Venezuela’s still hot — Verdict lifts Gold Reserve price

Following a Venezuelan Appeal Court’s decision on a lawsuit regarding ownership of the Brisas property, shares of Gold Reserve (TSE) climbed to record 52-week highs.

Shares were trading at $20.25 at presstime, compared with about $8 in the last week of September.

The gold-copper-molybdenum-silver project is south of Placer Dome’s (TSE) Las Cristinas property, in the famed Kilometre 88 gold district. The dispute resulted from an alleged violation of a contract between the previous owner of the concession and a group of Venezuelan investors. A provision in the contract stated that the contract could be terminated if lease payments were not received for a 3-month period. During the nine months that the investors leased the property, it was alleged that no such payments were made. Subsequently, the owner of the concession told the group he was terminating the contract.

Later, the concession owner sold the property to Gold Reserve de Venezuela. This company is 75%-owned by Spokane, Wash.-based Gold Reserve and 20%-owned by Gold Reserve’s 80%-owned subsidiary, Compania Mineria Unicornia. Gold Reserve itself, therefore, has a 91% interest in the property, which was reaffirmed by the Appeal Court’s decision. While this is not the judgment on the main action, it does lend further support to Gold Reserve’s claim to the concession, according to company spokesmen.

The only action left for the group of investors is to appeal the decision to the Venezuelan Supreme Court within 40 days. Such an appeal, however, will be heard only if it can be demonstrated that the Appeal Court has misinterpreted or misapplied the law. No additional evidence may be submitted. The main action relating to the validity of the original lease and option to purchase agreement will be heard by the Commercial Court in Caracas. The company feels the decision by the Appeal Court will lend support in this other lawsuit.

Interest in Brisas is speculative but strong because of its location. The concession is on strike with and adjoins Las Cristinas, which is open to the south and contains an estimated 128 million tonnes grading 1.32 grams gold per tonne. The potential of the Brisas claims is therefore believed to be significant.

Exploration by Gold Reserve indicates there are four types of mineralization present:

* saprolite containing free gold;

* andesitic porphyry with disseminated sulphides;

* quartz veins with free gold; and

* strongly sheared massive sulphide mineralization with pyrite, chalcopyrite and molybdenite. (Samples have graded up to 65.4 grams, 4.1% copper and 3.8% molybdenum.)

The company has drilled 31 holes on the property; no assays have been reported.

At the market price of $21.50, Gold Reserve has a market capitalization of $318 million.

By comparison, Venezuelan Goldfields, which traded around $7 when it listed on the Toronto Stock Exchange in September and which now trades at around $14.25, has a market capitalization of $315 million. Vengold also has no reserve figures but does have a substantial land position.

Gold Reserve also owns mining rights to the Alfa alluvial gold and diamond property in Venezuela.