CVG's argument for retaking control of Las Cristinas is incoherent, lawyer says - Venezuela

By Harvey Beltrán / Business News Americas

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Venezuelan heavy industry holding CVG's decision to unilaterally terminate Canadian company Crystallex International's (TSX, Amex: KRY) mine operating contract for the Las Cristinas project is incoherent, mining lawyer Mariana Almeida told BNamericas.

"The decision was made because Crystallex did not move forward with the project for over a year, among other arguments," Almeida said.

In June 2007, CVG confirmed the environment ministry (Minamb's) approval of the EIS, the posting of the construction guarantee bond and the payment of the environmental disturbance taxes. However, Crystallex did not receive any permits to proceed with development.

Almeida finds it strange and of concern that the government is using the same argument to unilaterally terminate this contract as it did in 2001 when it terminated the agreement it had with Minera Las Cristinas (Minca), a JV with what is now Canada's Infinito Gold, to develop Las Cristinas.

At the time, CVG argued that the company had not developed the area for a year, despite the project having been voluntarily suspended by the two parties mainly for market reasons, Almeida said.

Almeida is also legal counsel for Minca, which is involved in international arbitration over Las Cristinas after CVG revoked its operating contract.

"In many of the messages we [Minca] sent to CVG, we proposed starting up and redesigning the project to adapt it to the market, but CVG argued it was considering Crystallex because it provided the conditions to start up the project immediately. That was in 2002," Almeida said.

Ten years have passed and the project is in the same situation despite the fact that the price of gold has reached record highs.

"Other countries with similar or less resources than Venezuela have developed their areas. Why then is Venezuela, a mining country, back to where it started?" Almeida asked.

Minca has always expressed interest in reaching a friendly agreement that meets the needs of both parties, Almeida told BNamericas recently.

In 1992, Minca signed a 20-year contract with CVG to explore, develop and mine the Las Cristinas project, after which the former claims to have invested US$185mn.

Located in Bolívar state, Las Cristinas has proven and probable reserves of 464Mt grading 1.13g/t containing 16.9Moz gold.