CdA Mines sees future in old area

A historic Bolivian mining district is the backdrop for Coeur d’Alene Mines Corp.’s new silver project.

The company will build a $135 million open-pit mine at the base of Cerro Rico, the “rich hill” that was the site of a 1545 silver strike. The strike led to the Spanish colonial settlement of Potosi, a mining center high in the Andes Mountains.

The region is still known for silver, tin, lead and copper production. But most of the mining is done using methods described as “medieval” in tourist guides.

“This is … the first modern silver project in Bolivia and a major boon to the country’s local and national economies,” Dennis Wheeler, chairman of Coeur d’Alene Mines, said in a press release.

The San Bartolome Mine is expected to open in 2006. About 500 people will work at the mine during its construction phase, according to company estimates. After the mine opens, employment will level off at 370 full-time workers.

The open-pit operation will extract silver ore from gravels washed down from the top of Cerro Rico, which rises over the town of Potosi, population 130,000. According to company projections, the San Bartolome will produce about 8 million ounces of silver annually during its first five years of operation.

“It will create a ripple effect on the region,” said Tony Ebersole, director of investor relations for Coeur d’Alene Mines. Each job at the mine will create up to four additional jobs in the community, he said. The company will also set up a foundation to help develop tourism and other industries in Potosi.

Bolivia is one of the most poverty-stricken nations in Latin America. The Overseas Private Investment Corp. is providing a $135 million “political risk” insurance policy for the mine. OPIC is a U.S. agency that helps firms invest and manage risk in developing countries.

The San Bartolome will also raise Coeur d’Alene Mines’ profile as a silver producer. The mine, which is expected to operate for at least 15 years, has the potential to increase the company’s annual silver output by more than 40 percent.

Each ounce of silver from the San Bartolome mine will cost about $3.50 to extract. The metal was trading at $6.84 per ounce Wednesday.

Higher metals prices have made it easier for mining companies to raise money for new projects over the past year. Ebersole said Coeur d’Alene Mines has cash on hand to build the mine. The company reported cash holdings of $218 million in cash at the end of September, and recently raised another $110 million.

The Bolivian government issued permits for the mine in spring. On Tuesday, the company’s board of directors voted to move ahead with the project.

Coeur d’Alene Mines also has silver mines in North Idaho, Nevada, Argentina and Chile.