Crystallex plays the China factor to pry Las Cristinas gold mining permit from Venezuela

After years of fits, starts and stalling by President Hugo Chavez, Canadian junior miner Crystallex has decided to bring in a real power player into the Las Cristinas gold project equation.

Author: Dorothy Kosich
Posted: Tuesday , 08 Jun 2010

RENO, NV -

Chinese investment apparently lubricates a lot more than the Orinoco oil fields, as stalled, would-be Las Cristinas gold miner Crystallex realized when it announced Monday that it will take a backseat joint venture partner position with state-owned China Railway Engineering running the show.

After months of delays, stalling and other political song-and-dance by Venezuelan President Hugo Chavez and his administration, Crystallex announced it would cede majority control of the Las Cristinas gold project to a subsidiary of China Railway Engineering, China Railway Resources (CRRC).

China Railway Engineering is currently building a US$7.5 billion railway project in Venezuela linking southwest Cojedes State and the eastern Anzoátegui State.

With a parent who is a member of the Fortune 500 and one of the world's 150 largest companies, CRRC has managed to get the attention of a formerly recalcitrant Venezuelan government, which has reportedly expressed Venezuela's support for the new partnership and its development of Las Cristinas.

Of course, the fact China has agreed to lend Venezuela US$20 billion to secure oil supplies and the sale of $82 million in Chinese K-8 military training aircraft to Venezuela may have fueled warm feelings between Chavez and his new Chinese best friends. Chavez has proclaimed China as "one of the biggest allies of Venezuela, and Venezuela is one of the biggest allies of China in the world."

Chinese companies are involved in the exploration of Venezuela's Orinoco heavy crude belt, from which American companies have been evicted these past few years by socialist Chavez. The two countries have developed a $12 billion development fund, which is focused on financing infrastructure projects in Venezuela.

CRRC has mining projects in Africa, Australia, Central Asia, Ecuador and Panama. As one analyst told the Globe and Mail Monday, "There's no question that having a partner such as the Chinese state-owned railway company will finally help break the Gordian knot" now holding Las Cristinas final permit hostage. Analyst John Ing of Maison Placements Canada noted, "China has the political muscle to deal with Venezuela."

In a news release issued Monday, Crystallex announced that CRRC "is leading the efforts of the strategic partnership to unblock the stalled environmental permitting process for Las Cristinas and will provide the necessary project capital to develop the project to commercial production at an optimized mining rate."

Once the transactions are complete, Crystallex will hold a one-third interest in the Las Cristinas JV while CCRC will have the majority two-thirds interest. CCRC will supply the construction and operating capital to fund mine development, expansion and operation and will be responsible for project construction. Crystallex will contribute the mine operating contract, feasibility study, all design and engineering and other project assets.

Crystallex estimated proven and probable reserves to be 16.86 million ounces of gold. Measured and indicated gold resources are believed to be 20.76 million ounces.

CCRC has advanced Crystallex US$2.5 million during the negotiation of the joint venture between the two companies. A meeting of Crystallex shareholders to approve the transaction is scheduled in August with closing expected in the third quarter of this year.

Mineweb's phone call and e-mail to Crystallex for comment on the transaction were not returned as of Mineweb's deadline early Tuesday morning.