http://www.miningmx.com/mining_fin/775794.htm

Allan Seccombe
Posted: Wed, 09 Jan 2008

[miningmx.com] -- REPORTS from Venezuela say the Hugo Chavez government are in the throes of seizing all or part of Anglo American’s largest nickel operation, Loma de Niquel, leaving one of the world’s largest resource companies mystified as to what is going on there.

The news shows Gold Fields was justified in selling its gold mine there last year and letting someone else take on the risk. Radio Nacional de Venezuela cited an official government gazette in a report that said Anglo’s concessions in the country had been revoked and that it had 90 days in which to hand over its 248 hectare concession as well as all equipment and installations on it.

The news, which apparently came out of the blue, has left Anglo onto the backfoot and in a tricky position of being unable to comment fully because of the sensitive nature of negotiating with the Chavez government, which has nationalised oil businesses. It’s understood there are two gazettes issued in Venezuela and only one is available publicly.

“We are assessing the contents of the gazette and we’ll be seeking further discussions to clarify matters with the authorities,” James Wyatt-Tilby said. “Our intention is to take all appropriate action to protect the rights of the company, and Anglo reserves all legal rights under Venezuelan and international law,” he said.

The news must be of some concern to Anglo because its 91.4% held Loma de Niquel is its largest nickel operation in a current commodity market where steel ingredients are facing increasing demand and rising prices. Loma de Niquel produced 16,600 tonnes of nickel in 2006. Anglo's other nickel operation, the wholly owned Codemin, produced 9,800 tonnes in the same year.

Loma de Niquel has about 10 times more contained metal than Codemin, with proven and probable laterite reserves of 509,000 tonnes against 49,000 tonnes. It’s not clear if the Venezuelan authorities have laid claim to Anglo's entire holding and what impact this is having on production.

Anglo is growing its nickel production and it has the $1.2bn Barro Alto project in Brazil, which will produce 36,000 tonnes of nickel from 2011. Production starts at the project a year earlier.

Gold Fields, the world’s fourth-largest gold producer, has scaled back its exposure to Venezuela, handing over operational control of its Choco 10 gold mine to Toronto-listed Rusoro which is said to have a close relationship with the Chavez regime.

Choco 10 was a 95% held Gold Fields asset, but in December its sale for cash and shares was finalised, giving Gold Fields a 37% stake in Toronto-listed Rusoro and taking it one step away from Venezuela where it struggled bureaucracy and the environment in a fruitless attempt to get the mine to fire on all cylinders.

“The risk/reward equation in Venezuela has shifted more to the risk side over the past year. The introduction of rule by decree by Chavez was a factor in our decision,” Gold Fields CEO Ian Cockerill said in October.