Disseminated on behalf of New Pacific Metals Inc.
Bolivia has a long and storied mining history and was formerly one of the world’s leading producers of silver and base metals. Recent years have seen Bolivia fall from the map of international mining investment as policy decisions saw the country become less attractive than many of its competitors. Bolivia’s foreign direct investment has fallen from a high of US$1.7 billion in 2013 to $37.2 million in 2023, according to Statista figures, however, It improved to $294 million in 2023 and was $136 million in the first half of 2024, according to World Bank figures. Bolivia’s mining sector is actually experiencing disinvestment. Natural gas has historically been a major source of export revenue for Bolivia. However, production and exports have declined significantly in recent years due to factors like maturing gas fields and a lack of investment in exploration. This reduced inflow of dollars, coupled with high government spending resulting in large fiscal deficits, a fixed exchange rate that forces the Central Bank to sell its reserves to maintain stability, and persistent delays in the launch of its anticipated lithium project, has compelled the government to once again seek foreign investment in the mining sector by streamlining key administrative processes.
One company that will directly benefit from these efforts is New Pacific Metals, which is advancing silver projects at Silver Sands in Potosi and at Carangas in Oruro. The company’s Carangas project will be a beneficiary of the preferential right authorized for productive mining companies through Resolution 229/2024 issued by the Ministry of Mining and Metallurgy. Indeed, Deputy Minister of Mining Policy, Regulation and Supervision, Marcelo Ballesteros, sees mining development as a fundamental pillar of the regional and national economy and deserving of government support.
The resolution allows projects to migrate from a prospecting and exploration license to an administrative mining contract. “This … is expected to boost the local economy by generating new sources of employment and income,” said Deputy Minister Ballesteros. “This resolution … establishes a clear framework for all productive mining actors in the country. It gives us the rules of the game and the commitments that we must comply with as a private company to be able to move forward,” said New Pacific’s representative, Alex Rojas, during a meeting with Oruro department officials, during which the Resolution was presented.
Earlier this year, New Pacific issued a Preliminary Economic Assessment (PEA) for Carangas that outlined the production of more than 6.5 Moz per year of payable silver throughout a 16-year mine life, excluding 2 years of pre-production with 8.5Moz per year in the first six years. In total, Carangas will produce 106 Moz of silver, 620Mlb of zinc and 382Mlb of lead. The project has posted attractive economics with an after-tax net present value (NPV) of $501 million at a 5% discount rate, with an internal rate of return (IRR) of 26% and 3.2-year payback using base case metal prices of $24/oz silver, $1.25/lb zinc and $0.95/lb lead. This increases to $748 million and 34% at a $30/oz silver price.
Carangas will cost $324 million to build and produce silver at an all-in sustaining cost (AISC) of $7.60/oz net of by-products. With the project set to create 500 jobs, New Pacific is receiving support from both Oruro Department and the federal government, and Carangas is set to become the first project to transition from an exploration license to an administrative mining contract under Bolivia’s 2014 mining code.
New Pacific is in the process of determining with government authorities the potential timeline for project permitting. Once it has a favorable pathway agreed, including a comprehensive mine development agreement with the local community, and progress towards an Environmental Impact Assessment Study (EIA), the company will undertake a feasibility study. New Pacific anticipates undertaking a feasibility study at Carangas no earlier than the second half of 2025.
Investment promotion
The timing could be propitious for New Pacific and Carangas as the national government recently decided to regulate a 2014 law on investment promotion, Law 516, as it seeks foreign capital to drive the development of its mining sector. This includes, the “free participation and the broadest participation of investors,” to incentivize investment in mining, hydrocarbons and energy. The initiative seeks to reverse the consequences of more than a decade of governmental policy that favoured local development of natural resources, which was increasingly stymied by issues of a lack of local financial capital and lack of technical expertise.
Through Supreme Decree 5248 the government of President Luis Arce has provided regulations to bring Law 516 into effect, with incentives to attract investment for state projects. The law says that investment for the development of strategic natural resources and economic activities that contribute to the change of the productive matrix for the economic and social development of the country, will be considered “preferred investment”. Such investments include those in hydrocarbons, mining, energy and transportation, amongst other activities.
Ministries, such as the Ministry of Mining and Metallurgy, will send preferred investment candidate projects to the Ministry of Development Planning, which will verify whether the proposals meet the requirements. Incentives available under Law 516 may include subsidies, accelerated depreciation, investment promotion mechanisms, and others that ministries consider appropriate.
While the Investment Promotion Law is aimed at attracting investment in projects managed by the state, Article 3 opens the door for the arrival of private capital by allowing for the free participation and competition of investors. A key driver here is the government’s need for hard currency in the form of US dollars. It is increasingly turning to the private sector to address a lack of dollars in the country and is keen to stimulate the mining sector due to the dollars mining investment and the sale of mineral products can bring.
In February, government authorities, including Economy and Public Finance Minister Marcelo Montenegro, presented a ten-point economic, productive and business agreement with the private sector. The points included measures to reduce bureaucracy on exports, the immediate return of Tax Refund Certificates (CEDEIMs) after delivery of foreign currency for exports, the ability of large consumers to buy diesel from state energy company YPFB through auctions for delivery at their installations, making it easier to import diesel, and increasing the size and length of cargo trucks.
As Bolivia moves to embrace private sector investment in its mining sector again, New Pacific Metals is well-placed to be an early beneficiary. To learn more about New Pacific Metals Corp. (TSX: NUAG, NYSE-American: NEWP), please click here.
Notes
https://www.vision360.bo/noticias/2024/10/18/13703-el-gobierno-sale-en-busca-de-capitales-y-reglamenta-la-ley-de-inversiones-despues-de-10-anos
https://www.statista.com/statistics/1392919/net-foreign-direct-investment-bolivia
https://datos.bancomundial.org/indicador/BX.KLT.DINV.CD.WD?locations=BO
https://www.bcb.gob.bo/webdocs/files_noticias/CP_62%20Inversi%C3%B3nExtranjera.pdf
https://www.economiayfinanzas.gob.bo/node/9961
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