CVG doesn't seem to be interested in KRY as a partner,...see bolding at the end of this article. Lots of emotional banter back and forth, like a married couple heading for separation and divorce.
Placer's Venezuelan tempest threatens to boil over
Placer Dome Inc PDG
Shares issued 327,380,367 Aug 10 close $16.69
Fri 10 Aug 2001 Street Wire
Also Vannessa Ventures Ltd (VVV)
"ACCIDENT-PRONE" PLACER STUMBLES AGAIN
by Stockwatch Business Reporter
Placer Dome has been summoned to Venezuela by its government-backed
partner, Corporacion Venezolana de Guayana (CVG), for a board meeting on
Friday, Aug. 17. On the agenda is Placer's reported sale of its interest in
the Las Cristinas gold project to Vancouver-based mining junior Vannessa
Ventures Ltd.
CVG, which represents the interests of the federal government, claims
Placer's interest in Las Cristinas, held through the CVG-Placer joint
venture Minera Las Cristinas (Minca), is not its to sell.
"We have a board meeting with Placer Dome's people, because we never got
the information about the transaction to sell the shares to Vannessa
Ventures," said a CVG official on Friday. The official, who requested
anonymity, confirmed comments from CVG president Francisco Rangel on Aug. 7
that Placer did not have the right to sell its interest because it did not
adhere to the terms of the joint-venture contract. Mr. Rangel said Placer
had 90 days to set things straight or the contract will be revoked. CVG's
position is that Placer failed to give the required obtain written
permission from the development company.
Placer officials have responded with remarkable resolve and with remarkably
blunt talk, considering it is dealing with a government, saying the July
deal is completed, is final and there is nothing to discuss.
"The sale with Vannessa is closed, it's a done deal," says Placer
spokeswoman Brenda Radies. "CVG is incorrect in those statements," she
says, referring to Mr. Rangel's comments that Placer failed to adhere to
the terms of its contract with CVG. "The sale is closed and frankly, that's
the end of it. Now if CVG has issues with Minca, fair enough, and that's
now really for the shareholders of Minca to deal with, which would be
Vanessa.
"Talking to us would be useless. We have no legal standing to say or do
anything," she adds. "We sold it. It is really a bit odd and I'm not really
sure what the point is, why (CVG) would even want to talk to us when we've
sold it."
CVG, however odd or pointless Ms. Radies may find it, is threatening to
nullify the Placer-Vannessa deal, meaning that amongst other things, it may
not allow Vannessa onto the property to begin its planned small-scale
development. While it appears on the surface that it is Vannessa that has
the most to lose in Placer's showdown with the Venezuelan government, it
may actually be Placer that loses the most should the price of gold return
to $325 an ounce (all figures U.S.). A back-in clause in the Vannessa deal
ensures that Placer can restart its large-scale mining plans should the
price of gold once again reaches levels that make Las Cristinas economic
once again.
Even this threat fails to dislodge Placer officials from their almost
pig-headed position on the issue, pointing out that a peremptorial
nullification of its Vannessa deal will backfire. Says Placer South America
spokesman Filipe Ruiz from Santiago: "What you're talking about is a very
serious matter that goes beyond Placer Dome, Minca or whatever else because
it would be a sign of not respecting what are the regulations for
investors. So it would be a really negative one. If someone's going to take
that line, they're really going to have to assess what it means."
Ms. Radies says that since Placer is not on the board of Minca, it does not
plan to attend a meeting to discuss CVG's complaints. If Placer were to
attend, it would be strictly to advise CVG to keep its complaints out of
the news media. "I wouldn't read a lot of significance into a big meeting,"
she says. "You also have to understand that the story in North America is a
little different than it is in Venezuela. The Spanish-language one was very
emotional, accusatory. If anybody from Placer Dome has a discussion with
CVG it will be to address the things they said about Placer Dome, not to
discuss Minca, because we have nothing to do with Minca."
Ms. Radies, however, concedes that Placer may still "technically" be on the
Minca board. "To be honest, I'm not entirely clear, again because these are
shares in a company we've sold, PD Venezuela, so to be honest I'm not sure
we're clear on what's really happening other than Placer Dome no longer
owns any shares of PD Venezuela," she says. (PD Venezuela is Placer Dome de
Venezuela, the entity that held the majority interest in Minca.) "Employees
of PD Venezuela may technically still be board members until new board
members are brought on, but that does not mean that Placer Dome has
anything to do with Minca's business. We've sold the shares and so have no
more connection."
The unnamed CVG official says that as things stand, the sale does not exist
and will not be recognized by Venezuela's mining and energy ministry, at
least until some issues with Placer are worked out. That leaves open the
possibility that the Venezuelan government of Hugo Chavez will declare null
and void whatever deal Placer has made with Vannessa and ensure that
someone else develops the 11.8-million-ounce project should Placer want to
exercise its back-in clause.
Las Cristinas was declared uneconomic by Placer in July, 1999, when it
halted construction of the $575-million project. Vannessa planned a
small-scale $35-million to $50-million project -- well below the economies
of scale Placer demands. In return, Placer sold its interest for $50, a
2-per-cent net smelter royalty on copper and between 1- and 5-per-cent nsr
on gold -- plus the right to back into the deal if the price of gold goes
high enough to make its large-scale plans viable once more.
Placer's in-your-face response to the government's outrage prompted Maison
Placement president John Ing, who has experience with junior-company
activities in the South American country, to wonder aloud whether the
company has lost its collective marbles.
"It's very strange and surprising that a company of Placer's stature, which
is well used to dealing around the world, would be so inflammatory." Mr.
Ing says. "The noises coming from the Venezuelan government, whether it's
the government direct or CVG, the reality is that Placer had written (the
contract) and said publicly that their motivation is to get it developed."
Placer's timing of the announcement -- shortly before the July 15 expiry of
the one-year extension it had on suspending construction -- was a slap in
the face for Venezuela, he says. "The reality is that for Placer to do it
one day before the exploration date and in a manner that it was so
unilateral is surprising, given that who they were dealing with was
essentially a Crown corporation, the Venezuelan government."
Mr. Ing says Placer's behaviour is particularly significant after it went
through huge public relations problems in the Philippines. "Placer should
have known there would be some sensitivities involved," he says, referring
to the Marcopper Mining Corp. controversy stemming from a 1996 tailings
spill. Placer owned 40 per cent of Marcopper at the time, but sold its
interest in 1997.
Mr. Ing says that over the past few years, Placer has proved itself to be
accident prone. He cites the Western Areas purchase in South Africa, which
was hit by strikes and huge layoffs, plus its $1.1-billion purchase in 1999
of the Getchell property in Nevada, which was roundly criticized by many
analysts as a bad deal for Placer.
Even a recent deal for the Pueblo Viejo property in the Dominican Republic
has not gone smoothly, Mr. Ing says. He explains that Placer put out an
upbeat press release on July 17 saying that the company was awarded the
right to negotiate an agreement for the property, but in a subsequent
analyst conference call, Placer management was unable to answer many basic
questions about the deal. "They said they had right to bid on it but they
were very fuzzy on the environment (and) the metallurgy," Mr. Ing says.
"They didn't answer or said they'd look at it later. They cautioned that
they didn't yet have the property, but why put out a press release to that
effect? As an analyst, you have no idea about the capital cost,
environmental implications and the metallurgy itself."
Mr. Ing also says that while Placer wrote off its $116-million investment
in Las Cristinas last year, it could still one day become a money-maker.
"It's very surprising because while they've written those ounces off, we
know that if the price of gold goes higher, those ounces will come home to
roost." He adds: "This is a property where they wrote down for
$120-million. What is the consideration that you got? $50? It just doesn't
add up."
Ms. Radies explains that under the management of chief executive officer
Jay Taylor, who took Placer's top job in September, 1999, all projects must
be economic in today's gold-price environment, not what may happen in the
future. "Cristinas does not meet that test," she says, pointing out that
other properties with dubious economics have been sold recently, as well.
In addition, Cristinas is a "high-profile property that takes a lot of
management time but doesn't return any value." Far from being free to keep,
there are between $3-million and $4-million in carrying costs due to its
sustainability program and a small-miners' program to keep some local
people employed working the surface. "We're not returning anything on a
project we said we won't build," she says.
Ms. Radies denies Mr. Ing's suggestions that Placer is acting either
high-handed or erratically. "We have a property that we've written off,
we've said we won't build it, we've said we don't believe its economically
viable," she says. "We've taken it out of reserves, we've gone to the
(international) bankers to look at all of the options to make sure we
didn't miss anything, including a sale. Nobody's stepping up to the plate.
It's not as though there's a lineup to buy it."
Vancouver-based Vannessa, a penny-mine promotion by most measurements, was
chosen, not because it is heavy with jungle gold-mining expertise, and not
because it has the financial wherewithal to put a gold mine into
production, but, said Placer, because it was a junior with which Placer has
worked with in the past. The company, which may or may not benefit from the
support of Calgary's Mannix family, came up with a proposal that Placer
thought would work -- mistakenly, accordingly to the Venezuelan government
-- and bingo! the 70 center won the prize.
TWO CENTS
Not surprisingly, an official of Vannessa declined to comment on the record
about the Placer-CVG brouhaha. "In all fairness, we want to give Placer the
opportunity to answer that request before we go into this and put in our
two cents."
The official suggests, however, that contrary to Ms. Radies's comments,
there may still be some unfinished business between Placer and CVG, and
this may be addressed at an upcoming meeting, if Placer attends. "What
needs to be done in that particular sale agreement is there has to be an
extraordinary general meeting of the shareholders of Minca, the company
that owns the project," he says. At that point a new board will be elected.
"It is possible that between now and that time CVG wants to make sure that
Placer knows their position," he says.
The official added that it is also worth keeping in mind the peculiarities
of doing business in that part of the world. "In Latin America, there is an
awful lot of posturing that takes place, the reason being that 'We want
everybody to hear about this.'" So you can't discount (CVG's comments)
completely, but you can't take them at face value, either."
Meanwhile, the unnamed CVG official says Crystallex International Corp.,
which has conducted a long-running promotion based on a thin legal
challenge for the property -- it was denied the right to sue because it has
no standing in the matter -- is no more in the picture now than it has ever
been. "I understand the Crystallex secretary came to see us about a month
ago," the official says. "We listened to his proposal, but we just
listened. That's all."
As for Ms. Radies, she says that between the CVG kerfuffle, the
$116-million write-off and the ever-present aroma of Crystallex, Placer
will probably be a happier company without Las Cristinas.
"Sometimes a property just has bad karma," she says.
(c) Copyright 2001 Canjex Publishing Ltd. stockwatch.com |
