Rusoro Says It Is `Preferred Partner' for Gold Mine (Update1)

By Stewart Bailey

Nov. 14 (Bloomberg) -- Rusoro Mining Ltd. said it is the Venezuelan government's ``preferred partner'' to develop the country's largest gold deposit, which was to be dug by rival Crystallex Resources Ltd. until earlier this month.

Rusoro, which already operates the Choco10 mine in Venezuela, has access to the financing and technical expertise to exploit the Las Cristinas gold deposit, Chief Executive Officer Andre Agapov said today in a telephone interview from London. The Vancouver-based company is well placed to grow in the South American nation because it has a mining joint venture with the government of President Hugo Chavez, he said.

``With our experience and a lot of common ground with the Venezuelan government, I consider Rusoro to be a preferred partner,'' he said. ``Las Cristinas provides serious potential.''

Las Cristinas, which contains about 21 million ounces of gold, has been paralyzed for more than four years while Toronto- based Crystallex waited for the environmental permits it needed to start development. The Mining and Basic Industries Ministry said earlier this month it will seize control of the project as the government strengthens its grip on the nation's economy.

Crystallex spokesman Richard Marshall was unavailable to comment. The company, which was awarded a 20-year permit to develop Las Cristinas in 2002, said yesterday it had received no notification from the government regarding a change in control of the project.

Rusoro rose 2.5 cents, or 8.3 percent, to 33 cents a share at 1:29 p.m. in Toronto Stock Exchange trading, paring this year's decline to 80 percent. Crystallex gained 4 cents, or 15 percent, to 30 cents. The stock has dropped 87 percent this year.

`Common Ground'

The negative publicity generated by permitting delays has hurt Rusoro and other companies operating in Venezuela, Agapov said. He blamed the delays on Crystallex and Spokane, Washington- based Gold Reserve Inc., owner of the nearby Brisas gold and copper deposit.

``Gold Reserve and Crystallex had to find common ground and approach the ministry and they would have gotten their permit a long time ago,'' Agapov said. The delay ``is causing us problems. People are losing faith. I'm willing to make it my problem and solve the situation.''

Rodolfo Sanz, Venezuela's minister of basic industries and mining, wasn't immediately available to comment.

Brisas, which contains 1.2 billion pounds of copper and 9.2 million ounces of gold, provides ``less exciting potential'' to Rusoro than Las Cristinas, given the recent slump in prices of the industrial metal, Agapov said.

Gold Reserve is waiting for the government to set rules after revoking the company's permits in May, President Doug Belanger said today in a telephone interview.

`Opaque Situation'

``It's an opaque situation for everyone until the government establishes a new mining policy,'' Belanger said.

Gold Fields Ltd., the world's fourth-largest producer of the precious metal, sold its Venezuelan assets to Rusoro last year after it couldn't get operating licenses.

Rusoro received the permits soon after the acquisition was completed. Agapov has said the company, which has Russian directors and shareholders, stands to benefit from strong ties between Chavez and the Russian government.

Johannesburg-based Gold Fields, which remains Rusoro's largest shareholder, may be called on to assist ``technically and financially'' if Rusoro is awarded concessions near the community of Kilometer 88 in Bolivar state, Agapov said.

Willie Jacobsz, spokesman for Gold Fields, wasn't immediately available for comment when telephoned by Bloomberg.

To contact the reporter on this story: Stewart Bailey in New York at sbailey7@bloomberg.net.

Last Updated: November 14, 2008 14:11 EST