Legal issues prevent the operation of Las Cristinas with China and Russia A
business that shines

October 29, 2010, 2:12 a.m. | A newspaper series

1 This is the first of a series of journalism, based on a critical report on the
negotiations was announced by President Hugo Chavez for the exploitation and
exploration of gold.

2 It is hoped that the president makes the announcements on Sunday in El Callao.

3 Leaders of the government's own party have warned about the legal impediment
exists to negotiate with third parties in that sector.

4 The National Executive has maintained a firm position with regard to foreign
investment. There are huge resources involved in the mining sector in Venezuela,
especially the subject of gold $ 15 million Crystallex 4 and 6 gave is the number of concessions that were questioned.

1757 The decree is beginning debate on the exploitation of Las Cristinas, paralyzed
eight years of gold ore exploitation could mean up to 10,000 billion Carmen
Carrillo

Special World

Ciudad Guayana. At any time the president, Hugo Chavez, could herald the start
of the operation of the site perhaps more rich in gold that exists in Latin
America: Las Cristinas.

Following the announcement by the head of state in his penultimate tour of
Asia-Europe partnership with China or Russia for gold mining in this area, a
number of forces have been unleashed in the presidential entourage, which seek
to benefit from these sites.

The Venezuelan government announced the partnership on the basis of Decree 1757,
dated April 29, 2002, published on May 7 that year, which states that "the
National Executive reserves the direct exercise of exploration and exploitation
gold ore found in the fields located in the areas of gold concessions, obsolete
and extinct, called Cristina 4, Cristina 5, Cristina Cristina 6 and 7, located
in the municipality Sifontes Bolivar state, "says a report that was submitted to
the Government.

It's Las Cristinas, where eight years ago, despite the great price that has
reached the metal and an investment of $ 150 million made by Placer Dome,
between 1996 and 2001, not yet formally begun the exploitation of mineral gold
that could mean revenue for the country, between 8,000 and 10,000 million for
the negotiation.

With regard to the creation of corporations for the management of production
processes miners in Guyana, he begins to discuss what state enterprise, in the
case of gold, should be in front, but also discusses the beginning of the
exploitation of Las Cristinas that eight years is paralyzed.

Under Article 6 of the aforementioned decree, states that "in the exercise of
exploration and exploitation referred to in Article 1 of this decree, the
Ministry of Energy and Mines is empowered to contract with Corporación
Venezolana de Guayana (CVG) , or other entity the exclusive property of the
republic, the activities required for the exploration and exploitation, as well
as technical and economic terms more suitable for the rational exploitation of
the aforementioned fields. "

A little history

Speaking of Las Cristinas is traced to problems, disputes, a history of conflict
of laws, injunctions, applications for annulment, lawsuits and other actions
that went so far as the Supreme Court of Justice (TSJ).

Before that, it is important to highlight the role played by the CVG in
connection with the case of Minca, which was used as grounds for breach of
contract with Venezuela's foreign partner, Placer Dome, the argument that the
project was not developed in the short term and in alleged breach of obligations
of a formal nature, which ended with the decision of the CVG to end the
partnership.

It was noted at the time that had passed five years, between 1996 and 2001 gold
price was very low and that the price of that market timing of metal production
unprofitable.

Placer Dome was 70% of the profits and debts and the state was 30%, and when the
company, one of the largest gold producers in the world, he left, he returned
the country to mine with an investment of 150 million dollars.

The site of Las Cristinas 4, 5, 6 and 7 is considered the richest in the
continent, because according to technical studies, with between 8 and 11 million
ounces of gold.

Of course, with the country's current situation, the problem of unemployment in
the mining area in Bolívar state Caura implementation of the Plan, the
revitalization of this rich deposit would, as stated in the Decree 1757, "not
only revival of mining to the effects of a greater contribution to national
output, but essentially the job ", which is a strategic objective for the
Government, hence the fact that the state should assume.

Why is not producing Las Cristinas?

When President Chavez signed the decree which the state brings these
concessions, the Ministry of Energy and Mines, which then led Alvaro Silva
Calderon, is the entity authorized to initiate the exploration and exploitation
of this "pleasure gold."

For this command the CVG, the other entity mentioned in the statute, to initiate
the search for a private company or public, national, in order to start business
in the area.

Traditionally government decisions pachydermal Syndrome sufferers, as is so
large, it takes time to reach appropriate levels.

That did not happen in this case. Just the national executive empowered the
Ministry of Energy and Mines, the CVG hired, and with the same speed, the CVG
was granted each and every one of the rights to a private company through an
operating contract.

In this case, Crystallex, and who made the decision, as president of the CVG at
the time, was Brigadier General, Francisco Rangel Gomez.

That was in 2002. Between the period of the publication and entry into force of
Decree 1757 and the decision making, it took a little over a month.

It's been eight years and Las Cristinas, until now, have not reported any appeal
to the country of this "magnificent 1% to 3%" that General Rangel Gomez won with
the Canadian company.

"Before we were members of Placer Dome, as had 30% and now we can only hope as a
country between 1% and 3% of the profit to accrue to the operator, in this case
Crystallex," says a report which you access the World Economy Business

Crystallex, in return for agreeing to be the operator of Las Cristinas, gave the
state 15 million dollars, alleged to have paid in fees to lawyers a similar
amount.

Finally, the State through the CVG, received 15 million dollars, while Placer
Dome received an investment of 150 million dollars, but the relationship became
extinct because the project was halted five years and the CVG made that decision
to defend of the country's interests.

However, in the case of Crystallex, the project has stalled eight years.

In both cases, a Canadian mining company claimed that the Ministry of
Environment never gave them permission to gold mining. Hence the deadlock.

Crystallex Relations

All legal tangle had been woven around Las Cristinas. Crystallex president whose
name is on that Openheimer, claimed title to the concessions 4 and 6 of the
mine.

There were many legal loopholes and major national law firms involved in this
struggle that had overtones of struggle for El Dorado, that long sought by the
Spanish, but in the end, the state had managed to clarify the situation.

Crystallex Conveniently, after signing the contract operations for all Las
Cristinas, had withdrawn its lawsuit against the Venezuelan government.

CVG gave an operating contract to a foreign company (in this case Crystallex),
without meeting, according to legal briefs that rest in the hands of officials,
with a number of conditions.

First, we are talking about a very rich site, which already had a conflict and
whose contract encuadraría within the provisions of article 150 of the
Constitution, which states that "the conclusion of contracts of national public
interest require the approval National Assembly in the cases determined by law.
"

It is also noted in the reports can not be held any public interest contract
municipal, state or national states or foreign official entities or with
companies not domiciled in Venezuela, or make transfers to them, without the
prior approval of the legislature.

"The law may require in the public interest contracts certain conditions of
nationality, domicile or other matters, or require special guarantees" respect
the Constitution.

But apart from that, Article 11 of the Ombudsman notes that the public interest
every contract must be reviewed by the state attorney, the Attorney General's
Office.

In the contract that the Ministry of Energy and Mines signed with the CVG, gives
the authority to contract with a third and the only condition is that states
made after the contract, the CVG to report, just that report, within 10 days.

Even states that the Legal Adviser of the Ministry of Energy and Mines should be
secured and review the negotiations, let alone raise, despite the importance of
the site because it means income for the country, at least a third of
international reserves lie in the BCV, the application of 150 of the
Constitution or Article 11 of the Attorney General's Office. The spirit of the
1757 decree was to limit the contract that could hold the CVG with a third
party. Had to be a state-owned agency, who exploit the concession.

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