Bolivia Rejects Mittal's Bid For El Mutun

BOLIVIA

Bolivia rejects Mittal's bid for El Mutun

25th May 2006

SANTA CRUZ, Bolivia (Reuters) - Bolivia on Thursday rejected a bid by Mittal Steel Group, saying only Indian Jindal Steel and Power Ltd. had met conditions to develop the El Mutun site that is believed to contain Latin America's biggest iron-ore deposits.

Planning Minister Carlos Villegas told local television a second bid by Netherlands-based Mittal had been sent back to the company hours after it was opened by officials.

"In the early hours of the afternoon, we started to open the envelopes, and we detected that Mittal did not comply with the conditions that were set out ... and we had to return the envelopes to the company," Villegas said.

It was not immediately clear whether Mittal would be allowed to resubmit its bid. A final decision on the successful bidder is due to be announced on May 30.

The minister said the bidding process was one of the most transparent in Bolivia's history and added that officials would start considering the economic side of Jindal's bid on Saturday.

Government officials said an expected bid from Argentina's Siderar was not received, but they provided no explanation.

El Mutun lies in the eastern province of Santa Cruz near the Brazilian border.

The bidding process for El Mutun is seen as a test of the leftist government's approach to new contracts in the mining sector, which has been rattled by the nationalization of the energy industry announced at the start of the month.

Villegas said in early May that the contract to exploit El Mutun would run for 40 years, and that the successful bidder would get total administrative control of the project for the first 20 years.

In the second 20 years, control would be shared with state mining company COMIBOL.

The government has not put a figure on the expected size of the investment for the project, which envisions a steel production operation and the extension of a natural gas pipeline to supply the project with Bolivian gas.

Bolivia wants to produce steel at home so that the country benefits from the extra jobs the project will create.

Gilberto Banegas, a union leader from the city of Puerto Suarez -- near the site -- said the development of El Mutun would be a huge boost to the economy.

"The municipal government will receive fresh resources to launch an economic take-off," he told local radio.

According to official reports, El Mutun is estimated to hold reserves of between 40 billion and 44 billion tonnes. In comparison, proven reserves in ore-rich Carajas in Brazil's northern state of Para total 1.5 billion tonnes.

(Additional reporting by Helen Popper in La Paz)