Carlos Quiroga, (Reuters) - Bolivia's government said on Tuesday it wants to award a new contract to exploit a huge iron ore deposit within six months after Jindal Steel & Power Ltd confirmed it was abandoning the El Mutun project.
Jindal was awarded a 40-year contract to mine about half the El Mutun site, which is believed to contain some of the world's largest reserves of iron ore.
The project also included construction of the Andean country's first steel plant, but it got bogged down by delays and disputes between the government and the company that finally ended in Jindal terminating the contract on Tuesday.
Hector Cordova, head of Bolivia's state mining company Comibol, said the government would launch a new bidding round before the end of the year and hoped it could still fulfill the original target to start producing steel by 2014.
"Mining and steel-making at El Mutun continue to be a top priority. Jindal's exit gives us an opportunity to team up with a serious company that has the technical and economic capacity to guarantee the project's success," he told Reuters.
The collapse of the giant project is the latest in a series of setbacks for foreign mining companies in Bolivia and is a blow for leftist President Evo Morales as he seeks to attract foreign investors.
Morales has steadily increased state control over mining projects, the key natural gas industry and utility companies since he took office in 2006, but he says he wants to attract foreign firms as long as they are willing to be "partners" with the state.
Jindal said the government had failed to meet its side of the agreement, particularly in terms of natural gas supplies to the project.
It accused the Bolivian government of being unwilling to fulfill its obligations and said it planned to pursue international arbitration against Bolivia, which also threatened legal action.
"Jindal was simply trying to make investments on the basis of our potential. They didn't have their own capital, they were just speculating with stock markets and trying to invest on the back of that," Mining Minister Mario Virreira told a news conference.
"Now we want to find a company that shows us they've really got the capital to invest in Bolivia," he added.
(Additional reporting by Bangalore newsroom; Writing by Helen Popper)