CVG explores options at Las Cristinas

Vancouver — Since the early 1990s, when a host of foreign companies entered southeastern Venezuela in search of large gold deposits, the advancement of the historical Kilometre 88 mining district has been blocked by protests from illegal miners and protracted legal challenges to land titles. Some 12 years later, the saga continues, with Venezuelan state-owned Corporacion Venezolana de Guayana (CVG) rejecting Placer Dome‘s (PDG-T) sale of its 70% stake in the Las Cristinas gold project and looking at other options for developing the large, low-grade deposit.

The Venezuelan development company now has its sights set on a “macro-mining project” that combines Las Cristinas with Gold Reserve‘s (GLR.A-T) Brisas deposit.

“With this initiative, Venezuela would have the second-largest mine in Latin America and the sixth-largest in the world,” says CVG President Francisco Rangel Gomez. “We are not going to rest until we accomplish this.”

Placer is accused of having sold its interest in Las Cristinas without CVG’s written approval, though the Canadian company says no such approval was required. The proposed sale was made in mid-July, just days before the company’s rights to the Venezuelan deposit were scheduled to expire. Placer sold off its interest in Minera Las Cristinas, the operating company formed by Placer and CVG, to Vannessa Ventures (vvv-v). Vannessa’s total interest in the project is slated to be 95%.

CVG has made no secret that it wants Las Cristinas to move forward, with or without Placer. The latter shelved construction in the summer of 1999, citing low gold prices, and subsequently took a US$116-million writedown. Gold prices have not improved, leaving Placer few options other than to offer Las Cristinas to interested parties before its deadline expired.

An open-pit project, Las Cristinas hosts a reserve of 323 million tonnes grading 1.1 grams gold per tonne. An updated feasibility study, unveiled in the fall of 1998, recommended annual production averaging 470,000 oz. gold and 16,000 tonnes copper over a mine life of 20 years. The proposed daily milling rate was 48,000 tonnes, and production during the first 10 years was expected to average 530,000 oz.

Balking at Placer’s deal, 30% owner CVG has proposed making the nearby Brisas deposit part of the overall project. Brisas, which has proven and probable reserves of 235 million tonnes grading 0.14% copper and 0.79 gram gold per tonne, was formerly included in the protected Imataca Forest Preserve. Gold Reserve succeeded in persuading the Venezuelan government to grant it title to the hard-rock rights.

At present, the Brisas project is stalled, owing to low grades and weak metal prices. Gold Reserve proposes a 55,000-tonne-per-day operation with estimated operating cash costs of US$162 per oz. gold (net of copper credits). Total costs are pegged at US$254 per oz. gold.

“The combined project is the most rational and economic way to exploit this orebody with the least environmental impact,” says Gold Reserve President Rockne Timm. “We, together with CVG, are committed to developing this mine.”

Meanwhile, Crystallex International (KRY-T) is claiming a right to a portion of the Las Cristinas property. 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 Chief Executive Officer Marc Oppenheimer. “We were not happy with June 1998.”