February 22, 1999

Mythic silver lode may alter Bolivia fortunes again

                  LA PAZ, Bolivia (Reuters) -- The Cerro Rico, history's most fabulous silver
                  strike, changed Bolivia's social fabric 450 years ago. Now, thanks to
                  modern mining, it may do so again.

                  Legend has it that enough metal was extracted from the deposit to build a
                  bridge of silver from South America to Europe. Its heyday is now long past
                  but miners say the vast lode is still not exhausted.

                  Already believed to have yielded between 1 and 2 billion ounces of silver
                  since an Indian named Diego Hualpa discovered it in 1544, the mountain,
                  whose name means "rich hill," has modern miners pie-eyed with dreams of
                  more hidden treasure.

                  "It has an impressive amount of mineral wealth," Rolando Jordan Pozo,
                  secretary general of Bolivia's association of medium-sized miners, said.

                  Industry officials say the deposit could vault Bolivia back into the vanguard
                  of global silver production. But plans to develop the mine, an official World
                  Heritage Site, are hampered by its indelible imprint on Bolivian culture and
                  the cruel toll it took on the area's indigenous population.

                  "The first idea was to do an open pit in 1989. What happened? The local
                  people opposed it," former Mining Minister Jaime Villalobos told Reuters in
                  his La Paz office. "The great restriction is the cone. It is represented on
                  Bolivia's coat of arms," he said.

                  Endless bullion

                  Spanish conquistadors traced the Incas' mine workings to the Cerro Rico,
                  more than 15,000 feet above sea level on Bolivia's gray, desolate high
                  plateau. The mountain straddles a southern silver belt that contained other
                  massive deposits such as the Mesa de Plata, Porco and Pulacayo.

                  Eagerly following rich veins containing from 4 to 28 percent silver, the
                  Spaniards hit peak yearly production of about 13 million ounces in 1580 at a
                  time when the metal was as valuable as gold.

                  The city of Potosi was built at the base of the mountain in unbridled colonial
                  splendor, featuring a mint to produce Spain's currency and a reputation as a
                  wide-open den of easy money, prostitution and duels. Spaniards to this day
                  use the phrase "It's a Potosi" for anything superlatively wealthy.

                  By 1572 the city was the Western world's most populous with 120,000
                  inhabitants, more than London, Paris or Madrid.

                  Its silver was smelted in thousands of small ovens and carried by llama
                  caravans to ports in Peru and Chile. Shipped to Acapulco, Mexico, it was
                  then taken across the isthmus and loaded onto fleets bound for Spain.

                  English and Dutch pirates preyed on the boats and it is said the majority of
                  the Bank of England's deposits at the time came from Spanish silver seized in
                  the Gulf of Mexico. Potosi silver molded the social and political climate of
                  Spain's Renaissance, built the famed Spanish Armada and bankrolled wars
                  against Turks, Italians, Flemish, French and English. It also fostered runaway
                  inflation and killed Spanish industry.

                  Tarnished legacy

                  In Bolivia, the Cerro Rico's legacy can easily be seen in Potosi, still the
                  world's highest city with more than 100,000 people. The lofty settlement is a
                  portrait of rundown elegance beset with water problems, some of Bolivia's
                  fiercest poverty and a history of native toil in the dusty, narrow mine shafts.

                  "Without cheap labor the silver lode wouldn't have been so profitable," said
                  Villalobos, who is now a consultant.

                  Thousands of coca-leaf chewing cooperative miners still peck away at the
                  innards of the mountain's dome, shot through with narrow, twisting tunnels
                  and shaken by occasional dynamite blasts. Their methods are rudimentary,
                  "similar to Roman times," Villalobos said.

                  Any mining company set on developing Cerro Rico will have to cut a deal
                  benefiting the 20,000 cooperative members, he said. "The sentiment of the
                  people since the time of the Spaniards is that mining only wants to exploit the
                  wealth, take it somewhere else and leave behind poverty."

                  Plans to retrieve the Cerro Rico's remaining riches have ranged from an
                  open pit to subterranean mining, the latter including preservation of the
                  cone's shape via cement fixings.

                  The mine is on a long list of pending 1999 privatizations engineered by
                  state-owned Corporacion for Minera de Bolivia (Comibol), which is
                  negotiating with the Potosi government over the site's exploitation, Comibol
                  President Alvaro Rejas said.

                  "The ideal as a miner would be to lop off the (mountain) top but that's not
                  possible because it is a World Heritage Site," said Johnny Delgado, chief
                  executive officer of Andean Silver Corp. "It's a very big social problem."

                  His firm, the Bolivian offshoot of Cayman Islands-based Apex Silver Mines
                  Ltd., is "definitely interested" in the project, he said. Apex's nearby San
                  Cristobal mine is set to begin production in 2001 and produce 17 million
                  ounces a year.

                  A government study calculated a $118 million subterranean mine burrowing
                  into the Cerro Rico could produce 266 million ounces of silver over 25
                  years, churning through 54 million tons of ore graded at 182 grams per ton.

                  A more roundabout solution is being sought by U.S. firm Asarco, which is
                  finishing a feasibility study aimed at using loose surface material around the
                  23-million-year-old mountain. Their blueprint predicts silver production of 4
                  million ounces a year for 12 to 18 years based on throughput of 5,000 tons
                  a day and an investment of $48 million.

                  "Asarco will decide between year-end and the beginning of 2000 if the
                  project will proceed," said Ruben Terrazas, the company's representative in

                  Firms eyeing the bigger load lurking in the mountain's interior, which
                  Terrazas estimated at a minimum 250 million ounces of silver worth $1
                  billion, remain gun-shy of rumbling dissent in Potosi.

                  "The majority of the firms say it's a good deposit (but) with many political
                  and social problems," Villalobos said.