South American Silver Granted US$28 Million in Malku Khota Dispute

TriMetals Mining’s (TSX:TMI) Bermudan subsidiary South American Silver has walked away from an arbitration court in the Netherlands with approximately US$28 million. 

The payout, which includes about US$9 million in interest, follows a lengthy dispute over the company’s Malku Khota silver-indium-gallium project in Bolivia.

Exploration at the project began in 2003, with subsequent work including diamond drilling, metallurgical testwork and a preliminary economic assessment (PEA), published in May 2011.

The PEA indicated the mine would produce over 13.2 million ounces of silver per year for the first five years, and established a pre-tax net present value of $1.5 billion.

However, disputes surrounding the mine began in 2012, when the Bolivian government nationalized Malku Khota following protests from local indigenous communities over environmental impact concerns.

Bolivia’s government issued a supreme decree in August of that year, revoking mining concessions held by Compañia Minera Malku Khota, a South American Silver subsidiary, without compensation.

As mentioned, the US$28-million payout consisted of US$18.7 million in amounts invested, along with US$9 million in interest from August 1, 2012 onwards. However, South American Silver had originally sought $385.7 million compensation for damages, leaving TriMetals President and CEO Eric Edwards dissatisfied with the result.

“We are disappointed at the outcome of the international arbitration process and especially with the quantum of damages awarded to South American Silver, which we consider insufficient and are still evaluating,” Edwards said in a statement last Friday (November 23).

“We are still evaluating the award and its contents in order to consider next steps, including, among other things, seeking annulment of the award or enforcement under the New York Convention should Bolivia refuse to pay or unduly delay payment of the amounts due and owing,” he added.

Meanwhile, Bolivian Attorney General Pablo Menacho told reporters last Thursday (November 22) that the country had prevailed with the ruling.

“Bolivia did not violate its obligation to provide full protection and security to foreign investment,” Menacho said, according to Reuters. “This is an outright victory for Bolivia.”

As of 2:30 p.m. EST on Friday, TriMetals’ share price was down 14.3 percent on the TSX, hitting C$0.06.

TriMetals has two projects aside from Malku Khota, with its flagship asset being the exploration-stage Gold Springs gold-silver project in Nevada and Utah. The Escalones copper-gold porphyry project in Chile is its other operation.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.