I almost feel like we're back to the beginning... I thought this article reflects what *might* happen to us if Vz pulls a fast one on KRY and GRZ. Geezzz... you would think that when Vz takes a date to the dance that they atleast leaves with her...

Right now, KRY is that date... and Vz has "stepped out to get us a drink"... and we're wondering where he's gone. Meanwhile the dance is coming to a close soon...

In Place of Glitter, Lots of Bitterness

By CHRISTINA HOAG

Published: April 5, 2002

The gold and copper mine at Las Cristinas in southeastern Venezuela was supposed to be a national showcase. It would jump-start the country's languishing mining industry and rescue the impoverished regional economy by generating billions of dollars worth of ore and hundreds of jobs.

Instead, Las Cristinas, one of Latin America's biggest known gold deposits, is mired in recrimination and litigation involving the project's Canadian partners and the Venezuelan government.

Now consisting of a half-built mineshaft, rusting bulldozers and a lot of grand plans on paper, Las Cristinas appears little closer to yielding its treasure trove than it did in 1991, when the Canadian mining giant Placer Dome Inc. signed on to develop the mine with the Venezuelan government in a partnership called Minera Las Cristinas C.A., known as Minca.

''In the 11 years that Minca had this area, it never fulfilled its mission -- not one gram of gold has been produced,'' Francisco Rangel Gómez, president of the Corporación Venezolana de Guayana, said in a recent statement. The company, known as the CVG, is the state industrial conglomerate that was Minca's governmental partner.

In the latest chapter of the project's convoluted history, the government has stripped Minca of its mining rights to the site, thrown it off the property and terminated the partnership. Last week, the CVG announced that it was taking charge of the mine and would soon start approaching possible new partners.

The catalyst was Placer Dome's sale last July of its 95 percent stake in Minca to Vannessa Ventures Ltd., a small mine company based in Vancouver, British Columbia, that planned a radically scaled-down project. The CVG, owner of the remaining 5 percent, said that the deal was fraudulent and that Vannessa's plan for a smaller Las Cristinas project was unacceptable.

Erich Rauguth, president of Minca and Vannessa Ventures de Venezuela, says the CVG is abusing its power and trampling on the law. ''The government is using its authority to freeze us out, but we're not walking away,'' he vowed.

It was all smiles and handshakes in 1991 when Minca was formed as a 70-30 partnership between Placer Dome and the CVG to invest $575 million to develop Las Cristinas.

When the state company could not come up with the cash for its 30 percent stake, it shifted 25 percent of its shares to Placer.

Then a scrappy little Vancouver mine concern, the Crystallex International Corporation, sued Minca, claiming title to part of Las Cristinas. After an expensive two-year hiatus in the mine's construction, a judge agreed with Placer that its title acquisition superseded the Crystallex claim.

The legal tussle caused further friction, as Placer said that the CVG, which controls mining concessions, had left it vulnerable to the suit.

In 1999, it was the CVG officials who were angry, and embarrassed, when Placer announced that it was pulling out of Las Cristinas because gold prices, around $400 an ounce when the project began, had slipped to $275 and made the project uneconomical. Still, the CVG allowed Placer to seek a successor.

After offering the shares to the CVG but receiving no reply, Placer sold its stake to Vannessa for a token $50. Vannessa also assumed $173 million in liabilities, payable upon the start of production. It agreed to pay Placer a royalty on production and to allow Placer back into the project later if gold prices shot up again. Meantime, Vannessa would spend $50 million building a small, shallow mine that could be deepened if gold prices recovered.

CVG officials were furious that Placer had not sought their approval for the sale and resented the re-entry option that Placer retained. They rejected Vannessa's smaller-scale project out of hand. The CVG demanded that Minca cancel the sale within 90 days or face revocation of its partnership. It also filed criminal charges accusing Placer of defrauding the CVG by using Vannessa as a ''front.''

Vannessa ''does not have the capacity to confront a project of this size, and the deal is illegal, as it was done behind the partner's back,'' Mr. Rangel, the CVG president, said in his recent statement.

Minca argued that it did not need CVG's approval to sell. ''There was nothing obscure or illegal about it,'' Mr. Rauguth said. The charges are pending.

After Vannessa refused to back out, the CVG terminated its contract with Minca. The National Guard seized the property last November.

Minca sued to force the CVG to submit the dispute to arbitration, as called for in the partnership contract. The CVG said that because other parts of the contract had not been fulfilled, the arbitration clause was void. A ruling a few weeks ago left both sides claiming victory.

The CVG is plowing ahead and says it has already started seeking new investors with ''great financial muscle'' to develop Las Cristinas's prodigious proven reserves of 11.8 million ounces of gold, worth around $3.4 billion at current prices, as well as 1.2 billion pounds of copper, worth an additional $780 million.

''We're interested in a large-scale project that will reactivate the economy in southern Bolívar state, generate employment and report significant earnings to the country,'' Armando J. Madero, CVG's vice president for mining, said in a statement. ''There are about 10 companies in the world who have that capacity.''

Vannessa has filed numerous court actions to stop the CVG from awarding the site to another company and has filed criminal charges accusing the CVG of the theft of a Vannessa vehicle when the property was seized and abuse of authority.

''I have faith in the system and that the law will be taken into consideration, not politics,'' Mr. Rauguth said. ''We want due process, but it may take four or five years.''

Rivals are not planning to wait that long. So far, although the CVG has made it clear that it is seeking major companies, two so-called junior mining operations have announced their interest.

Gold Reserve Inc., a small mining company based in Spokane, Wash., has proposed building a mine by combining Las Cristinas with its adjacent property, Las Brisas, which also holds impressive reserves. The combination would result in an $850 million investment in a mine with proven reserves of more than 21 million ounces of gold and 2.2 billion pounds of copper, on a par with Africa's huge gold mines.

''Why build two projects that will produce less gold at a higher cost of production, leaving less revenue for the nation and less profit for the operator?'' A. Douglas Belanger, executive vice president of Gold Reserve, wondered in an e-mail interview. ''We have the detailed plan already in place, and we have the infrastructure already in the area with a well-trained work force. We also have the funds already in hand.''

The other bidder is Crystallex, which is still pressing its claim of title to Las Cristinas in the appeals courts. Crystallex has also proposed combining its neighboring property, Albino, with Las Cristinas to build one big $400 million mine. Crystallex officials did not respond to numerous requests for comment.

Neither bidder appears fazed by Vannessa's vow to keep the case in court, which could make it hard to raise funds for a new project.

The tale continues.