on exploration in Pakistan, rather than the South American countries that are erecting more roadblocks to foreign investors.

Patricia Dillon, president of the Prospectors and Developers Association of Canada, said plans by Bolivia to raise taxes and royalties on foreign mining firms are disconcerting.

“We respect the right of governments to act as they see fit and in their people’s best interests. However, we believe that countries should be wary of adopting policies that, over the long term, will act as deterrents to foreign investment.”

Bolivia’s government said last week it would extend its control over mining, forestry and other sectors of the economy, after President Evo Morales nationalized the country’s natural-gas industry on May 1.

The moves solidify the role of Mr. Morales, President Hugo Chavez of Venezuela and President Fidel Castro of Cuba as Latin America’s socialist leaders, united against the capitalist influence of the United States and other foreign investors.

Foreign exploitation’

Mr. Morales said his countrymen are weary of foreign exploitation of their natural resources, and he intends to put more revenue from those assets back into the poorest country in South America.

“We’re not expelling any company, but they will not earn much — not as they did before,” Mr. Morales told Telesur this month. [Telesur is short for “Televisora del Sur” (Television of the South), a Venezuelan-Argentine-Brazilian-Uruguayan broadcaster.]

“We hope they’ll remain partners, and if they don’t respect these laws, we’ll make them respect them with political force,” he said.

Bolivian Vice President Alvaro Garcia Linera has stressed that mining will not be nationalized. But he said foreign companies face higher taxes and royalty payments and that the government will intensify enforcement of existing laws to break up big underdeveloped land holdings.

This uncertainty prompted the founder of one of the world’s largest gold sources to say he now sees Pakistan as a better place to invest, despite the presence of Islamic militants in the South Asian nation.

“Pakistan … from a mining point of view, from a business point of view, is among the better countries,” Peter Munk, chairman of Toronto-based Barrick Gold Corp., told shareholders at the Canadian company’s recent annual meeting. “If I had the choice to put my money in one of the Latin American countries run by Evo Morales or Chavez — I know where I’d put my buck.”

Pakistan has allure

Barrick Gold Corp. bought a stake in the Reko Dig copper-gold project in Pakistan from Antofagasta PLC, a Chilean mining group for $100 million in February.

When Chief Executive Officer Greg Wilkins went to Islamabad to make the purchase, Mr. Munk said, he was received by both Prime Minister Shaukat Aziz and President Pervez Musharraf.

Although the company’s assessment of opportunities in that country is still in the early days, Mr. Wilkins said Barrick would be “very interested” in more projects there, despite the presence of al Qaeda terrorists in some parts of Pakistan.

Speaking at a mining conference in Peru this month, Pierre Lassonde, president of Denver-based Newmont Mining Corp. and chairman of the World Gold Council, also expressed concerns about Bolivia.

“Looking at what’s happening in Bolivia, Ecuador and in Venezuela, I think one has to be nervous. This is every foreign investor’s nightmare: that you invest billions of dollars, and all of a sudden you find that your investment has been nationalized,” he told reporters in Lima.

One senior official at a Canadian mining company, who did not want to be named, said the moves by Mr. Morales, compounded by what he called endless harassment by environmentalists and bribe demands from Latin American officials, make Bolivia an increasingly unpleasant prospect.

A Latin Robin Hood’

However, Paul Zdebiak, vice president of the Canadian gold-exploration firm Eaglecrest Explorations Ltd., sees the recent moves by Mr. Morales as political grandstanding that will cool down. His Vancouver-based firm has invested $25 million in the last 14 years in gold exploration in northeastern Bolivia, and it intends to start drilling soon.

“He’s beating his chest and saying he’s going to be Robin Hood, robbing the rich to give to the poor,” Mr. Zdebiak said. “But after a while, he just cannot isolate Bolivia from the international world when it comes to investing, because Bolivia is the poorest country in [South] America.”

Mr. Morales was elected in January with a mandate to help the working people, who often resent the multinational companies that have invested $3.5 billion in the landlocked nation.

Scott Lamb, vice president of investor relations for U.S.-based Coeur d’Alene Mines Corp., the world’s largest publicly traded silver miner, said the events in Bolivia will not deter the company’s mining project there. The firm has invested $135 million there and hopes its project will yield 8 million ounces of silver per year.

“We’re certainly mindful of the political situation in Bolivia, but the mining industry in that country has a history that goes back hundreds of years and understanding and respect for the mining industry is ingrained in the culture,” Mr. Lamb said.

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