Venezuela's Las Cristinas gold mine mired in uncertainties
(All figures U.S. unless otherwise noted)
By Paul Simao
TORONTO, March 19 (Reuters) - Venezuela's disputed Las Cristinas gold mine, the focus of a
bitter turf war between Crystallex International Corp (AMEX:KRY - news; KRY.TO - news) and
industry giant Placer Dome Inc (NYSE:PDG - news; PDG.TO - news), is not viable at current gold
prices, a Toronto mining analyst said on Thursday.
Ownership of the $600 million mining project and its estimated 12 million ounces of gold has touched
off a no-holds-barred legal and public relations battle between the two Vancouver-based companies.
Crystallex has asked the Supreme Court of Venezuela to reverse a July 1997 decision denying the
company the right to challenge Placer's 70 percent ownership of the project, located in the remote
southeastern reaches of Venezuela.
''The irony of all ironies is that the fight is over a deposit that at $300 gold is probably not economic.
Even at US$375 it was shaky at best,'' said John Ing, the highly respected president of Maison
Placements Canada.
''It begs the question why is there a fight and why hasn't there been a settlement,'' Ing said.
Gold closed at $291.30 on Thursday, sharply down from a 1997 high of $363.
Slumping bullion prices, however, haven't dissuaded Placer from a fervent belief in the long-term
viability of the Las Cristinas project.
Placer spokesman Hugh Leggatt estimated gold could be produced at Las Cristinas at a cash cost of
$200 an ounce during the mine's expected 14-year life.
''Our mine plan is spread over a long period of time in which you will have high prices and low prices
and it sort of averages out,'' Leggatt said. ''That is why you calculate the reserves at a long-term
average gold price, which in our case is still calculated at $375 an ounce.''
Leggatt also said Placer was not interested in an out-of-court settlement with Crystallex and denied
any involvement in the recent mudslinging which shaved almost 40 percent off the value of Crystallex
stock.
Crystallex shares, which had traded as high as 11.85 this year, tumbled to 4.50 on Wednesday after
a Venezuelan congressman attacked the company's claim to Las Cristinas.
Rafael Rodriguez Acosta, president of a Venezuelan congressional subcomittee on mining, told
reporters at a trade conference in Miami that Crystallex had no right to develop Las Cristinas and
hinted that the company had bribed a Venezuelan official to get control of the property.
Acosta's claims were backed up by Asensio & Company Inc, a New York-based investment firm,
which called Crystallex's stock ''grossly overvalued'' and reaffirmed its sell recommendation.
Crystallex issued a strong denial of Acosta's charges and said he did not speak for the Venezuelan
government.
Shares in Crystallex bounced back on Thursday, gaining 1.00 to close at 5.55 a share.
''This (stock's activity) is about dueling press releases, It's 'he said,' 'they said' and it's really a
function of what was the last press release,'' Ing said.
''The ultimate arbiter always has been the Supreme Court of Venezuela and everybody is waiting for
a decision. Everything in between has been up and down on speculation and different nuances and
angles,'' Ing added.
Placer said a speedy court decision in its favor would allow it to finalize financing for Las Cristinas
and continue construction at the project site.
The company has spent about $20 million at Las Cristinas and expects the mine to begin production
by the year 2000.
Placer shares closed down 0.60 at 17.10 in trading on the TSE.
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................... Bob |
