DENVER GOLD FORUM: Venezuelan gold – Rusoro advances, Crystallex 'encouraged'

Project permits or acquisitions apparently move much more rapidly in Venezuela if a gold mining company adds the Chavez administration as a joint venture partner.

by Dorothy Kosich

As gossip in the investment community and Rusoro Mining itself makes very clear, the junior miner may be the vehicle of choice for the Venezuela government and the Chavez administration to jump into the pool of gold deposits found in the KM 88 area.

President Hugo Chavez' "solid political alliance" with Russian for the past few years, the investment by Russian gold miner Peter Hambro in Rusoro, and the social connections of Rusoro CEO Andre Agapov have all contributed to the success of the Vancouver-based junior.

In a presentation to the Denver Gold Forum Monday, Rusoro president George Salamis declared, "Rusoro is essentially a Russian owned and Russian operated company" in the eyes of the Venezuelan Government. He also attributed his company's rapid success in a politically challenging country in which do to business to having gained the trust of the Venezuelan Government.

Just maybe, it may also help when the Chavez administration becomes an equal partner in Rusoro's newly acquired Mina Isidora, which Salamis called "a true gem of a mine," which Hecla Mining just happened to sell on its way out of the country after a three-month shutdown. "We're very happy to put in partnership with the government on this one," Salamis declared, adding that Rusoro is the first company to partner with the Venezuelan Government in a mixed enterprise joint venture gold mining company.

The new partnership also extends to milling ore as Rusoro announced last week that it had completely landmarks agreements with government ministries to custom mill ore from various Minerven operations in the El Callao District and to officially begin processing the ore from the Isidora Mine. Nevertheless, the new partnership doesn't necessarily dazzle other foreign miners with stalled projects in Venezuela.

Rusoro recently made an all-stock offer, which Gold Reserve apparently felt it could refuse for its Las Brisas gold project. However, Salamis told the Denver Gold Forum audience that Rusoro made the offer with the thought "we could remove the deadlock in the Kilometer 88 situation." Kilometer 88, located in the Bolivar State, is currently Venezuela's highest ore grade region, and emerging as a world-class mining district. The Las Brisas and Las Cristinas projects are located in the region, conveniently next door to each other from the perspective of Russian companies interested in possibly acquiring two stalled gold projects.

Rusoro views itself as the "active consolidators in Venezuela," Salamis said, noting that the company has acquired two operating gold mines, making the transition from exploration company to gold producer in only 12 months.

After acquiring Gold Fields' Venezuelan assets, Salamis said Rusoro significantly lowered cash costs at the Choco 10 gold mine. Meanwhile, the company also established a new collective agreement with the unions, resolved previous water issues, and permitted a new waste dump at Choco 10. Salamis admitted that he was discouraged by Rusoro's location at the low end of the valuation curve, a quagmire he attributed to "the Venezuelan discount is hard at work" and is "exacerbated by events in Kilometer 88." Nevertheless, Rusoro expects to mine 210,000 ounces of gold in Venezuela next year and projects that it will produce 150,000 ounces this year. The junior miner is also busy with exploration programs at several mines and properties which will yield updated resource estimates next year.

CRYSTALLEX

However, for the non-Russian-connected miner Crystallex the realities of mine permitting in Venezuela still remain very much a quagmire. Nevertheless, executive chairman and CEO Bob Fung told the Denver Gold Forum that "we're very encouraged by recent discussions" with the environmental ministries in Venezuela that could at very long last, get that final permit for Crystallex's Las Cristinas project. Fung said that the negotiations have resulted in modifications to the footprint of the project from a reclamation and environmental perspective, such as phased development and reclamation of tailings, and concurrent clean-up of areas impacted by illegal small mining. A local water company has also been formed. No changes were made to mining operations or mine production, he added.

Crystallex president Bob Crombie said the company's compliance with the mine operating contract places it in a better position legally to pursue legal remedies or other options regarding Las Cristinas. New homes have been constructed for local residents, sewer infrastructure has been installed, local roads have been paved, and considerable medical services are being offered to local communities. Crombie noted that Las Cristinas had been fully permitted in the past, which definitely makes the permitting of Las Cristinas this time around very realistic.