New tax scheme coming to Bolivia (January 22, 2007)

Speculation over President Evo Morales’ plans for Bolivia’s mining sector was rekindled recently by strong words from his mining minister, who suggested that the country’s mineral export tax was too low.

Commenting on the US$45 million that the current export tax added to government coffers last year, Mining Minister Guillermo Dalence told a Bolivian news agency that the amount was too small, considering the value of the exported minerals — US$1 billion.

“That’s a ludicrous amount taking into account that these are not renewable resources,” he said. “If in 2007, we were to export US$1 billion worth of minerals again, the state should receive at least US$300 million.”

The comments came as a new mining policy is being hammered out between the government, members of state-run miner Comibol, co-operative miners and foreign investors. Revisions are expected by the end of January.

Despite the tough rhetoric, John Carlesso, president and chief executive of Toronto-based Apogee Minerals (APE-V, AGEEF-O), says communication between foreign business and the government has remained strong.

“You need to filter through the rhetoric,” Carlesso says. “The message we’ve tried to convey — and they’ve grasped the importance of it — is that raise taxes, fine, but ensure that it remains competitive with other countries.”

In May of last year, Morales nationalized the country’s energy industry, fuelling speculation that the mining industry could be next. And while Morales alluded to such a move in some speeches, a lack of funding forced the government to drop the plan.

Then in October, violence broke out between smaller co-operative miners and Comibol, prompting the government to promise US$100 million to protect co-operatives.

Ivan Rebolledo, president of the Bolivian-American Chamber of Commerce, says the mining minister’s comments are, in part, a reaction to that violence, as the government is now under pressure to come up with the funds necessary to meet its promises.

But the Morales government has already displayed a pattern of using harsh populist rhetoric, Rebolledo says, only to retract when push comes to shove, and move towards a more measured middle ground.

“Considering that a lot of foreign direct investors have been told repeatedly by authorities that the future for them will be pretty status quo, the changes shouldn’t be that significant,” he says.

Expansion of Comibol’s smelting capacity and the implementation of a new royalty system of taxation that will cover more metals — namely iron — are seen as likely.

Bolivia is home to significant tin, zinc, wolfram, lead, silver and gold deposits.

Denver, Colo.-based Apex Silver Mines (SIL-X) and Coeur d’Alene, Idaho-based Coeur d’Alene Mines (CDM-T, CDE-N) are slated to go into production at two separate, large-scale silver and zinc projects later this year.

Apogee Minerals has all of its assets in Bolivia and is currently producing silver, zinc and lead.

The news sent Coeur d’Alene shares down 1 in Toronto to $5.22 on roughly 33,000 shares of volume. Apogee fell 7, or about 9%, to 69 on 63,365 shares and Apex shares were off almost 5% or 70 in New York, falling to $14.37 on volume of 591,000 shares.