Reuters
Venezuela reconsidering Imataca mining ban -miners
06.24.08, 4:59 PM ET

Canada - (Adds Gold Reserve statement)

By Cameron French

TORONTO (Reuters) - Venezuela appears to have reopened the door to mining on its mineral-rich Imataca Reserve, according to two Canadian mining companies, who said Tuesday the government is reconsidering the denial of their mining permits.

Shares of Crystallex International (amex: KRY - news - people ) shot up by two-thirds on optimism it may get the green light for its long-delayed Las Cristinas gold project, while Gold Reserve , which wants to develop the nearby Brisas copper and gold deposit, jumped by 35 percent.

In separate statements, the companies said they had met with the country's environment ministry and been told the government had instructed the ministry to discuss modifications that would allow the permits to be issued.

Crystallex also said it had received minutes of a committee meeting of the country's National Assembly, which showed representatives of the Ministry of Mines confirming support for Crystallex.

"It is too early for Crystallex to forecast how this issue will be resolved, but it is encouraged by the support from the Venezuelan government and the National Assembly," the company said.

The company had expected to get final approval for construction of the mine this year, but it said in late April it had been told the permit would be denied, leading to a 57 percent dive in its shares.

On Tuesday, the stock surged 43 Canadian cents to close C$1.08 on the Toronto Stock Exchange amid optimism permitting could get back on track. Gold Reserve climbed 45 Canadian cents to C$1.75.

John Ing, president of Canadian investment dealer Maison Placements, said the fact that Crystallex is sitting down with ministry officials suggests the situation might be turning in the company's favor.

"It appears ... that it unblocks the logjam," he said.

Crystallex has faced repeated delays in its attempts to get permission to mine the Las Cristinas deposit, which holds massive gold reserves of 17 million ounces.

The most recent hiccup came as the environment ministry moved to stop all open pit mining on the Imataca forest reserve, where key gold deposits are located.

NATIONALIZATION FEARS

In the back of investors' minds has been President Hugo Chavez's nationalization movement, which has swallowed energy, steel and cement companies.

Catherine Gignac, an analyst at Wellington West in Toronto, said if Chavez intended to nationalize the mining industry, he would make his intentions clear. Rather, she pointed out the environment ministry has been out of step with the rest of the government on the permitting issue.

"The mines ministry, Chavez, the locals, the governor of Bolivar state and Canadian mining companies all seem to be on the same side, and the minister of the environment is saying, nope, we don't want any development," she said.

"It sounds like they haven't even opened the file."

Crystallex said ministry officials had discussed possible modifications to Las Cristinas, including mitigating the environmental impact of the project and improving remediation plans at the end of the mine's life.

($1=$1.01 Canadian) (Reporting by Cameron French; editing by Rob Wilson)