CVG eyes new Las Cristinas option

Vancouver — Since the early 1990s, when a host of foreign companies entered Venezuela in search of large gold deposits, the advancement of the historical “Kilometre 88” mining district of Bolivar state has been plagued by protest from illegal gold miners, protracted legal challenges to land titles, environmental maneuvering and behind the scene deals. 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 to develop the large low-grade deposit.

The Venezuelan development company now has its sights set on a macro-mining project that combines Las Crisitnas with Gold Reserves‘ (GLR.A-T) Brias deposit.

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

The latest mining scenario comes after Placer sold its interest in Las Crisitnas without CVG’s written approval, which was essential for the sale. Placer responded that it did not need CVG’s approval. The proposed sale came 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 gold company shelved construction in the summer of 1999, citing low gold prices, and had subsequently taken a US$116-million writedown. Gold prices haven’t improved since then, leaving Placer few options other than to shop Las Cristinas to potentially interested parties before its deadline expired.

Las Cristinas is an open-pit project in Bolivar state. It 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 20-year mine life, at a milling rate of 48,000 tonnes per day. Production during the first 10 years was expected to average 530,000 oz.

Balking at Placer’s deal, 30% owner CVG has introduced yet another prospective mining scenario by adding the nearby Brisas deposit (itself a past victim of much controversy) into the fray. With proven and probable reserves of 235 million tonnes grading 0.14% copper and 0.79 gram gold per tonne, Brisas was initially included in the protected Imataca Forest Preserve. Gold Reserve fought for four and a half years before the government of Venezuela granted the company title to the hard-rock rights.

Measuring 1.9-by-0.75 km the deposit has stalled due to its low-grade and weak metal prices. Gold Reserve tabled a projected a 55,000-tonne-per-day operation with estimated operating cash costs including mining, processing with production of on-site copper cathode, smelting and refining coming in at US$162 per oz. of gold, net of copper credits. Total costs per oz. of gold would hit US$254.

“The combined project is the most rational and economic way to exploit this orebody with the least environmental impact,” says Gold Reserve’s president, Rockne Timm. “We are committed with CVG to the successful development of this world class mine.”

Waiting in the wings and still claiming a right to a portion of the Las Cristinas property is Crystallex International (KRY-T). 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 continues to take legal action against the Venezuelan government to assert its claims to the property.

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