ANALYSIS: Lack of judicial control spurs illegal mining in Sifontes

Business News Americas - 17 August 2009

The lack of clear regulations for the Las Cristinas and Brisas gold projects, located in the area known as Kilometer 88 in the district of Sifontes, within Venezuela’s Bolívar state, has increased illegal mining in the region.

According to sector executives that spoke with BNamericas, the Venezuelan government’s reluctance to approve the environmental license that Canadian company Crystallex International (TSX: KRY) needs to begin developing the Las Cristinas gold mine has shaken up the security in the zone and motivated illegal miners to move into the area.

Since Crystallex received operating permission for Las Cristinas in 2002 it has completed all of the required documentation. However, the company is still waiting to receive the environmental license needed to begin construction.

Meanwhile, in December a spokesperson for the basic industries and mining ministry (Mibam) announced it aimed to withdraw the Brisas mining concession from US company Gold Reserve (TSX, AMEX: GRZ), leaving the area’s future up in the air and Gold Reserve without the legal support necessary to begin development of the deposit.

Further complicating these legal problems was an announcement by the government that it will only develop both projects via public-private JV companies.

Russian company Rusoro Mining (TSX-V: RML) was supposed to have taken over the projects but it was later announced that both would be developed by a 100% Russian state-owned corporation through a JV with Venezuela called VenRus. However, several months have passed since this announcement was made and there have been no apparent advances.

The Venezuelan national assembly is currently discussing a new mining law but is making little headway, which has proven to further promote illegal mining in the zone.

The prolonged discussion of the new mining law has halted the sector for several months, blurring regulations and delaying the approval of environmental licenses for a number of projects.

Mibam has suggested nationalizing all natural resources and substituting expired mining concessions with JV companies in which the state is the majority shareholder as the best solution to these problems.

“The lack of serious and effective decisions for the sector has made informal miners feel more sure of themselves in a zone where nothing happens and no one says anything,” a sector executive that preferred to remain anonymous told BNamericas.

In a related issue, although illegal mining has been a problem in the area for several years, the lack of a clear vision for the future has spurred uncontrolled growth in such activities.

In the zone there are nearly 3,000 informal miners that with water pumps dissolve earth and mix it with mercury in order to search for gold, without regard for the environmental impact of their work.

“Environmental damage and deforestation in the zone are very serious. Many hectares are being destroyed while authorities worry themselves over so-called more important issues,” the executive added.

Las Cristinas has 464Mt grading 1.13g/t gold or 16.9Moz contained in proven and probable reserves, in addition to 629Mt grading 1.03g/t gold or 20.8Moz contained in the measured and indicated categories.

Brisas holds reserves of 485Mt grading 0.67g/t gold and 0.13% copper.

Source: http://www.bnamericas.com/news/mining/ANALYSIS:_Lack_of_judicial_control_spurs_illegal_mining_in_Sifontes

http://www.landcoalition.org/cpl-blog/?p=2878