Vannessa to seek injunction

Vancouver — Legal issues are once again taking center stage at the Las Cristinas property in Venezuela. Minera Las Cristinas C.A. (MINCA), 95% held by Vannessa Ventures (VVV-V), is appealing a government decision to revoke its contract to exploit one of South Americas largest gold deposits.

Venezuela’s state-owned Corporacion Venezolana de Guayana (CVG), 30% owner of the Las Cristinas project, notified Minca last week that it had ended its license to mine Las Cristinas, situated in southeastern Bolivar state. The company cites Minca’s failure to meet contractual obligations as the reason for the termination.

Responding to the move, the company stated:

“Minca’s next step is to seek an injunction against the CVG to cancel its attempt to revoke the contract without fulfilling its commitment to arbitrage.”

Vannessa picked up a 95% interest in the Venezuelan holding company through its July purchase from Placer Dome’s (PDG-T). Minca’s main asset is the 20-year mining lease for alluvial and hard rock gold over Las Cristinas.

Under the deal, Placer retains a 2% net smelter return on Vannessa’s portion of copper revenues from the project and a net smelter return on Vannessa’s share of the gold revenues. This starts at 1% if the gold price is below US$276 per oz., moves up to 3% if the gold price is between US$276 and US$350, and runs to 5% if gold goes over US$350. Placer also has a retained back-in right, which kicks in if a bankable feasibility study shows a 250,000-oz.-per-year gold mine is profitable. The right can be exercised for Vannessa’s capital costs and “pre-production soft costs,” plus 10%. Vannessa would then be entitled to 2% of Placer Dome’s net smelter return 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.

Vannessa is looking at the possibility of a 100,000-oz.-per-year mine, a much smaller operation than had been planned by Placer. The junior estimates that a project on that scale, which would only exploit near-surface mineralization, would cost between US$35 million and US$50 million to go into production.

Placer originally planned a US$600 million development in Las Cristinas, but halted the development in 1999 due to a slump in gold prices.

CVG subsequently rejected Placer’s sale to Vannessa and is now setting its sights on a macro-mining project that combines Las Cristinas 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.”

With proven and probable reserves of 235 million tonnes grading 0.14% copper and 0.79 gram gold per tonne, Brisas lies adjacent to Las Cristinas and in fact, is part of the same ore body.