Two engineers and a police officer kidnapped by Indians in the Bolivian region of Potosi were released Sunday after their abductors reached an agreement with the Bolivian government to nullify the concession granted in the zone to Canadian mining firm South American Silver, a government official said.

The representative of the Ombudsman's Office in Potosi, Rene Arroyo, confirmed to Efe by telephone that the mining company's two employees captured 11 days ago and policeman Herbert Perez, who was taken hostage last Thursday, were handed over to the authorities.

"We're coming out of the zone with the three (men) at this time in different vehicles. They are in very bad shape. There will have to be a medical evaluation," Arroyo said.

The engineers and the officer were held hostage near the Mallku Khota mine, some 350 kilometers (215 miles) south of La Paz, and now they are being transported to the nearby town of Llallagua, where they will receive medical attention.

Three other employees of the mining firm and a prosecutor who were also kidnapped by the Indians regained their freedom on Friday as a result of police search operations in the area.

Arroyo said that the Indians captured the engineers because allegedly they were dressed as natives to spy and "divide" the residents of the sector, who have been demanding that the Canadian mining firm leave the region so that they can exploit the mine themselves.

Before letting them go, the Indians forced the mine employees to appear before an "indigenous peasant judicial audience," which imposed a punishment on them of having to make 500 adobe bricks by hand.

Previously, Labor Minister Daniel Santalla and the Indians signed a document in which the government of Bolivian President Evo Morales committed itself to issuing a decree to annul the concession granted to South American Silver to operate the Mallku Khota mine.

The government also agreed to pay an indemnity to the relatives of the Indian who died in a clash with police last Thursday and to agree not to prosecute the local natives for kidnapping seven people, Santalla told Erbol radio. All of those kidnap victims are now free.

With regard to the Indians' demand that the government release indigenous leader Cancio Rojas, the parties agreed that the Potosi government will make two attorneys available who will take charge of the matter.

Rojas is being held under house arrest in the city of Potosi accused of kidnapping and torturing other Indians and policemen for several days some weeks ago as part of the same conflict.

The Canadian firm has been conducting exploration work in northern Potosi - one of Bolivia' poorest regions - since 2007 to evaluate the local reserves of silver and indium. The massive Mallku Khota mine project mainly contains those two minerals, although it also holds lesser quantities of gold.

One faction of the indigenous people living in the Quechua community of Mallku Khota has been trying to force out the mining company so they can exploit the mine themselves.

South American Silver unit Compañia Minera Mallku Khota says a majority of the Indian clans in the area support the firm's activities.

The company's opponents, led by Rojas, have attacked other Indians and illegally detained police, authorities say. EFE