La Paz, Aug 3 (IANS/EFE) Bolivia's government issued a decree Thursday formally revoking a mining concession held by the private firm Compania Minera Malku Khota and rejected claims for compensation by Canadian parent South American Silver Corp., saying no contract was signed with the Vancouver-based company.

Mining Minister Mario Virreira said the decree returns the concession for the mining project - located in Malku Khota, a town 350 km south of La Paz - to the government.

A faction of Indians who had kidnapped seven people in that region in late June - including five Malku Khota employees - had secured a pledge from the government to cancel the concession and had threatened more violence if the government did not keep its promise.

Compania Minera Malku Khota, a unit of SAS, said in June that a majority of the Indian clans in the area supported the firm's project, but that one faction of the indigenous people saw the operations as an obstacle to their own efforts to mine gold.

The concession area, located in the southern province of Potosi, which borders Argentina and Chile, had been explored by that private company since 2007 and will now be turned over to state-owned mining firm Comibol.

SAS executives said in July that the deposit had no concrete economic value prior to the exploration work, but after years of studies on its silver and indium reserves it now is estimated to be worth $2 billion.

They have indicated they want to negotiate a favorable settlement with Bolivia's leftist government, but Virreira said Thursday authorities did not sign any contract with SAS but only with Malku Khota, whose shareholders are Bolivian and Chilean.

He acknowledged that Canadian diplomats and officials have expressed concern over the company's investments in the country, but insisted that no official document or records exist in Bolivia indicating the concession belongs to SAS.

Virreira said he plans to meet in the coming days with SAS executives and Canadian government officials to convey the reality that no relationship officially exists between the Bolivian government and that company.

--IANS/EFE

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