Bolivia opening up huge iron ore deposit to mining
May 28, 2008 - Los Angeles Times
By Patrick J. McDonnell, Los Angeles Times Staff Writer
EL MUTUN, BOLIVIA -- The sloping expanse of verdant hillside known as El Mutun doesn't stand out amid the lush semi-jungle straddling the remote Bolivian-Brazilian frontier.
But the rust-colored stones strewn about provide a hint of hidden treasure: This is a mountain of iron ore.
Forty billion tons of it.
(left) Map (From LA TImes)
El Mutun is, in fact, the world's largest concentration of iron ore at a single site, said Pritam Singh Rana, Bolivian managing director for Jindal Steel & Power, a New Delhi-based conglomerate.
"It's very unusual," a cheerful Rana said from his office in nearby Puerto Suarez, a sleepy river town that is a hub of borderlands commerce, both the legal and illicit varieties.
South America's commodity boom is poised to jolt El Mutun and the remote expanse of swamp, savanna and forest known as the Pantanal -- one of the world's largest and most biologically diverse fresh-water wetlands, sprawling between Brazil, Bolivia and Paraguay.
Bolivia's government has granted Jindal a 40-year concession to mine ore at El Mutun, a site extending over some 23 square miles. In the next eight years, the company says, Jindal plans to invest $2.1 billion -- perhaps India's largest venture ever in Latin America.
China has gotten a head start on the continent, purchasing vast quantities of metals from Chile and Peru and soybeans from Brazil and Argentina. From Jindal's perspective, India is a natural player in the region.
"We in India have a lot of trained know-how, a lot of technical expertise," said Rana, a veteran of India's steel sector. "And Bolivia and South America have a lot of land, a lot of resources. . . . I think there's a very good marriage."
An aura of myth, intrigue and possibilities envelops El Mutun. Residents whisper about supposed deposits of uranium and other metals. The rusting hulks of trucks and machinery attest to failed mining ventures.
People have known about the riches at El Mutun since at least 1845, when Francis de Castelnau, a French count and naturalist, scouted the region. But its isolation, and fluctuating ore prices, thwarted development.
Today, however, emerging economies such as India, China and Russia crave iron ore, the key ingredient used in blast furnaces to produce steel. Prices are expected to continue to climb, analysts say. El Mutun's time appears to have arrived. But the checkered history of past ventures and broken government promises have left local officials wary.
"There are doubts," said Juan Manuel Perez, deputy provincial chief in Puerto Suarez, a sluggish town 15 miles to the north where the riverside cafe features piranha soup, said to be an aphrodisiac. "We've been down this road so many times before."
Bolivia, a nation of 9 million, has doggedly retained the title of South America's poorest nation despite a wealth of natural resources, including natural gas, tin, zinc, silver and gold.
Two years ago, a Brazilian steel maker, EBX, was ready to start mining here. The company began building giant brick ovens where the ore was to be processed. Hopes were high. Job seekers began to flood into the area.
But conservationists complained that the charcoal-fired foundry works would result in rapid deforestation of the sensitive Pantanal, home to jaguars, monkeys, macaws and caimans, a relative of alligators. Bolivia's new president, Evo Morales, declared that the Brazilian firm had opened shop without the needed permits. He expelled EBX, ruffling feathers here and in Brazil.
Steel makers from India, China, Europe and Argentina lined up when the government put the project out to bid. The Morales administration chose Jindal, which boasts plants in Asia, Europe and the U.S.
Jindal will work with a Bolivian government entity to exploit El Mutun. The blueprint envisions new roads, a bustling river port, improved rail lines and a steel plant, Bolivia's first. All this is planned in a region that lacks paved roads, power lines and buildings, and hosts more snakes than people.
Once the operation is up and running by 2012, the government says, Bolivia should rake in more than $200 million a year, about 5% of its current estimated annual government revenue. The complex will create more than 21,000 new jobs, the government says.
"This will be the gateway for prosperity for the region," Rana predicted. "There will be a sudden jump in the economy."
But skeptics wonder whether the gold-rush hype is a mirage.
In particular, they question where the energy will come from to power the plant's gargantuan furnaces. Unlike the charcoal-burning Brazilian design, Jindal's project is to run on natural gas.
Bolivia sits atop vast natural gas reserves but lacks infrastructure to tap much of them. It is hard-pressed to cover domestic gas demands while meeting contractual obligations to neighboring Brazil and Argentina.
"What's lacking now is the gas," said Edil Gericke, president of the provincial civic committee, a pro-development group.
Bolivian authorities have guaranteed a gas supply to Jindal. The company says it's not worried about energy.
Meanwhile, Bolivia's corrosive political atmosphere looms like a poisonous cloud.
El Mutun sits in the southeastern edge of Santa Cruz province, a center of conservative resistance to the leftist Morales. Many here suspect that the far-off capital of La Paz has no intention of helping the region and wouldn't mind if the undertaking flopped.
"Unfortunately, our president is guided more by resentment than a desire to generate progress," said Perez, the deputy provincial governor.
The Morales administration insists it is committed to El Mutun. Last month, La Paz granted Jindal its initial environmental permit, the first of many needed. Rana says the company hopes to begin exporting ore by December or January -- a date some area officials view as overly optimistic, if not delusional.
Residents say the jobs and opportunities will be welcome. But some worry about the transformation of this sylvan backwater into a rambling, smoke-belching mining camp. Environmental groups have withheld judgment, awaiting more specifics on the project.
"I know that progress is necessary, but everything will change," said Jose Alvarez, 40, a businessman in Puerto Suarez who was reared in the shadow of El Mutun, hiking its ridges, wading in its fresh-water springs. "Maybe it's all for the better. But El Mutun will never be the same again."
patrick.mcdonnell@latimes.com
Special correspondent Martin Romer Monasterio in Puerto Suarez contributed to this report.