Gold Fields hangs on in Venezuela
Brendan Ryan
Posted: Thu, 07 May 2009

[miningmx.com] -- GOLD Fields CEO Nick Holland was upbeat on exploration at today’s press briefing pointing out the group had three “advanced stage” projects about to be drilled to bring them to the inferred resource stage after which scoping studies would be completed.

Holland singled out developments in Mali saying there was a possible “5m oz gold camp” there consisting of various ore bodies that could be treated through a central plant.

“These projects are not three to five years down the track. They are close. We expect to have an inferred resource for Mali by the end of 2010,” he commented.

But not covered by the quarterly documentation - and not mentioned by Holland until it was raised at question time - was the future of Gold Fields’ Venezuelan interests held through Canadian-listed junior Rusoro Mining.

These are potentially huge depending on how the confrontation between firebrand socialist Venezuelan president Hugo Chavez and two other Canadian gold juniors - Gold Reserve and Crystallex - eventually plays out.

Gold Reserve and Crystallex control two of the world’s largest unmined gold resources located in Venezuela called Las Brisas and Las Cristinas. The projects are contiguous because they make up two parts of the same orebody and the total amount of gold they contain is estimated at some 26moz.

Development of both projects have been stalled for years because the Venezuelan government will not provide the final environmental permits required to go ahead.

Gold Fields is the largest shareholder in Rusoro which is the company nominated by Chavez to develop Venezuela’s gold deposits in partnership with the Venezuelan government.

In December last year Rusoro made a bid for Gold Reserve which was rejected by Gold Reserve and expired in February.

Gold Reserve is currently suing Rusoro and has also obtained an injunction in Canada restraining Rusoro from making any further unsolicited takeover bid.

Both Gold Reserve and Crystallex have vowed to take legal action to protect their assets in Venezuela.

In January, apparently under pressure from the impact of falling oil prices on the Venezuelan economy, Chavez sounded off about the need for the State to develop the two gold deposits to help fund his socialist revolution.

It’s a messy situation where Gold Fields could be called upon to make some critical decisions despite Holland’s stance that Gold Fields is a “passive” investor in Rusoro with no involvement in management.

What if Chavez nationalised the two gold projects and handed them over to Rusoro for development which then had to call on its shareholders for the necessary capital expenditure to develop them?

Holland replies, “I will make that decision at the time. I am happy to keep our stake in Rusoro as a long-term option on Venezuela. What we do will be determined by events in Venezuela where things could change.“

Holland pointed out that Gold Fields did not follow its rights in a recent capital raising by Rusoro which diluted its stake in the company to 26% from the previous level of 38%.

Rusoro had hoped to raise C$100m but only managed to bring in C$80m.

Holland added, “we are still in the driving seat at Rusoro with a 26% stake. They cannot ignore us.”