Like its neighbour in Bolivar State of southwest Venezuela, Crystallex International Corp., Gold Reserve Inc. has seen its share price get punished by the uncertainty surrounding mining projects in that country and the possibility that Hugo Chavez's government will take over their deposits.

Gold Reserve recently reported its third quarter results and completed the sale of some of its mining equipment but gave no update on Brisas. There has been no change to its status in the past five months and the Venezuelan government has not responded to the company's request to review the decision to revoke mining permits, notes Michael Curran at RBC Capital Markets. Nor has the government moved to officially expropriate the concessions. So no news likely isn't good news, the analyst said in a research note.

Gold Reserve did have $64-million in cash at the end of September and sold some mining equipment for another $19-million. While essentially getting rid of one of its two processing lines planned for Brisas, the company still has more unused mining equipment that could be used or sold in the future, Mr. Curran said.

He thinks it is highly likely that the government will try to take control of the project and Gold Reserve will be forced to seek a legal remedy. This may take several quarters, if not years, the analyst predicted, and once the legal process begins, Gold Reserve could seek to buy another exploration or development project as it seeks to restore shareholder value. Obviously, this won't be in Venezuela.

Jonathan Ratner

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