When the blue whale surfaced, Gold Reserve officials knew they had found something special beneath the forest of southeastern Venezuela.

Doug Belanger, president of the Spokane company, said he and Chief Executive Officer Rocky Timm had followed well-regarded Placer Dome Inc. into Bolivar State. Encouraged by that company’s drilling activity, they did a flyover of adjacent claims to detect mineralization.

Strongly encouraged by the results, they were already negotiating with the owner of the area south of Placer Dome’s claim when pumping of a pool created by indigenous miners revealed the “whale,” a dark gray outcropping that stood out against the surrounding dune clay.

Belanger said an assay of a sample from the rock yielded 2 ounces of gold per ton, and copper content of 8 percent and molybdenum of 11 percent – incredibly rich results.

Placer had offered a small amount of cash for the property and a cut of future profits. The owner, in his 70s, snapped up the $2.5 million cash tendered by Gold Reserve instead.

Gold Reserve had a mine, or at least solid prospects for one.

That was 1992. What Gold Reserve has today is not entirely clear.

After investing $230 million in the Las Brisas claim — drilling, mapping and designing a mine that over a projected 20-year life could produce an estimated 11 million ounces of gold and 1.4 billion pounds of copper — the company has been stymied by the Venezuelan government led by President Hugo Chávez.

Gold Reserve received a construction permit for Brisas in March 2007. Belanger said engineers were preparing final plans, and orders were placed for equipment, when in May 2008 the Venezuelan Ministry of the Environment revoked the permit, citing what he called incorrect or vague reasons that included global warming.

Since then, he said, the company has been unable to get clarification of government policy regarding the mine’s development, which had already cleared other permitting hurdles.

“Things are in a pretty unsettled situation,” Belanger said last week.

And while Gold Reserve worked on getting its permit restored, an interloper showed up.

Rusoro Mining Ltd. of Vancouver, B.C., made a friendly offer to buy the company last summer by exchanging two of its shares for one of Gold Reserve’s. Vladimir Agapov, a major shareholder, is a former Aeroflot executive who says he has ties to Chávez and to Prime Minister Vladimir Putin.

Nevertheless, Gold Reserve rejected the Rusoro bid within days.

According to an account of the takeover effort contained in a ruling by the Superior Court of Justice in Ontario Province – Gold Reserve and Rusoro are incorporated in Canada – Gold Reserve’s longtime financial adviser, Endeavor Financial International Corp., threw in with Rusoro.

Endeavor had become a creditor and shareholder of Rusoro, and the companies shared some history.

Gold Reserve sued, seeking injunctions that would block the takeover bid, and any Endeavor assistance to Rusoro in its bid.

On Feb. 10, the Ontario court granted Gold Reserve’s requests. Rusoro withdrew the offer the same day.

Belanger said Rusoro and Endeavor could ask for a rehearing but, given the language used by the judge, that seems unlikely. They have until April 2. Gold Reserve can then pursue a claim for $550 million in damages, he said, adding that a claim against Venezuela could follow.

Belanger said revocation of the construction permit violates a bilateral investment treaty between Canada and Venezuela. Gold Reserve is entitled to seek arbitration of a claim against Venezuela from the International Center for Settlement of Investment Disputes, an organ of the World Bank. Rulings are binding.

Should Venezuela choose not to pay, Gold Reserve would have the right to seek a lien on the country’s assets anywhere in the world, Belanger said.

ExxonMobil last year convinced courts in the United States, United Kingdom, and the Netherlands to freeze billions in Venezuelan assets while arbitrators consider its claim the state-owned oil company improperly seized ExxonMobil’s interest in an oil-processing project.

Belanger said Gold Reserve could seek recovery of its $230 million investment at Brisas, plus lost profits.

“This will be a very large claim if it goes that far,” he said, adding that the arbitration process can take three years.

He said the company has held off seeking arbitration while awaiting written clarification of the Venezuela government’s reasons for its action, but a petition by July is likely.

Were Gold Reserve a U.S. company, he noted, the company would not have access to arbitration because the country has no bilateral trade agreement with Venezuela.

A spokeswoman in Venezuela’s U.S. Embassy in Washington, D.C., said no one on the staff there was qualified to discuss mining policy. But in statements made shortly after Gold Reserve had its permit yanked, Environmental Minister Yubiri Ortega said the nation was seeking “to save and appropriate what is ours.”

Chávez said in 2005 Venezuela would no longer grant mining concessions to foreign companies.

In the Ontario case, the judge cited a press report that Venezuela would partner with Rusoro to develop Brisas.

Shortly after Gold Reserve lost its permit last year, Hecla Mining Co. sold its Isidoro mine and other Venezuela assets to Rusoro. The government became half-owner of the mine.

Hecla Vice President Don Poirier said labor strife and other pressure, plus investors’ unease about any exposure to Venezuelan politics, suggested it was time to go. And the $20 million cash part of the Rusoro purchase — it also received stock — was a timely contribution to Hecla’s buyout of its partners in the Greens Creek Mine development in Alaska.

Isidoro, he said, “became more and more difficult over time to operate, and operate with certainty.”

The mine had been a significant contributor to Hecla earnings earlier in the decade, Poirier said.

Belanger said the Venezuelan action against Gold Reserve was regrettable because the company had invested not only in the mine, but in the surrounding communities and in environmental protection, as well.

Gold Reserve had supported schools, clinics, sports, and provided an Internet center. The manager of its social programs is a native who has worked for the company almost since the day the claims were purchased, he said.

He said neighboring Community Councils, 22 in all, had weighed in on the company’s behalf with the government in Caracas, the capital.

The mining plan complied with the Equator Principles, international standards intended to assure development sensitive to environment and social risks, Belanger said. The company paid for a survey of the mining region’s biodiversity by Conservation International, an organization that supports practices and development that minimize long-term damage to natural resources.

Belanger said that, contrary to government claims, Gold Reserve had kept small miners that do extensive environmental damage off its property.

The mine was expected to employ 2,000 during construction, he said, and 1,000 during its 20-year operating life, out of a local population of 4,000.

With a Gold Reserve future in Venezuela unlikely, Belanger said, the company is looking for other ways to deploy its $105 million in cash and $47 million in equipment while its pending and possible claims against Rusoro, Endeavor and Venezuela proceed.

But surrendering the work of 15 years will not be easy, he said.

“We did everything under the law, and then some, to the highest standards in the world, and here we are,” Belanger said. “That’s what’s disappointing.”