AMERICAS — Bolivia courts foreign mining investment

As increasing numbers of companies join the exodus to South America, opportunities to obtain properties with high mineral potential are decreasing quickly. This development is particularly true of countries such as Chile and Venezuela.

Yet the mineral potential of South America is much vaster than the regions where the majority of mineral exploration companies have concentrated their efforts. Most companies, however, have been reluctant to venture beyond these areas for fear of the unknown, of untrodden ground and political instability. Bolivia is one country which has been trying intently to attract foreign investment, especially in the mining sector.

The mineral potential of Bolivia is enormous. Bolivia hosts the world’s largest hard rock tin and silver deposits, world-class base metal mines and significant gold deposits. The potential for diamonds in the Precambrian region remains untested. Including oil and natural gas, almost 85% of Bolivia’s export income is from geological resources.

Until recently, Bolivia was engulfed by economic and social crisis. During the last 10 years, reform has been achieved by modernization of the political and economic system. The creation of a free market economy has benefited Bolivia greatly.

Although inflation was at 23,000% in 1983 and 18% in 1990, Bolivia reduced its inflation rate to less than 10% by 1993, and has maintained the lowest inflation rate in South America for the past three years. There are concerns, however, regarding the corruption associated with the cocaine trade, which is a well-funded and widespread industry in Bolivia. Despite this, crime rates are low.

Landlocked in the heart of South America, Bolivia has access to several ports on the Pacific Ocean via Chile and Peru, and through the jungle lowlands of Argentina to Rosario on the Atlantic Ocean. The Andes occupy western Bolivia, and the eastern part of the country is within the Amazonian basin. Lowlands and valleys comprise 70% of the country.

Bolivia is slightly larger than British Columbia, covering an area of 1,098,581 sq. km. Geologically, the country has five distinct provinces. The Precambrian region, located in the eastern tropical plains, covers one-third of Bolivia. It consists of Proterozoic granitic gneisses and granulites, schists and mobile belts. Known deposits include lode gold, sediment-hosted gold, ultramafic complexes, sediment-hosted lead-zinc and banded iron formations.

The Don Mario copper-gold deposit of Billiton, hosted by an amphibolite belt, has a geological resource of 42 million tonnes grading 1.6 grams gold per tonne. There is also potential for alluvial gold deposits. Potential for diamonds has not been tested.

Bolivia’s Western Cordillera has had little exploration because of difficulty of access. Tertiary and Quaternary volcanic complexes, some of which still have fumarolic activity, have good potential for precious metal deposits. The interior flatlands, or Altiplano, consist of Tertiary red-bed sedimentary rocks and volcanic complexes with potential for volcanic-hosted epithermal precious metal deposits similar to those found in Chile and Nevada. Situated in the central Altiplano, the Kori Kollo deposit of Battle Mountain Gold (NYSE) contains reserves of 66 million tonnes grading 2.32 grams. The Cordillera Real consists of sedimentary rocks of Devonian-Silurian age which are intruded locally by Tertiary intrusives and host gold, silver, tungsten, tin, lead, zinc and antimony mineralization. Gold occurs as both epithermal sediment-hosted and vein deposits. The rich Cerro Rico de Potosi silver mine sits within this region, as do silver-tin deposits. The Sub-Andean zone consists of sedimentary rocks of Devonian to Teriary age, which host large oil and gas deposits.

Bolivia has the lowest tax on mining profits in Latin America, at a maximum of 30% on net profit. A 2.5% production tax applies if profit tax is less than production tax. There is a maximum tax of 5% on imported capital goods, 10% on imported materials and a 10% value added tax on all sales. All re-invested profits are income tax exempt, and there are no restrictions on capital or profit repatriation.

Mining and labor legislation has been recently revised and streamlined to create a more favorable investment environment. Mining is authorized throughout the entire country; however, foreigners cannot acquire or possess mineral concessions with 50 km of international borders unless by joint venture with a Bolivian company.

The tenure system is simple, and there is a good security of title and contract. There is a large work force trained in geology, mining and engineering, and labor costs are low. However, there have been demonstrations by unions against the privatization of mines.

Companies currently exploring in Bolivia include Asarco (NYSE), Cominco (TSE), Jordex Resources (TSE), Minproc, Orvana Minerals (TSE) and RTZ (NYSE). Legal reforms in Bolivia relating to foreign investment, mining law and taxation have created a political and economic environment conducive to successful mine development. In consideration of the geology of the country, known mineral deposits and the large areas that remain unexplored, there is great potential for major discoveries.

— The author is a geologist who resides in Vancouver.