Venezuela, Russian Venture to Mine Las Cristinas Gold Deposit

Jan. 14 (Bloomberg) -- Venrus CA, a joint venture of Rusoro Mining Corp. and the Venezuelan government, was formed to mine Las Cristinas, a deposit containing an estimated 35.2 million ounces of gold, Venezuelan President Hugo Chavez said.

Venezuela wants to develop the mine this year “under the control of socialism,” Chavez said on state television late yesterday. The mine covers five concessions, he said, naming four where Crystallex International Corp. of Toronto has been awaiting permits to begin mining and one concession belonging to Gold Reserve Inc., which is also awaiting a mining permit.

“The Venezuelan state is getting ready this year for the exploitation and control of the gold deposit Las Cristinas,” Chavez said. Venrus was formed last year, he said.

Las Cristinas has been the subject of decades of changing corporate control. After Placer Dome Inc. was permitted to begin mining some of the concessions in 2001, it sold out to Vannessa Ventures Ltd. Chavez expropriated the site and awarded it to Crystallex. Gold Reserve has held its concession throughout the saga.

A fly-by of the site this week sponsored by Rusoro showed miners living in shacks and using high-pressure hoses to separate gold from the surface of the deposit, creating several square kilometers of swampy, deforested land amid a vast forest.

Rusoro

Rusoro is a Russian-funded company that is buying gold deposits in Venezuela and is in the midst of a hostile takeover bid for Gold Reserve. Venrus is a joint venture between Rusoro and Corp. Venezolana de Guayana, a state holding company.

Venrus currently operates the Isidora mine, which Rusoro bought from Hecla Mining Co. last year.

Chavez wants gold mining and other commodity exports to compensate for falling oil prices, he said Dec. 27. Oil made up 93 percent of Venezuela’s export earnings in 2008.

Gold Reserve President Doug Belanger declined to make an immediate comment. Richard Marshall, a spokesman for Crystallex, didn’t immediately return a call for comment after business hours. Rusoro Chief Executive Officer Andre Agapov didn’t immediately return a call to his mobile phone.

The concessions Chavez mentioned were Cristinas 4, 5, 6 and 7 and Brisas del Cuyuni.

Venezuela also plans to boost diamond mining, Chavez said. The country will rejoin the Kimberley Process, an international treaty meant to exclude from international trade those gems that are mined without permits in conflict areas.

“We are coordinated with international organizations to establish the technical assistance mechanisms so that Venezuela can reincorporate itself into the international certification process,” Chavez said.

Venezuela left the Kimberley Process last year as non- governmental organizations that lobby on diamond issues pressed other members to expel the South American nation.

To contact the reporter on this story: Steven Bodzin in Caracas at sbodzin@bloomberg.net.

Last Updated: January 13, 2009 23:35 EST