Placer stands by Las Cristinas deal

Vancouver — The battle over control of the Las Cristinas gold property in Venezuela is turning nasty with reports that the Toronto Stock Exchange (TSE) has appointed a disclosure analyst to investigate the details of Placer Dome‘s (PDG-T) sale of its 70% stake in Venezuelan subsidiary Minera Las Cristinas (Minca). Minca holds the mining license of the Las Cristinas gold property in the Bolivar state.

“We don’t confirm, deny or comment on investigations,” says TSE spokesman, Steve Kee, “but we look into all complaints.”

According to the Venezuelan newspaper El Nacional, Placer sold just the non-voting class “A” shares in the Venezuelan company to Vannessa Ventures (VVV-V), while retaining the voting class “B” shares. A complaint was subsequently filed with the TSE alleging that Placer failed to report sufficient details of the deal to the market.

“That’s just not correct,” says Placer’s spokesman, Brenda Radies. “The class “A” voting shares were all sold to Vannessa and on closing of the sale all of the economic interests in Las Cristinas were transferred to Vannessa.”

Documents filed by Vannessa with the CDNX in July agree with Placer’s claims. The report states that the purchase agreement includes all the outstanding shares of Placer Dome de Venezuela CA, a company indirectly owned by Placer Dome – which holds a 70% stake in Minca, as well as all of its outstanding debts payable to Placer Dome’s affiliates.

The price tag for the shares comes in at US$50, while the cost of assuming the debt is another US$50. Vannessa also agreed to assume all the work obligations governing development of the project, including the estimated annual cost to maintain the concessions of US$300,000.

Placer retains a sliding percentage interest in revenues derived from sales of gold and copper from the property. Under the deal, Placer gets a 2% net smelter return on Vannessa’s portion of copper revenues from the project and a net smelter return on Vannessa’s share of the gold revenues. This starts at 1% if the gold price is below US$276 per oz., moves up to 3% if the gold price is between US$276 and US$350, and runs to 5% if gold goes over US$350. Placer also has a retained back-in right, which kicks in if a bankable feasibility study shows a 250,000-oz.-per-year gold mine is profitable. The right can be exercised for Vannessa’s capital costs and “pre-production soft costs,” plus 10%. Vannessa would then be entitled to 2% of Placer Dome’s net smelter return on gold and copper production — provided it has spent a minimum of US$2 million in capital costs on the project and maintained the mining rights for more than a year.

“Placer holds a single “B” share in Vannessa Venezuela and a one “B” share in Vanessa Holdings as security for the back-in right,” added Radies. “Those 2 single shares don’t give Placer any right to receive anything from any Vannessa company and it does not give us any voting rights.”

Vannessa is looking at the possibility of a 100,000-oz.-per-year mine, a much smaller operation than had been planned by Placer. The junior estimates that a project on that scale, which would only exploit near-surface mineralization, would cost between US$35 million and US$50 million to go into production.

Placer originally planned a US$600 million development in Las Cristinas, but halted the development in 1999 due to a slump in gold prices. Placer subsequently took a US$116-million writedown and just days before the company’s rights to the Venezuelan deposit were scheduled to expire, Placer sold off its interest to Vannessa.

Venezuelan state-owned industrial holding Corporacion Venezolana de Guayana (CVG), which holds a 5% stake in Minca with an option to earn an additional 25%, objected to the sale and decided earlier this month to rescind the Minca operating contract. Vannessa responded by seeking an injunction of the move in Venezuela’s Supreme Court. The Venezuelan National Guard is currently occupying the project site

CVG plans on moving the project forward by attracting new investors. “Crystallex is interested, Gold Reserve is interested, there are other Canadian firms that are interested (in the project),”’ says General Francisco Rangel, president of CVG.

Vancouver-based Crystallex International (KRY-T) has long claimed the rights to two of the core concessions. In the early 1990s, the junior purchased a Venezuelan company, Inversora Mael, which claimed to hold the rights to the Las Cristinas concessions. A series of legal challenges to CVG’s title to the ground appeared to end in June of 1998, when the Venezuelan Supreme Court refused to hear claims brought by Mael and Crystallex.

Despite the ruling, Crystallex is continuing to take legal action against the Venezuelan government to assert its claims to the property.

“We had one major setback, says Crystallex’s CEO, Marc Oppenheimer. “We were not happy with June 1998.”

Spokane-based Gold Reserve (GLR.A-T) holds the rights to the neighboring Las Brisas property, which host proven and probable reserves of 235 million tonnes grading 0.14% copper and 0.79 gram gold per tonne.

Las Cristinas holds proven and probable reserves of 323 million tonnes grading 1.1 grams gold.