Vannessa seeks injunction

Vancouver — Legal issues are once again taking centre-stage at the Las Cristinas gold property in Bolivar state, Venezuela. Minera Las Cristinas (Minca), which is 95%-held by Vannessa Ventures (VVV-V), is appealing a government decision to revoke its contract to exploit the deposit.

Venezuela’s state-owned Corporacion Venezolana de Guayana (CVG), 30% owner of Las Cristinas, recently gave notice it would cancel Minca’s licence to mine the deposit, citing Minca’s failure to meet contractual obligations. Vannessa is seeking an injunction against CVG “to cancel its attempt to revoke the contract without fulfilling its commitment to arbitrage.”

Vannessa acquired a 95% interest in Minca in July from Placer Dome (PDG-T). CVG subsequently rejected Placer’s sale to Vannessa, saying Placer should have sought written consent.

Under the deal, Placer retains a 2% net smelter return royalty (NSR) on Vannessa’s portion of copper revenue from the project and a variable net smelter return on Vannessa’s share of gold revenue, which ranges from 1% (if gold is below US$276 per oz.) to 5% (at prices above US$350).

Placer can back in if a bankable feasibility study shows that a 250,000-oz.-per-year gold mine can be profitable. The right can be exercised for Vannessa’s capital costs and “preproduction soft costs,” plus 10%. Vannessa would then be entitled to 2% of Placer Dome’s NSR 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 had planned a US$600-million operation, producing 470,000 oz. gold and 16,000 tonnes copper annually, based on reserves of 323 million tonnes grading 1.1 grams gold per tonne with 0.14% copper. Placer halted development in 1999 when gold prices entered their prolonged slump.

Vannessa envisages a 100,000-oz.-per-year mine, much smaller than Placer had planned, to exploit near-surface mineralization. The junior estimates it would take US$35-50 million to put that project into production.

CVG is now setting its sights on a expanded mining project that would combine Las Cristinas with Gold Reserve’s (GLR.A-T) Brisas deposit. Brisas has proven and probable reserves of 235 million tonnes grading 0.14% copper and 0.79 gram gold per tonne.