CVG nixes arbitration

Corporacion Venezolana de Guayana (CVG) says it isn’t interested in arbitration with Vancouver-based junior Vannessa Ventures (VVV-V) over who will develop the Las Cristinas gold project in that country.

Vannessa points to a recent ruling by the Supreme Court of Venezuela saying that the decision supports its contractual right to arbitration to settle the dispute.

The government of Venezuela recently unilaterally reacquired full rights to the gold-copper property, refusing to recognize Placer Dome‘s (PDG-T) sale of the mine to Vannessa subsidiary Minera Las Cristinas (Minca). Also, the government’s holding group, Corporacion Venezolana de Guayana (CVG), rejected Vannessa’s US$50-million startup plan, saying the sale violated the original concession contract.

For its part, CVG is refusing to enter arbitration with Vannessa, saying that the junior’s interpretation of the court’s decision goes too far.

“At no point does the decision order CVG to go to arbitration to resolve the dispute,” says CVG director Jose Rafael Torrealba.

Vannessa says it would prefer to resolve the dispute through dialogue, but CVG shows little interest, stating that the removal of Minca’s rights to Las Cristinas places the state-owned company in control of the project.

CVG’s plans call for Las Cristinas to be developed with the help of a major mining company with the financial wherewithal to tackle a large scale, US$600-million investment over 10 years.

In 2001, Vannessa acquired from Placer Dome a 95% stake in Minca, which held the rights to the property. Minca’s partner in the project, CVG, holds the remaining stake.

The partnership between Placer Dome and CVG soured in 1999, when the former froze investment in Las Cristinas, arguing that a slump in gold prices rendered the original US$600-million project uneconomic.

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. However, the company halted development 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 will take US$35-50 million to put such a project into production.

Crystallex International (KRY-T) claims 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 1998, when the Supreme Court refused to hear claims brought by Inversora Mael and Crystallex.

Despite the ruling, Crystallex continues to take legal action against the Venezuelan government to assert its claim to the property.

Minca is currently in discussions with the county’s mines ministry with respect to title and development issues.