Venezuelan gold project appropriation soap opera continues

Has the Hugo Chavez Administration now targeted gold projects Las Cristinas and Las Brisas as its next expropriation victims?

Author: Dorothy Kosich
Posted: Thursday , 06 Nov 2008

RENO, NV -

The tangled web of Venezuelan expropriation politics has ensnared the Las Cristinas and Las Brisas gold projects as the country's mining minister appears to playing games with the nation's news media.

Early Thursday morning it was reported by Reuters that Mining Minster Rodolfo Sanz told a Russian delegation that a memorandum of understanding will be signed Friday with Canadian gold mining company Rusoro to jointly operate the Las Cristinas and Brisas projects with the government.

Rusoro's Chairman Vladimir Agapov and CEO Andre Agapov have emphasized their ties with Russian officials and businesses.

Sanz also told Dow Jones that the "plan is to operate the mine next year," adding that the government intended to operate the mine directly. When asked if Crystallex could expect any kind of compensation from the government, Sanz said the government isn't considering that at the moment.

However, by Thursday afternoon, Sanz later told Dow Jones, "We haven't defined anything on that; it's something that we haven't thought about."

Rusoro bought Las Camorra from Hecla Mining as the U.S. miner decided to depart Venezuela, agreeing to split ownership of La Camorra with the Venezuelan government. Subsequently, the two entities also reached an agreement which allows Rusoro's Choco10 operation to process ore from various state-owned MINERVEN operations.

Rusoro approached Spokane-based Gold Reserve several months ago about acquiring the Brisas project. In an e-mail to Mineweb Thursday, Gold Reserve President Doug Belanger said, "We considered their offer to be an insult to our shareholders and was ill conceived."

Gold Reserve felt Rusoro was losing "a significant amount of money from operations," Belanger added, "there are numerous other concerns and questions we had about this company and its continued viability."

Although the news media has frequently identified Rusoro as a Russian company due to the involvement of Agaopov family, Belanger stressed that "they are now only minority shareholders of the company with about 14%." The largest shareholder is Gold Fields with 36%. While Russian miner Peter Hambro has participated in an $80 million convertible debt financing for Rusoro, Hambro is not currently a Rusoro shareholder.

Belanger stressed that Rusoro's offer for Gold Reserve "did not even reflect the cash in the company (Gold Reserve) let alone the significant value of equipment purchased and the over $200 million investment to date nor reflect any in the ground value for the 10.2 million ounces of gold and 1.4 million pounds of copper ..."

Meanwhile, Las Cristinas parent, Toronto-based junior Crystallex released a statement Thursday afternoon about the media reports that it has lost Las Cristinas to the Venezuelan government. "Crystallex International Corporation ...wishes to advise that, as a result of miner reports relating to control of the Las Cristinas gold project, the company has requested formal clarification from the Minister of Mines ("MIBAM") as to the status of the Project and the Mine Operating Contract ("MOC")."

"To date, other than media coverage and comments therein, the company has not been advised by MIBAM or any other government agency of any changes to the control of the Las Cristinas Project or to the MOC."

In media reports, Sanz said that Venezuela hopes to double the country's gold production from 4 million ounces of gold in 2008 to 8 million ounces next year. "We want to industrialize our gold production."

Over the past year, President Hugo Chavez has nationalized Venezuela's largest telephone, electricity and cement companies. His government also is negotiating compensation for the takeover of the country's biggest steel maker, Sidor.