South American Silver Plummets As Bolivia Announces It Will Nationalize One Of World's Largest Silver Deposits

Tyler Durden's picture




 

Anyone long silver miner South American Silver Corp today is not happy, because while the precious metal responsible for the company top and bottom line has risen significantly, it is our old nationalizing friend, Bolivian President Evo Morales (who last year caused substantial moves higher in silver with threats to nationalize various silver mines in his resource rich if everything else poor country) who has stolen the spotlight, with his latest announcement that he is on his way to nationalize SAC.TO's Malku Khota property, which the company describes as "one of the world's largest undeveloped silver, indium and gallium deposits" and which El Pais adds "is considered one of the largest undeveloped silver deposits, with reserves estimated at 230 million ounces, and at least 2,000 tons of indium, gallium and gold as well." Of course, while this is good news for the actual precious metals as it means much more supply is coming offline, it is very bad for mining and extraction companies such as South American Silver, which stand to lose one after another property to a repeat of last year's wave of nationalization. Indeed, at last check SAC.TO was down 27% today alone and plunging.

This is how Reuters covered the development overnight:

Bolivia will consider nationalizing Canadian miner South American Silver Corp's silver property, President Evo Morales said on Sunday, following violent indigenous protests against the mining project.

 

Leftist Morales, who last month took control of global commodities giant Glencore's tin and zinc mine in the Andean country, said he hadn't taken a final decision on whether to revoke the Canadian miner's concession.

 

"Nationalization is our obligation, I already raised the issue of nationalizing (the Malku Khota project) last year, and I told (local residents) to reach an agreement, because when they want we're going to nationalize," Morales told a farmers' gathering.

 

Exploration work, in which South American Silver plans to invest some $50 million, is expected to end within three years. The company describes it as "one of the world's largest undeveloped silver, indium and gallium deposits."

Then, El Pais provided the following update:

Morales announced that he will nationalize major silver deposits

 

The Bolivian government withdraw the mining concessions awarded to the South American Silver Canadian company for the exploitation of silver deposits, indium and gallium Mallku Khota the hill, as agreed between government authorities and indigenous communities north of Potosi.

 

Agreement is reached, local communities agreed to free two engineers of the Canadian mining company and a police officer who had held for several days in order to pressure the government to listen to their demands to break the contract with South American Silver.

 

The Labor Minister Daniel Santalla, explained that the President Evo Morales is predisposed to reverse the mining concessions but that the decree will take several days due to legal and technical process should be launched for that purpose.

 

"Nationalize it is our obligation," said Morales in the city itself Colomi in the department of Cochabamba (center), barely a few kilometers from the mine site in question.

Finally, this is what the company itself had to say:

On Sunday the Bolivian Labor Minister, Daniel Santalla, signed an agreement to secure the release of the final three detained individuals with the indigenous opponents to the project. As part of this agreement the opponents were seeking cancellation of the mining concession, however, the government minister acknowledged that this could be difficult due to the original decree giving South American Silver the rights to the project.

 

Also on Sunday, President Evo Morales and the Government Minister Carlos Romero agreed that a "prior consultation” among all indigenous communities in the project area would be needed to proceed to determine the direction of the project based on the consensus view of all communities.

 

At this time there has been no change in the status of the project concession. The Company is continuing to work with the government at all levels and with the local communities to agree on an approach to development that is inclusive of all communities in the project area and allows development of the Malku Khota project to its fullest potential.

 

As noted in earlier updates, Bolivian government authorities have previously stated that there will be a period of constitutionally mandated consultation with local indigenous communities before the project enters the extraction phase.

 

On May 28 the Mining Minister Mario Virreyra signed an accord with 43 out of 46 indigenous communities in the project area specifying that the state will not reverse the mining concession and stating that the company should continue exploration activities and that Bolivian authorities should provide increased police security in the region.

 

The vast majority of the indigenous groups in the project area have formally demonstrated their support for the project and understand the social and economic benefits to their communities that the development of a world class, modern mine at Malku Khota will bring and which will create with thousands of well-paying local jobs.

 

By contrast, the artisanal mining that has been centered near one of three villages in opposition to the project would provide little economic benefit to the 43 other indigenous communities in the project area and has been cited by the Bolivian Mines Minister as causing local environmental damage.

 

South American Silver has worked closely with the local indigenous communities over the past several years providing significant direct employment on project related jobs, as well as jointly developing programs with the communities to facilitate job training, education, agricultural enhancement and water management for long-term sustainable development.

In conclusion, if before there was any doubt as to why miners trade at such notable discounts to the underlying precious metal, we hope that incidents such as this one give a good glimpse into the real ugly underbelly of what very well may happen to offshore projects if and when destitute countries decide to follow in the path of Argentina and Bolivia.

Finally, for those curious, here is a slideshow of the world's biggest silver mines.

Argentum Emptor.

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Mon, 07/09/2012 - 14:13 | 2599226 Its_the_economy...
Its_the_economy_stupid's picture

Priced in. Or should have been. Does this actually surprise any stackers?

Mon, 07/09/2012 - 14:16 | 2599244 NotApplicable
NotApplicable's picture

Just any who believe the conventional wisdom concerning owning mine companies in troubled times.

With the exception of a privileged few (kept alive for appearances, and use as a weapon) no miner will escape this outcome, as the legal systems will require this wealth in order to remain functional another day.

Mon, 07/09/2012 - 14:45 | 2599314 Divided States ...
Divided States of America's picture

In the grand scheme of things, this is nothing compared to the hi-hacking or 'nationalization' of our liberties and freedom in this, our very own, country.

Mon, 07/09/2012 - 16:00 | 2599737 DoChenRollingBearing
DoChenRollingBearing's picture

@ NotAp

+ 1

Yes, correct.  As PM prices go up, the socialist countries will take the mines.  It is MUCH better to own the PMs themselves.

If we get FOFOA-like numbers, the local .govs will tax or nationalize the mines.

Mon, 07/09/2012 - 15:40 | 2599642 Ookspay
Ookspay's picture

Socialism viewing wealth as something to be seized always leads to wealth destruction.

Francisco D'Anconia learned this in Atlas Shrugged. Let the shrugging begin...

Oh, and keep on Stackin' Bitchez!

Mon, 07/09/2012 - 17:03 | 2599950 spencer
spencer's picture

I am surprised.

This is an 80M stock.

Who cares????? WTF??

 

 

Mon, 07/09/2012 - 18:55 | 2600242 VegasRage
VegasRage's picture

...but, but I thought gold and silver were just commodities? That's what all the super-genius Keynsian economists keep saying. They must have nationalized the silver mines as matter of tradition, like the FED holds gold.

Mon, 07/09/2012 - 20:16 | 2600571 HungrySeagull
HungrySeagull's picture

Stack it, don't worry about the hole in ground when you have a box at the Mint waiting for you.

Mon, 07/09/2012 - 14:13 | 2599231 Comay Mierda
Comay Mierda's picture

got phys?

Mon, 07/09/2012 - 14:18 | 2599252 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Buy silver and take back the money supply!

Mon, 07/09/2012 - 14:33 | 2599322 LowProfile
LowProfile's picture

Here we go again.

Have you learned nothing?

Silver is an expensive industrial metal like platinum, neodymium, etc.; with a history of being used for money.  Gold has only been used for money (occasionally wearable money).

Silver is for speculating.

GOLD is for saving.

Mon, 07/09/2012 - 14:34 | 2599327 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

So silver is an industrial metal and has a history as being used for money.

Sounds like a great case for bulls.

Mon, 07/09/2012 - 14:41 | 2599361 LowProfile
LowProfile's picture

Sure, under NORMAL circumstances, it would be. 

Except that current circumstances are so far from normal, it's hard for most sheeple to imagine.

The central banks of the world are buying GOLD, not silver, which means they are going to use gold as money (more likely as reserves) again.  This means GOLD will be revalued upwards (since they own it, and can offer to buy all gold at $xxx,xxx.00), but not silver (because they no longer own any, and it would not be in their interest to put a bid in for silver at $x,xxx.00).

Miners will work silver deposits to get the gold, and throw the silver away.

Silver is SPECULATIVE.  But if your risk tolerance fits it, sure, buy some.

But if you are looking to preserve capital, gold is the far safer bet.

Mon, 07/09/2012 - 14:46 | 2599380 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

You are appealing to authority.  Just because Central Bankers do something does not mean it is the be all and end all of investing.  The CBs say fiat is the monetary standard.  So I should sell everything and invest in dollars if I want money?  No.  Money by definition needs to hold its value, and precious metals do this at the molecular level. 

Your fallacious arguement:

http://en.wikipedia.org/wiki/Argument_from_authority

Mon, 07/09/2012 - 14:58 | 2599420 LowProfile
LowProfile's picture

Lol.  Appeal to Authority.  As if.

YOU are engaging in the Straw Man fallacy https://en.wikipedia.org/wiki/Straw_man , by conflating Argument from Authority with my pointing out the ACTIONS of central banks.

In addition, you are engaging in Wishful Thinking https://en.wikipedia.org/wiki/Wishful_thinking and Group think https://en.wikipedia.org/wiki/Groupthink .

If you think there will be a complete and total breakdown in society that eliminates central banking, then by all means, buy silver.  And make sure you buy lots of ammunition, as well.

You bla bla bla a lot about "take back our money, buy silver!" "silver is money!" "silver's historical ratio to gold is way high!" bla bla bla-bla bla...

BUT YOU HAVE YET TO MAKE THE ARGUMENT THAT SILVER IS LESS SPECULATIVE THAN GOLD.

Mon, 07/09/2012 - 15:02 | 2599441 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Group think?  You just said that the "group" (CBs) are against silver because they do not hold it as a reserve.

Make up your mind what arguement you want to have.

And in no way is my arguement for showing your arguement that you are appealing to authority is a strawman, when your point is that since CBs hold no silver silver is not a fair investment compared to what they do hold, gold.

Nowhere here have I discussed the GSR.  Now you are just making shit up, Strawman.

Mon, 07/09/2012 - 15:07 | 2599477 LowProfile
LowProfile's picture

You made the GSR argument in a previous exchange, asshole.

Still waiting for you to make the argument that silver is less speculative than gold...

Quit dodging the question, bitch.

Mon, 07/09/2012 - 15:23 | 2599551 fuu
fuu's picture

It's all speculation. There is no investing, there is only gambling.

Mon, 07/09/2012 - 16:04 | 2599754 LowProfile
LowProfile's picture

Then which is safer, gold or silver?  Be specific.

Mon, 07/09/2012 - 16:21 | 2599823 fuu
fuu's picture

What a strange question.

Mon, 07/09/2012 - 16:39 | 2599860 moonstears
moonstears's picture

Well, I have some FB, and some NTFLX, and I think maybe you work for the banks who WILL have the powers that be confiscate gold, so I guess silver's safer, as being a non asset class, and not tier 1 like gold will soon be, but it's GOOG for me. p.s. Gold re-valued once J6P cannot own it, sure it'll be. So to sum it up, I pick "B", LP, silver's "safer" of these two barbarous relics, 'cause you're correct in it being less likely to be confiscated.(but they're both awful "purdy")

Mon, 07/09/2012 - 17:44 | 2600096 LowProfile
LowProfile's picture

You may want to review the actual proceedings of gold confiscation in the USA under Roosevelt.  It's on Wikipedia.

I hazard that may find it's not quite what you thought...

Mon, 07/09/2012 - 18:19 | 2600218 moonstears
moonstears's picture

I realize they confiscated silver too, it was also still a monetary metal (ever see a dime, quarter or dollar from the thirties?). Ever see one today? Copper-nickel. Silver's safer based on YOUR arguments, thanks for sharing.

Mon, 07/09/2012 - 20:17 | 2600576 HungrySeagull
HungrySeagull's picture

Irrelevant.

47 silver or one gold today. Matters not.

Mon, 07/09/2012 - 23:25 | 2601045 HardAssets
HardAssets's picture

Fookin' A !  Damned straight.

Its all a big gamble.

The only sure thing is that the system is run by criminals.

Best speculator/gamblers question before placing your bet :

"Now what would these crooks likely do to shaft everyone else?"

Mon, 07/09/2012 - 15:02 | 2599446 TheCanadianAustrian
TheCanadianAustrian's picture

Sure, silver is more speculative than gold. That has nothing to do with whether it's grossly undervalued or not.

Mon, 07/09/2012 - 15:07 | 2599469 LowProfile
LowProfile's picture

Thank you!

The really interesting question to me is:  WHY are so many people advocating silver ownership over gold..?

Mon, 07/09/2012 - 15:10 | 2599483 TheCanadianAustrian
TheCanadianAustrian's picture

Because the silver-to-gold price ratio is much lower than its historical norm.

Mon, 07/09/2012 - 15:13 | 2599499 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The above ground supply of silver = the above supply of gold.  Yet the price diference is 60:1.  Let's speculate ;) and say demand for gold was equal to demand for silver bullion (it is, if not in silver's favor considering coins).  Why wouldn't the ratio be 1:1?

Now this is speculation, but what is not speculation is that owning silver bullion has no counterparty risk and it defines money as its molecular structure maintains itself longer than anything, it is divisable, and it is a means of exchange, and has been for thousands of years.

Just because Bernanke does not agree, he who didn't know if he had any gold on his balance sheet (he does), doesn't change the facts about silver as money.  If anything it means that there is a greater upside to silver, for if a Central bank did remonetize its debt via silver.....

Also, one point about all of this, there are Major Banking Houses that do own silver and use it as an asset.  Barclays through their iShares, JPM through their ownership of iShares, and many other banks hold silver and use it as a reserve and asset to balance their books.

Mon, 07/09/2012 - 15:21 | 2599535 LowProfile
LowProfile's picture

Amazing to me it took so much goading to get you to actually offer an argument.  But thanks for finally doing so!  And thanks for using the GSR as an argument, that's pretty funny, considering what you wrote earlier.

But anyway, refute THIS:

If you think silver will be used as MONEY, which means you will be using it in exchange for goods and services, then your argument works.

But if you think people (99% of which hold NO precious metals, gold or silver) will be using FIAT to exchange for goods and services, your argument is invalid.

If you think central banks (which hold GOLD and not silver), will revalue gold upwards to fix their balance sheets, then your argument that silver is less speculative is invalid, and financially suicidal.

 

The more people who hold a type of money, the less speculative it is.  More people hold USD, making it the least speculative fiat currency.

More people hold GOLD instead of silver, making it the least speculative precious metal.

Therefore, gold is less speculative than silver.


Mon, 07/09/2012 - 15:24 | 2599561 tmosley
tmosley's picture

Being less speculative is like being less pregnant.  I'm sure you mean that YOU think there is less RISK in owning gold.

Mon, 07/09/2012 - 15:46 | 2599664 LowProfile
LowProfile's picture

Pregnancy is an either/or.  That is hardly the case here.

Clearly, holding ammunition is less speculative than gold.  Clearly gold is less speculative than fine art, or commercial real estate.

Question is (that nobody seems to want to honestly argue), is silver less speculative than gold?

Mon, 07/09/2012 - 15:59 | 2599733 tmosley
tmosley's picture

No, you are comparing apples and oranges now.  Most people buy ammunition to shoot it, or to have it for destructive use later.  If you have it for later sale should the price go up, then you are speculating, PERIOD.

People buy fine art because it is beautiful, and commercial real estate for a return.  Neither is speculative, unless they are planning to sell it for more later.

Read the definition of speculation and stop trying to make stupid claims: http://en.wikipedia.org/wiki/Speculation

Mon, 07/09/2012 - 16:02 | 2599746 LowProfile
LowProfile's picture

You are being argumentative.

Explain which is safer, gold or silver.  Be specific.

Mon, 07/09/2012 - 16:14 | 2599793 tmosley
tmosley's picture

No, I am not being argumentative, I am pointing out the flaws in your thinking, of which there are many.

Define "safe".  From my perspective, they are both equally safe, as I would buy one and never trade it for dollars.

Mon, 07/09/2012 - 17:22 | 2600014 LowProfile
LowProfile's picture

Do you have an opinion on which is a better store of value, or don't you?

Mon, 07/09/2012 - 17:40 | 2600083 akak
akak's picture

Which is better as an exclusive diet, steaks or oranges?

The fault here does not lie in the answers which do not satisfy you, they lie in the false assumption(s) inherent in your question itself.

Mon, 07/09/2012 - 17:42 | 2600089 LowProfile
LowProfile's picture

Do you have an opinion on which is a better store of value, or don't you?

Mon, 07/09/2012 - 17:58 | 2600124 akak
akak's picture

"Better" is inapplicable here. 

Both gold AND silver are stores of value, the possible machinations of failing world central banks being largely irrelevant to the matter. 

You implicitly put your trust in the actions of governmental central planning agencies to determine the value of gold, whereas I trust that the actions of individuals in the free market will eventually prevail in that determination.  It is your wrongheaded assumptions that mislead you here, and which are generating so much backlash from others here who are not of the pro-central banking, pro-fiat currency, pro-government mindset that you apparently hold.

Mon, 07/09/2012 - 18:56 | 2600310 walküre
walküre's picture

Gold is safer. I tell you why. It is safer to store and transport thousands of Dollars in gold as opposed to silver. The chances of escaping and carrying as much of the metal as possible when you're on the run are higher.

Duh!

Mon, 07/09/2012 - 15:50 | 2599690 runlevel
runlevel's picture

Because unlike you... they are using their brains. If gold goes to 50,000/oz ... do you really think silver will stay at 26$... or even 70$.... ??? 

Mon, 07/09/2012 - 16:06 | 2599761 LowProfile
LowProfile's picture

What if gold goes to $50,000, but silver goes to $500?

Which is safer, gold or silver?  Be specific.

Mon, 07/09/2012 - 16:15 | 2599794 tmosley
tmosley's picture

What if elephants could fly?  Would they be safe?

Be specific.

Mon, 07/09/2012 - 17:01 | 2599943 Rahm
Rahm's picture

LowProfile, who at JP Morgan is your boss?

Be specific.

Mon, 07/09/2012 - 17:25 | 2600027 LowProfile
LowProfile's picture

Amazing that neither of you offers an opinion on the actual question.

Mon, 07/09/2012 - 21:38 | 2600780 jumbo maverick
jumbo maverick's picture

I've listened to you parrot long enough. Whatever I have in my pocket- gold, silver is safest. Why because I have it. It's a stupid riddle you make which is safer gold or silver ? Be specific. Whatever I got on me is the safest. Why? Because I have it in my possession.

When someone comes to me and tries to take it I have an answer for that too.

Mon, 07/09/2012 - 16:23 | 2599827 runlevel
runlevel's picture

I could be wrong here but i do not know of any other significant point in history that gold moved and silver didnt follow it somewhat closely (the GSR that is). Is there any other period of time when gold was revalued dramatically and silver stayed at its then high GSR? Its possible silver stays at a 50:1 ratio after gold revalues to $50,000.. just not sure how probable that is. I believe both gold and silver are safe especially if no one has the forethought to own iether and you own a lot of both. BUT then again were talking the current paper price of silver/gold. 

Can you name me a time when the G/S ratio stayed at such a high divergence after a global fiat currency implosion? BE SPECIFIC!

Mon, 07/09/2012 - 17:42 | 2600088 LowProfile
LowProfile's picture

There was a similar precedence, I'll see if I can bring find it (think it was pre 1800's).

But as far as an EXACT historical precedence to the current situation, there isn't one...

WHICH IS CENTRAL TO MY ARGUMENT, and which nobody is addressing..! XD

Mon, 07/09/2012 - 15:05 | 2599457 Paul Atreides
Paul Atreides's picture

We don't speculate we buy physical and we don't care which is less or more speculative because we are buying both and we are holding to protect our wealth. Do you not even look at the downvotes your recieving? Your argument is weak just like your mind.

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