Glencore Says Bolivia to Nationalize Zinc, Tin Mine
06/22/2012| 10:55am US/Eastern
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-- Bolivian government to nationalize Glencore's Colquiri mine with immediate effect
-- Glencore has now lost two assets to nationalization in Bolivia in four years
-- Glencore says has right to compensation; government says to compensate within 120 days
-- Glencore says has invested $250 million in Bolivia and planned to invest another $160 million over next five years
LONDON--Swiss commodities titan Glencore International PLC (>> Glencore International Plc) said Friday that the Bolivian government has decided to nationalize its Colquiri zinc and tin mine with immediate effect, marking the second nationalization of a Glencore asset in the South American country in just over four years.
The government of Bolivia said it will compensate Glencore for machinery and equipment, but the company said the move raises doubts about the country's policy toward foreign mining investment.
Bolivia has nationalized a string of assets in the natural-gas, mining and power-generation sectors since President Evo Morales took office in 2006, most recently taking control of Spanish Red Electrica Corp.'s (>> Red Electrica Corporacion SA) power grid assets in May. It also nationalized Glencore's zinc smelter in 2007, which led the commodities trader and producer to halt a $400 million mine expansion project.
Bolivia says it has nationalized assets in order to make sure that its citizens benefit most from the country's natural resources. In the case of the Colquiri mine, the nationalization puts an end to a standoff between workers at Glencore's Bolivian subsidiary, Sinchi Wayra, and co-operative miners who have been disputing ownership of the site's mining rights.
About 1,000 co-operative miners seized control of Colquiri at the end of May, demanding they be granted the exclusive right to mine the site, while Sinchi Wayra's roughly 400 employees pushed for the government to take it over.
Glencore owns 100% in Sinchi Wayra, which operates five mines in the Oruro and Potosi regions of Bolivia, including the Colquiri mine.
Glencore said in a statement that it "strongly protests the action taken by the Government of Bolivia and reserves its rights to seek fair compensation pursuant to all available domestic and international remedies."
Bolivian Vice President Alvaro Garcia Linera told a local news agency that the mine will be run by state-owned Comibol and that the government will calculate Glencore's compensation within 120 days.
The nationalization of Colquiri comes amid talks to amend Sinchi Wayra's mining contracts in order to bring them in line with Bolivia's new constitution, which requires miners to form joint ventures with the government.
Glencore said the new agreement would have awarded the Bolivian government a 55% share of the profits from its Bolivian mines, with the prospect of raising this share to 77%-79%. Under the new contracts Glencore said it would have also invested $160 million in its operations over the next five years, of which at least $56 million would have been invested in Colquiri.
Glencore said it has invested $250 million in the Bolivian mining industry and the wider economy to date, with $80 million spent on capital investment across its operations, including $22 million at Colquiri.
"The action taken by the Government of Bolivia will pose a number of serious questions relating to the Government's future policy towards foreign investment in the mining sector," Glencore said.
As of 1412 GMT, Glencore's shares were down 3.1%, or 10 pence, at 312.8 pence a share.
--Shane Romig and Tapan Panchal contributed to this story.
Write to Alex MacDonald at alex.macdonald@dowjones.com
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