Misery has company

Gold Reserve (GRZ-T,GRZ-X) has lost its status as the project that could in Venezuela.

The company announced that the ministry of the environment has struck at its Brisas project by way of planning to rescind a key permit for the project.

The permit, which was granted in March of last year, allowed for construction to get underway.

The news came on the same day that the ministry informed Crystallex International (KRY-T, KRY-X) that it wouldn’t grant the company its long awaited environmental permit for the Las Cristinas property Crystallex shares fell 40% on the news.

Spokane, Washington-based Gold Reserve has seen havoc reaped on its share prices too. As recently as Apr. 28 its shares were trading for $3.87 but on May 1 they closed in Toronto at just $2.40 on 1.5 million shares traded a 40% decrease.

The company says the ministry cited environmental degradation, the presence of small miners and the protection of the Imataca forest reserve as the key reasons for their decision.

But Gold Reserves contends against those claims.

It says there are no small miners at the site and that any environmental disturbances were made before it acquired the property.

Further, it claims those “disturbances” were documented and addressed in its operating plan which was approved by the government.

As for the contention that the project infringes on a forest reserve, Gold Reserve counters that the area the project sits in was approved for mining before it acquired the project a status, it says, was confirmed as recently as 2004.

With the environmental and social impact study approved early in 2007 and the green light for construction in the form of the Initiation Act — given shortly there-after, Gold Reserve believed any such issues were well behind it.

“Prior to this, at no time during our year-long effort to obtain the administrative Initiation Acthas any environmental issue including the Imataca Forest Reserve been raised by (the ministry) as an impediment to proceeding with our project,” Gold Reserve’s president Doug Belanger said in a statement.

The company says that should the project go ahead it would amount to a US$1 billion investment on the part of the company over the course of the mine’s life. It would, according to Gold Reserve, represent the biggest gold and copper project in Venezuela and create over 1,000 jobs.

Thus far, the company has invested close to US$300 million in the project.

“We are prepared to protect our rights to Brisas through the Venezuelan legal system and, if necessary, other avenues to protect the interests of our shareholders will be pursued,” Belanger went on the say in the statement.

While Gold Reserves says it has still not received formal notification of the move, it says it is working with various government officials on the matter.

The company has roughly US$130 million in cash, investments and restricted cash, project related equipment with an original cost of over US$30 million and convertible notes payable of approximately US$104 million.