full of sound and fury, Signifying nothing

Why is South American Silver (SAC.to) so keen on running a bought deal financing this month?

On June 18th South American Silver (SAC.to) announced a $4m bought deal financing with Canadian house Wellington West as lead underwriter. This is probably a smart move, as even though SAC had working capital of over $5.3m as per its last report (March 31st) and was burning it at a modest rate of $400k per month, taking advantage of the recent price hike isn’t such a bad tactic.

It’s also smart when you consider the bad news about concessions in Bolivia that’s bound to affect its flagship Mallku Khota project that has kinda been non-reported in the English language media up to now. Yet another reason to subscribe to The IKN Weekly, as subscribers knew all about the upcoming crapstorm that’s going to hit Bolivian-based juniors two issues ago on June 20th. It’s not too late to cancel your participation in the bot deal and leave Wellington holding the bag, folks….it’s not due closed until July 12th 🙂 Here’s the excerpt from IKN59.

Bolivia’s mining law

Last week, the Bolivian government ran a “New Mining Law” seminar to discuss the structure of the reforms to come with the industry. Here are some of the main points to consider about the upcoming changes to the law (14):

1) All mining operations will be run as 50/50 joint ventures with the State, via its Comibol state mining company (15).

2) No new concessions and many current concessions revoked. Concessions that have already been granted to co-operative groups inside Bolivia will be honoured, but the new law envisages that current non-cooperative concession holders will have to move to a operators contract within one or two years and that in the future only contracts to mine to companies and individuals will be granted. To quote the Vice-Minister for the Productive Development of Mining and Metallurgy Héctor Córdova (16),Before the granting of a concession brought certain privileges to its owner, such as the possibility of using the concession as loan collateral or even as a family heirloom, but now the contracts will state that the mineral resources are owned by the State of Bolivia and will authorize mining rights to the operator for their exploitation and the contract holders will no longer be owners of the resources.”

3) An as yet undefined proportion of profits made by mining companies will have to be reinvested inside Bolivia and will not be remittable. This rule is envisaged as an alternative to raising further current mining royalty rates, or in other words it’s a new stealth tax on mining.

4) Once the new big smelting plant, currently under construction at Karachipampa Bolivia, is opened, all lead, zinc and silver production in national territory will be required by law to be sent to this plant for processing. As any mining executive will immediately recognize, this is a serious crimp on potential profits for privately owned mining operations in Bolivia, as smelting charges can be raised (or lowered) at a moment’s notice and the mining company is forced to pay the price charged. When the smelting operations are held in the hands of the State (and an openly Socialist one at that), the shivers that run down capitalist spines are even stronger.

5) Indigenous consultancy on projects will be an integral part of the permitting process, much like the current situation in Ecuador where not only does the law exist but it applied to the letter.

At the conference, Mining Minister José Pimentel said that the aim was to have a “clear concept” of what mining in Bolivia would be like in the future and that mining in the country should be “efficient, profitable and responsible”. That may be his wish, but your author wonders “profitable for whom?” and once again states clearly that junior mining companies operating or wanting to operate in Bolivia should be avoided like the veritable plague by sector investors. When the field of play is tipped so heavily in favour of the State there threatens to be mere crumbs left for the retail player compared to peers operating in different, more ‘investor-friendly’ countries. Or put another way, it didn’t surprise this author in the least to hear that South American Silver (SAC.to), the junior silver exploration company currently developing its Mallku Khota project in Bolivia, chose this week to announce its $4m bought deal financing (17) to be run by Wellington West. It’s not going to have much chance of raising at current levels once news of changes in the mining laws in Bolivia becomes more common knowledge. A company headed up by ex-Novagold Greg Johnson, too….hoodathunkit?

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