This coming on the heels of Rusoro’s announcement on Wednesday of a record quarter at its Choco 10 mill, where 38,868 ounces of gold were produced at a cash cost of US$358 per ounce. The Choco 10 mill produced 14,261 ounces of gold in December 2008.
(click on the photo for a larger image)
This marks the third consecutive month of record gold production and can be
attributed to high volumes of ore processed from the Choco 10 mine which
produced 9,234 ounces of gold with the other 5,027 ounces of gold coming from
ore processed from the near-by Isidora gold mine.
(click on the photo for a larger image)
The comments by Hugo Chavez were reported by Reuters late in the day on Tuesday the 13th, and caught the former owner of the property, Crystallex International, by surprise. "In 2008 we created the joint venture Venrus with Russia, a Russian company and a Venezuelan company, an joint venture for the Las Cristinas fields," Chavez said during a televised address to Congress.
Crystallex had been developing the Las Cristinas project over the last several years to have an initial production rate of 20,000 tonnes per day. Its ability to maintain its rights to the project were thrown into serious doubt when the Venezuelan government rescinded construction permits on environmental grounds.
The joint venture known as VenRus is a fifty-fifty partnership between Rusoro and the government of Venezuela, with each partner responsible for fifty percent of capital costs to earn fifty percent interest in the project.
The Las Cristinas deposit contains an estimated 17 million ounces of gold in both proven and probable reserves. Rusoro is the “mining partner of choice” in Venezuela, and is the only foreign mining company to successfully finance, build and operate gold mining operations on a long-term basis.
The reasons for that are clear.
The company is funded in large part by Russian investors, and the largest single shareholder in the company is Vladimir Agapov, who owns 65 million shares of the company personally. Since Russia and Venezuela are ideologically sympathetic towards one another, its only natural that Venezuela would seek a Russian partner to help develop its mineral wealth. And certainly Rusoro management’s inclination to embrace the “social/industrial” partnership structure that Hugo Chavez stipulates is a plus for the company, not to mention their track record of competently managing the operations within the country.
Many investors are wary of Rusoro’s ability to continue funding itself, but they overlook the fact that any of the projects that are subject to the fifty-fifty model come with half the funding already in place, since Venezuela is obviously in a position to pony up its share of development costs. With that half of the financing a slam dunk, it won’t be a stretch for investors from countries similar to Venezuela in political leanings to participate in the remaining fifty percent. China and Russia can easily contribute to that requirement. In reality, with the partnership between Rusoro and the government of Venezuela growing stronger as time passes, its just a matter of time before these projects are put into production under Rusoro management.
Rusoro is also in the process of acquiring the outstanding shares of Gold Reserve Inc., who is the concession holder of the Brisas deposit, another massive Venezuelan gold project with as much as 15 million ounces of gold likely. Gold Reserve also had its construction permits rescinded on environmental grounds, and it is widely expected that Gold Reserve shareholders will tender their shares to the takeover bid, which will likely be extended until mid-February to accommodate the policy of Gold Reserve.
So from an investor’s standpoint, with a company that potentially will control a combined reserve of 45 million ounces, it seems that Rusoro’s funding issues will not be problematic, and it certainly seems that the company’s status as mining partner of choice diminishes its political risk.
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