There were some jitters in some mining companies yesterday on reports that Bolivian President Evo Morales was threatening to nationalize the mines.
JPMorgan explains what’s going on:
Bolivian President Evo Morales was talking about mining industry nationalization yesterday. We find this strange since the Bolivians sent a delegation to the major mining investment conference, PDAC in March to lobby for new investment to be directed towards Bolivia. Coeur d’Alene and PanAmerican Silver have operations in the country. We estimate Coeur’s San Bartolome mine represents about 20% of its NAV while PanAmerican’s San Vicente mine delivers about 9% of its NAV. We think PanAmerican is the more vulnerable, should new legislation be introduced since Coeur doesn’t own reserves in Bolivia but has contracts with the very powerful mining union, the Cooperativas.
We understand Evo Morales is losing ground and his approval rating has been falling. Also, he often delivers new political initiatives on May 1st (labour Day) which is just two weeks from now. The very powerful Bolivian Workers centre Union (COB) is putting pressure on the president after he refused to give the 30% pay rise it demanded. The Cooperativas are also a powerful component of the COB.