Bolivia ‘Worried by Zinc Declines Amid Mine Closings (Update1)
By Jonathan J. Levin
Dec. 5 (Bloomberg) -- Bolivia said its "worried" about a slump in zinc prices that threatens the nations second-largest export as companies reduce output and close mines.
"Were worried about zinc not only because of falling prices but because its the principal mineral that we mine in Bolivia," Freddy Beltran, mining director at Bolivias Mining and Metallurgy Ministry, said today in an interview. Zinc "has traditionally been our top mining export," he said.
Zinc, used as an anticorrosive by auto manufacturers, is Bolivias largest export after natural gas. The metal accounted for about $665 million of sales in the first 10 months. Miners including Toronto-based Apogee Minerals Ltd. are suspending production in Bolivia after prices for zinc and other metals such as lead fell by more than half this year and costs rose.
The country is preparing to combat a mining "crisis" that began with zinc and may spread to other metals as prices fall, Beltran said. The government has set up a so-called sustenance fund to help finance some miners, he said.
"For now only zinc has reached a level at which mining operations may close," Beltran said in La Paz. "In other sectors, miners are working for small profits, but profits that are large enough to allow them to continue."
The Andean nation exported $1.3 billion in minerals in the first 10 months of the year, according to a report from Bolivias National Statistics Institute. The countrys miners also extract copper, iron ore and silver.
The value of exports from Potosi, the center of Bolivias zinc-mining industry, fell 47 percent through October to $1.17 billion, according to the Potosi Chamber of Exporters. The city, located in the high Andes, produces the majority of Bolivias zinc, lead and silver exports, according to the report.
Eleven small mining operations have closed in the last two months in Potosi, and more closings are expected, Chamber President Alejandro Oldedo Ramirez said in an interview.
"Export earnings have dropped considerably, and we estimate that theyre going to drop further," he said. "If commodity prices continue to fall, logically the large companies will have to reduce their output and cut jobs, too."
Apex Silver Mines Ltd., a silver producer and exploration company, announced Nov. 10 it planned to sell its shares in the San Cristobal silver mine after posting a third-quarter net loss of $332 million because of declining metals prices and rising costs.
Zinc fell $70, or 6.1 percent, to $1,075 a ton as of 5:41 p.m. on the London Metal Exchange.
"The times of good and bad prices always pass, but we have to worry about the structural crisis in this countrys mining industry," said La Paz-based geologist Dionisio J. Garzon, a former Mining and Metallurgy Minister.
Indias Jindal Steel and Power Ltd. plans to go forward with a $2.1 billion project to develop Bolivias El Mutun iron- ore deposit after government clashes with local miners.
"Jindal was planning to spend $200 million in Bolivia this year and its not going to reach $50 million," Beltran said.
Jindal plans to set up a 1.7 million-ton steel mill in Bolivia. Jindal signed a $2.1 billion commitment to the project with the Bolivian government in 2007.
"El Mutun is a long gestation project and is on schedule," Naveen Jindal, the Indian companys vice chairman and managing director, said in an interview Nov. 24 with Bloomberg Television.
To contact the reporter on this story: Jonathan J. Levin in La Paz at Jlevin20@bloomberg.net