South American Silver's Bolivian mining license revoked, workers set free

Bolivian Labour Minister, Daniel Santalla, signed an agreement on Sunday with the leaders of the Andean local community of Malku Khota who were holding five employees of Canadian South American Silver (TSX:SAC) captive.

According to local newspaper La Razón, the authorities promised local representatives to reverse the mining concession for South American Silver, in exchange for three of the professionals kidnapped last week.

President Evo Morales and Interior Minister Carlos Romero said, the process of nationalizing the Malku Khota project should have the consent of all the local communities in the area.

“Some groups do not want [the mine to be nationalized] and others want it to, and we do not know whose opinion to ignore. The moment they reach an agreement we are here to act on it," said Morales according to the Bolivian newspaper.

"South American Silver reaffirms its cooperation with Bolivian authorities and its strong support for the indigenous people of the Malku Khota communities in their continuing efforts to bring a timely and peaceful resolution to this situation," said Greg Johnson, CEO of South American Silver in a statement.

"The company looks forward to a constructive dialogue with regional and national governments along with the local indigenous authorities after this situation is resolved in order to agree on an approach to development that is inclusive of all communities in the project area," he added.

The miner has temporarily ceased all field activities while government-led talks proceed to seek a peaceful resolution.

Violence spread at the silver mining property on Thursday evening as authorities and indigenous from the Bolivian Andean region were negotiating a potential deal.

Late Monday, the Vancouver-based company published a statement saying the company was working closely with the authorities from the provincial government of Potosi and national Bolivian agencies to resolve the situation.

"Our first priority is the safety and security of our employees, contractors and all those in the local communities,” said Johnson. "We are working closely with the authorities from the provincial government of Potosi and national Bolivian agencies to constructively resolve the situation and to seek an approach to development that is inclusive of all communities in the project area including the small number that have been opposed to the project.”

Compañía Minera Malku Khota, a subsidiary of the Canadian miner, says that a majority of the indigenous clans in the area – known as Ayllus – support the firm's project.

South American Silver has invested more than $50 million in the mining project since 2007. Malku Khota is one of the world's largest unexploited resources of silver and indium, a rare metal used in flat-screen LCD televisions.

Though rich in mineral and energy resources, data from the Unicef shows that Bolivia is one of the poorest countries in Latin America and the weakest economy in all of South America.

Bolivia is a current hot spot for investors as President Evo Morales has been in consultation with local leaders to allow the extraction of resources originally thought to be untouchable.

Read more on Bolivia's decision to allow foreign companies access >>