Venezuela awards gold mine contract to Crystallex
Friday September 6, 8:12 pm ET
>>Crystallex's Cottin said several banks and investment companies had shown interest in financing the project, among them Deutsche Bank, Standard Bank of London, Endeavour Financial Limited of Britain and Canada's Yorkton Securities.<<
By Pascal Fletcher
CARACAS, Venezuela, Sept 6 (Reuters) - Venezuela's state industrial holding CVG said on Friday it had selected Canadian miner Crystallex International Corp. (Toronto:KRY.TO - News) to operate the Las Cristinas gold mine in the southeast of the country.
Past exploration has shown that the mine, located in the Venezuelan state of Bolivar, has proven and probable reserves of more than 11.8 million ounces of gold. It is believed to be one of the world's top five undeveloped gold resources.
"The directors of the Corporacion Venezolana de Guayana ... approved the signing of an operating contract with the Canadian company Crystallex for the development of the las Cristinas gold deposit," a CVG statement said.
It added the project to develop Las Cristinas foresees a total investment of $500 million. When fully operational, the mine would process 40,000 tonnes a day of ore.
State holding CVG had considered bids from several foreign mining firms after President Hugo Chavez's left-wing government this year resumed state control of the mine.
Another Canadian company, Vannessa Ventures Ltd. (Vancouver:VVV.V - News), has been involved in a long-running legal dispute with the Venezuelan government and CVG over what it said was its rightful claim to develop the deposit.
CVG President Francisco Rangel said Crystallex, which has other mining properties in Venezuela, was chosen to operate the project because the company offered the best prospect for a rapid development and start-up of the mine.
Discussions on contract details would now take place.
Luis Felipe Cottin, President of Crystallex de Venezuela, said construction work at the mine would take some 18 months.
He added the Las Cristinas project would be the flagship of the company's mining development operations in Venezuela. "We have invested more than $200 million in Venezuela so far, and this country is our center of operations," Cottin said.
BITTER ROW
Over the last year, Las Cristinas has been the object of a bitter public row between Venezuela's CVG and Vancouver-based Vannessa, which last year purchased a controlling stake in MINCA from the original owner Placer Dome Inc. (Toronto:PDG.TO - News).
CVG has consistently refused to recognize Placer Dome's sale to Vannessa of its controlling stake in the mine, arguing it violated the terms of the original concession contract.
Vannessa has continued its legal challenges to the Venezuelan government's decision to resume state control of the mine. It has also announced it is taking its claim to Las Cristinas to international arbitration under an investment protection agreement existing between Canada and Venezuela.
"We don't fear any claim before the Venezuelan courts, because these can't affect the titles to the deposit," Cottin said. Rangel said that although Crystallex was being given the operating contract, the mining rights to the Las Cristinas concessions would remain in the hands of the state.
The original partnership in Las Cristinas between Placer Dome and CVG broke down after the Canadian mining firm froze investment in the mine in 1999, arguing that a slump in gold prices made the project uneconomical.
Cottin described the Las Cristinas project as "viable even with low gold prices".
In its proposal, Crystallex committed itself to developing local infrastructure by building houses and roads and improving local health and water services in the Kilometro 88 section of the Sifontes district where the mine is situated.
The company also promised to comply with environmental safeguards.
Crystallex's Cottin said several banks and investment companies had shown interest in financing the project, among them Deutsche Bank, Standard Bank of London, Endeavour Financial Limited of Britain and Canada's Yorkton Securities. |
