Crystallex, Rusoro deny project shakeup

Business News Americas, quoting an unnamed official at Venezuela’s basic industries and mining ministry, or Mibam, has reported that the country plans to withdraw the Las Cristinas mining concession from Crystallex International (KRY-T, KRY-x) and will take control of its operations with Russian-controlled Rusoro Mining (RML-V, RMLFF-o).

The bilingual news service, headquartered in Santiago, Chile, also reported that the government planned to withdraw the Brisas concession from Gold Reserve (GRZ-T, GRZ-x), as well as concessions from Hecla Mining (HL-n).

Business News Americas said the unnamed official described the decision as a move to “recover the country’s mining resources, primarily gold and diamonds, which is why it formed a JV between Rusoro and Mibam through (state mining company) Empresa Minera Nacional.”

Doug Belanger, chief executive of Gold Reserve, did not return telephone calls requesting comment. But senior management at both Crystallex and Rusoro said they had not been informed of any changes to the concessions.

“We’ve read a number of things like this for years,” Richard Marshall, Crystallex’s head of investor relations, told The Northern Miner. “It’s an unnamed source and there appears to be a number of inaccuracies in the article. We’ve not been advised of any changes.”

Similar news hit the headlines in early November, when Venezuela’s minister of mines, Rodolfo Sanz, reportedly said the country would mine the Las Cristinas project under state administration.

Crystallex has tried to move Las Cristinas into production since it won the contract to mine the state-owned in 2002, but has yet to secure an environmental permit for the project.

George Salamis, president of Rusoro, said it was the first he had heard of the story and couldn’t confirm its validity. But he said rumours like this one are a frequent occurrence in the country.

“It’s not much different than comments we’ve heard from the government in the past to media down there,” he explained.

“This seems to be a weekly event and it’s hard to really determine what is spin, and what is a real communiqu from the government, or what are just comments from one official to a journalist. It is very, very hard to say who is speaking from what level of government.”

Even if the news is true, Salamis said, it would not have an impact on Rusoro’s bid for Gold Reserve. On Dec. 15, Rusoro launched an all-stock takeover bid for Gold Reserve. In response, Gold Reserve filed for an injunction to prevent the hostile takeover from moving forward.

The Russian-controlled, Vancouver-based company has launched a takeover bid for Gold Reserve, offering three shares of Rusoro for each Gold Reserve share or equity unit.

The offer represents a 140% premium for Gold Reserve, based on the Dec. 12 closing prices for each company, and a 209% premium based on the 30-day volume-weighted average trading prices for Rusoro and Gold Reserve.

The Brisas project is in southeastern Venezuela’s KM88 region, about 30 km from the border with Guyana. Brisas has proven and probable reserves of 10.2 million oz. gold and 1.4 billion lbs. copper.

Gold Reserve expects Brisas will have a mine life of about 18.25 years and churn out about 457,000 oz. per year when it starts production, slated for 2011.

Venezuelan President Hugo Chavez has become well known for nationalizing key industries and aligning the interests of the South American nation with those of Russia, China and Iran.

The news report sent shares of Crystallex down 2.5¢ apiece, or 14.7%, to close at 14.5¢ on the Toronto Stock Exchange, while Gold Reserve shares fell 3¢, or 4.2%, to 68¢ per share on the TSX Venture Exchange. Rusoro shares closed up 1.5¢, or 5.4%, to 29.5¢ apiece.