Venezuela ends Gold Reserve rights

Reuters | Thu, 28 May 2009 10:13
[miningmx.com] -- VENEZUELA has stripped Gold Reserve of rights to part of the Brisas project, making it dificult for the U.S.-based mining company to access one of Latin America's largest gold deposits.

The government's official publication on Wednesday declared "extinct" the Brisas del Cuyuni concession, one of several properties making up the Brisas project, two days after ending Gold Reserve's El Pauji concession in the same project.

Venezuela's socialist President Hugo Chavez has nationalized many industries, and he plans to develop the mining sector via state-controlled joint ventures in a bid to diversify government income in South America's top crude exporter.

Brisas and its sister project Las Cristinas in Venezuela's southern jungle together are estimated to sit on well over 20 million ounces of gold, but legal battles and red tape mean no company has been able to develop the district.

Gold Reserve and Canada's Crystallex, which has rights to Las Cristinas, have unsuccesfully waited for years for environmental permits to start production.

Gold Reserve's Brisas del Cuyuni alluvial concession contains little gold but sits above the project's main hardrock gold deposit, making it hard to access.

"The impact of this implied seizure on our rights to the hardrock ... concession is unclear at this time since the alluvial and hardrock concessions occupy the same 500 hectare area," the company said in a statement.

"In addition, we are extremely concerned about the future status of our employees located at the Brisas Project site," Gold Reserve said.

Brisas contains an estimated 10.2 million ounces of gold. The company acquired the concession in 1992 and has invested $100 million in the project.

Chavez wants to develop Brisas and Las Cristinas via a joint venture between the government and Russian-owned mining companies.

Gold Reserve said on Tuesday it did not intend to comply with a recent request by the mining ministry for all the technical information about Brisas.

Gold Reserve, a Canadian company that is headquartered in Washington state, last month threatened to file a $5 billion arbitration suit against Venezuela for blocking development of Las Brisas by revoking a construction permit last year.