Bienvenido a Nacionalización: Bolivia Nabs Silver Deposit
COMMENTARY—ProspectingJournal.com—These days, it seems the best thing to do if you are a miner who hits a big deposit in [enter foreign country here] is to try to keep the deposit as hush-hush as possible. Of course, pesky regulations prevent this secrecy from happening, as all those nosey shareholders demand “full and true disclosure” after all . . .
Well, South American Silver Corp. (TSX: SAC) just found out the hard way that sometimes finding a great discovery in a foreign land is a nationalistic magnet. Bolivian President Evo Morales, who last year created a considerable stir in the silver market upon threatening to nationalize several mines, has now firmly planted his feet in SAC’s Malku Khota Property.
After a brief development, the Bolivian Government made its move. News of the event spread throughout the web, while SAC’s latest press release tried its best to tip-toe around the punch to the face.
While this government takeover is hardly surprising in a region of the world that has seen an alarming flare-up of nationalism, it’s a big blow to precious metals miners in Latin America. According to SAC, the property is “one of the world’s largest undeveloped silver, indium and gallium deposits” and is “one of the world’s largest undeveloped silver deposits, with reserves estimated at 230 million ounces, and at least 2,000 tons of indium, gallium and gold as well.”
With SAC’s stock plunging more than 25% today, the news has also sparked a new wave of fear among the online investing community. Turmoil in Peru, a government going insane in Argentina, now Bolivia—who is next in the great “National Reclamation” movement? A huge number of Canadian miners stand to lose much if Bolivia and its South American neighbors continue the unfriendly trend.
Interestingly, the move could be positive for the price of silver as it could equates to a further supply squeeze. Privatizing the mine would take even more silver supply offline, which further adds to supply restraints.
Bottom line: If there was any doubt to the level of risk associated with investing in miners who operate in politically and economically unstable regions, that doubt has now been put to bed with SAC’s loss. The advantages of investing in developing countries can far outweigh the risks, but with the rising number of nationalistic policy moves in South America and around the world, owning the physical metal instead of a miner is starting to make even more sense.