Business in Vancouver (Krisendra Bisetty): A junior Vancouver miner appears to have staged a Latin American coup by winning presidential approval for a hotly contested precious metals venture. Backed by a Russian oligarch and advised by Canadian tycoon Frank Guistra, Rusoro Mining Ltd. is racing to exploit gold deposits in Venezuela -- something that has been tried unsuccessfully before by others.
Although in existence for only two years and operating mines for just half that time, Rusoro is confident it can unlock some of the region’s best deposits in the Kilometre 88 district, a gold rich region in a country where numerous small players are fighting for their piece of turf.
"The government is not happy with the way things have gone down in KilometreThe company has a unique joint venture covering projects in Venezuela, said Salamis, a geologist who previously worked with former Vancouver miner Placer Dome Inc.
88," Rusoro's president George Salamis said in an interview. "But it’s confident
dealing with us because we have a track record of production and delivering on
promises."
Last week, the country’s president, Hugo Chavez, said that joint venture vehicle Venrus CA would be used to develop the district, which is home to two major deposits, Las Cristinas and Brisas, that combined contain more than 30 million ounces of gold. But Las Cristinas is tied to Crystallex International Corp. (KRY), a Toronto-based gold producer that said it hasn’t been formally notified by the government of any changes to its principal asset ... and neither has Canadian miner Gold Reserve Inc. (GRZ), owner of the Brisas deposit and a target of a hostile bid by Rusoro.
Gold Reserve claims it has spent US$230 million on its key asset, but would be willing to give it up -- for the right price.
However, Rusoro's $120 million offer, which Gold Reserve has asked its shareholders to reject, is substantially less than the value of the company's net cash, equipment and the Brisas investment, it said. As a last resort, Gold Reserve has threatened to seek recovery of its investment from the Venezuelan government, plus potential lost profits, which it said could amount to billions of dollars. Heavily dependent on oil revenue, which accounts for approximately 90% of export earnings and more than 50% of federal budget revenue, Venezuela is reeling from falling oil prices. That may be giving the socialist government the push to finally exploit the country’s gold resources as it seeks to uplift poor communities that surround mine sites and large deposits. "There's a bit of a squeeze on and he [Chavez] is looking to the gold sector certainly to provide a bit of a rescue," said Salamis.
Rusoro is the only foreign company producing gold in Venezuela. Its founding shareholders are members of Russia’s Agapov family, which has been operating small mines in Venezuela since 2002. Salamis said good "synergies" between Russia and Venezuela have helped Rusoro cement its partnership with the government, but he still can’t guarantee that his company will be granted the permits to build the new mines. "We have a fairly good view that we can get these permits in fairly short order, but obviously there’s negotiation work to be done; there’s filings to be done."
In the past year, however, Rusoro has successfully permitted two other assets inIt's December 2007 acquisition of the Venezuelan assets of a subsidiary of South African miner Gold Fields Ltd. (GFI) -- Gold Fields own 35% of Rusoro -- vaulted Rusoro into the ranks of producers. The deal was followed a few months later with the acquisition of Hecla Mining Company’s Venezuelan assets.
the country, but just two years ago it was a little known exploration company
before it embarked on its gold consolidation strategy.
After producing 38,868 ounces of gold at its two mines during the past quarter -- a record amount of gold poured in any quarter and at record low cash costs of US$358 per ounce -- Rusoro now has its sights set on building new mines, which Salamis said would be easier to do with the government as an equal participating partner. "Whatever we contribute, they have to contribute," he said, "so the government would have skin in the game."
And with the government giving guarantees and long-term stability agreements, Salamis expects that financing will be "relatively easy to get a hold of" once the debt markets recover, "especially in a rising gold market and especially with a deposit as strong as the one down there."
Krisendra Bisetty
kbisetty@telus.net
http://www.biv.com/subscriber/05news.asp
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