VZCZCXYZ0002
RR RUEHWEB

DE RUEHLP #1593/01 3431621
ZNY CCCCC ZZH
R 091621Z DEC 09
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC 0204
INFO RHEFDIA/DIA WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUEHAC/AMEMBASSY ASUNCION
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA
RUEHBU/AMEMBASSY BUENOS AIRES
RUEHCV/AMEMBASSY CARACAS
RUEHLP/AMEMBASSY LA PAZ
RUEHMN/AMEMBASSY MONTEVIDEO
RUEHPE/AMEMBASSY LIMA
RUEHQT/AMEMBASSY QUITO
RUEHSG/AMEMBASSY SANTIAGO
RUEHUB/USINT HAVANA 0019
RUEKJCS/SECDEF WASHINGTON DC

C O N F I D E N T I A L LA PAZ 001593 
 
SIPDIS 
 
E.O. 12958: DECL: 2019/12/09 
TAGS: ECON PREL PGOV EAID BL EMIN EINV
SUBJECT: BOLIVIA MINING -- UPDATE ON CERRO RICO 
 
REF: 09 LA PAZ 1477 
 
CLASSIFIED BY: John S. Creamer, Charge D'Affaires, Department of 
State, Embassy La Paz; REASON: 1.4(B), (D) 
 
¶1.  (C) SUMMARY.  During a visit to the San Bartolome silver mine 
in the southern Bolivian city of Potosi, EconOff learned that the 
financial impact of the suspension of mining above 4400 meters is 
significant and is already impacting operations for Manquiri, a 
subsidiary of U.S. mining company Coeur D'Alane.  However, 
cooperative miners continue to work above 4400 meters with no signs 
of stopping.  Manquiri has made no progress in negotiations with 
the government of Bolivia (GOB) regarding the suspension, but is 
hoping that progress can be made now that national elections are 
over.  END SUMMARY. 
 
 
 
¶2.  (U) EconOff visited the San Bartolome silver mine operated by 
Empresa Minera Manquiri, a subsidiary of U.S. mining company Coeur 
d'Alene, on December 1.  San Bartolome is located on Potosi's 
historic Cerro Rico ("Rich Hill").  Manquiri started mining in June 
2008 and is mining only loose material from the mountain.  Half of 
Manquiri's deposits are above the 4400 meter mark where the GOB 
suspended surface mining activity in October (reftel). 
Unfortunately, that half contains more silver content than the 
lower half; deposits at the top of the mountain are close to 200g 
of silver per ton of rock/dirt, while those on the lower half are 
closer to 110g/ton.  Manquiri had planned to mine from the top 
down.  The restriction imposed by the GOB in October meant that 
Manquiri had to alter mining plans and begin mining the lower half 
of the mountain 2-3 years earlier than planned.  Additionally, it 
greatly impacts cash flow, as Manquiri had hoped to use the higher 
grade material from the top of the mountain to more quickly pay off 
its $240 million investment in San Bartolome.  However, relatively 
good silver prices have helped them recently. 
 
 
 
¶3.  (C) The GOB claims to have restricted mining in order to 
preserve the shape of the Cerro Rico, seen as a national monument. 
However, the restriction is only on surface mining.  There are 8 
mining cooperatives that continue to operate 42 interior mines with 
entrances above the 4400 meter mark.  In addition to these, various 
cooperatives or random day miners continue to mine surface material 
above 4400 meters, with no repercussions or concern of reprimand. 
The political strength of the cooperative miners means that they 
can mine wherever they want without interference by the GOB. 
 
 
 
¶4.  (C) The GOB says that mining is restricted until the completion 
of a study about the geophysical impacts of the mining activity on 
the Cerro Rico.  Manquiri officials say the study has been underway 
for years and is uncertain of when or if it will ever be completed. 
Additionally, UNESCO produced a report in 2007 that was favorable 
toward the San Bartolome project.  Manquiri believes they are 
actually aiding in the prevention of the collapse of the mountain, 
as they are relieving pressure on the internal mines that have very 
haphazard support structures. 
 
 
 
¶5.  (SBU) Otherwise, Manquiri has a relatively normal relationship 
with the cooperatives.  There are daily complaints and minor issues 
to be dealt with considering they are working on overlapping 
territory, but Manquiri works hard to keep things cordial. 
Manquiri has hired the cooperatives to conduct hauling services. 
The cooperatives run the trucks that bring the rock/dirt down the 
mountain to the Manquiri processing plant.  In addition, in all of 
the space below 4400 meters, Manquiri has a joint venture with the 
state mining company COMIBOL and with the cooperatives.  Manquiri 
has the rights for surface mining, while the cooperatives get a 
percentage of their royalties (4% is split between COMIBOL and the 
cooperatives) and have the rights for internal mining on the same 
land. 
 
¶6.  (C) COMMENT.  Despite the political trouble, Manquiri continues 
its operations and hopes that things will be sorted out.  Since 
Manquiri officials in La Paz believe the restriction on mining 
activity was a political move, they hope now that national 
elections are over they will be able to make progress with the new 
government.  It is agreed by many in Potosi that the cooperative 
miners are likely doing more physical and environmental damage to 
the area than Manquiri, but are given amnesty due to their 
political power.  As Manquiri told us months ago, they will 
continue to operate and be profitable as long as the rules of the 
game don't change further.  If this suspension in activity becomes 
permanent Manquiri will likely get what they can out of the lower 
levels and then cut their losses and leave.  END COMMENT. 
Creamer