The "Las Cristinas" Saga: Part two

This latest legal action against the mine’s owners at the time lead once more to a halt in operations at the mine in early 1998. Afterwards a court ruling dismissed the Oppenheimer legal actions and ruled in favor of MINCA. However, this was a hollow victory; low gold prices made the mine an unprofitable investment and once again operations were suspended. And like a festering open wound the mine continued to be plagued with problems; a lack of proper financing to develop the mining site, and as time passed frictions emerged between the two partners of MINCA ( Mineria Las Cristinas) made up of Placer Dome and CVG and the Corporacion Venzolana de Guyana an affiliate of the mining ministry. This further hobbled the project.

Enter Vanessa Ventures:

In 1999, Placer Dome declined to put the project into production after nearly a decade of legal battles over the mine’s ownership. Placer officially claimed the project was no longer economically feasible due to low gold prices at the time. So in another twist in the already bizarre tale, it sold its stake for $50 to Vannessa Ventures. Selling concessions for one of the world’s largest gold mine deposits for such a ridiculous sum rightly enraged the Bolivarian authorities and the Venezuelan government then proceeded to file criminal charges against Placer Dome. Furthermore, in retaliation to Placer’s $50 bail out of the unprofitable gold mine, a presidential decree expropriated Las Cristinas and the National Guard seized control of the property. CVG was given the authority to determine the fate of the property. Immediate after wards CVG cancelled Vanessa’s rights to exploit the property. In 2002 CVG’s president who was part of well connected members of Chavez’s cabinet General Francisco Rangel then awarded the Las Cristinas concession to Crystallex KRY which had battled with Placer Dome previously for stake in the mine during the turbulent 1990s. Once President Chavez announced the quasi nationalization of the mine in the national interest Vannessa Ventures sought redress first in front of the high court of Venezuela and then when the company realized that the fight over control of the mine had stirred up sentiment of patriotism aimed against foreign companies exploiting the nation’s natural resources it suddenly dropped its appeals. Instead, Vannessa Ventures went internationally with their grievances against the government of Venezuela which it accused of canceling the contract it had with the the state’s mining authority CVG and thereby relinquishing Vanessa ventures rights to concession at the mine.

Vanessa takes the offensive:

Meanwhile, In order to meet the requirements to submit its Las Cristanas dispute to international arbitration, “junior” Vanessa Ventures [VV] of Calgary, Alberta, had to drop five appeals to Venezuela’s Supreme Tribunal of Justice which it filed in front of the tribunals.

The Las Cristinas case, which was until then merely a domestic dispute between the government and foreign mining companies, then went to another level in front of International Centre for Settlement of Investment Disputes (ICSID), a Washington, D.C.-based organization which is backed by the World Bank, for arbitration. The escalation of

the dispute drew unwanted attention to the issue and created diplomatic friction between the Canadian government (which assisted Vannessa in sponsoring the compensation claim in front of the WB tribunal) and the Venezuelan government. This put pressure on the government to reassess Vannessa’s claims for compensation. Caracas, who most likely feared that the all powerful World bank may withhold millions of huge loans to Venezuela as a sort of blackmail if the government did not compensate the junior Canadian mining company. Thus fearing retribution from the World bank not surprisingly the Venezuelan supreme court decided in extremis to examine Vanessa’s compensation claim and consider the company’s demands for financial and monetary compensation . Yet the compensation claim against the Venezuelan remains unresolved and several related pending lawsuits have been filed, yet have been delayed. In its law suits challenged the mining contract awarded to Crystallex in September 2002, the April 29, 2002, presidential decree expropriating Las Cristinas, and other decisions involving the case. That same year Crystallex KRY was granted exploitation rights to the gold mine by the Venezuelan government. Yet it remains unclear to this day who really owns the mine and who will inevitably gains access to its riches.

Las Cristinas “Program”

Venezuela: Hugo Chavez, President. Elected by popular majority in 1998. Survived a recall vote in 2004. Constitutional republic currently moving left toward full socialism under Chavez. Chavez seen as antagonistic to the United States, friendly to Marxist countries such as Cuba.

Crystallex International [AMEX:KRY; TSX:KRY]: Toronto based mining company which has operated gold mines in Venezuela for a decade. CEO Todd Bruce, former president of Iamgold Corp. (AMEX: IAG). Chairman Robert Fung, financier, Canada. COO Kenneth G. Thomas, former Barrick, Hatch geologist, engineer. VP Investor Relations Richard Marshall. KRY holds a mine operating agreement (MOA) with CVG to exploit Las Cristinas. Currently (October 2005) awaiting final approval to impact natural resources from MARN in Venezuela.

Corporacion Venezolana de Guayana (CVG): Government-owned holding company in Venezuela to administer and manage heavy industry, mining and construction in Bolivar State, et al. Current president is Chavez appointee Victor Alvarez, who doubles as the cabinet-level Minister of Basic Industries and Mining. The former president of CVG when the Crystallex MOA was inked, General Francisco Rangel Gomez, a close associate of President Chavez, has since been elected governor of Bolivar State. CVG is responsible for obtaining permits for Las Cristinas including the final permit to impact renewable natural resources from MARN.

Ministry of Natural Resources and Environment (Atmosphere) (MARN): Government bureaucratic overseer responsible for environmental matters. Reviews applications for mining and construction permits and is responsible for approval of environmental permitting. Jacqueline Farias is cabinet level Minister of MARN.

Placer Dome [NYSE:PDG]: Vancouver based multi-national mining company. PDG formally held a contract with CVG to mine the Las Cristinas. In 2000 it wrote the project off at a reported cost of $116 million citing low gold prices, but in July 2001, hours before their mining contract was set to expire, PDG purported to sell a portion of its Venezuelan subsidiary which held Placer’s interest in MINCA, a joint venture of Placer and CVG for Las Cristinas, to Calgary based Vannessa Ventures, Ltd. [TSXv:VVV] for a reported $50. A “sale” never recognized or approved by the government of Venezuela or CVG.

In March, 2002 the Placer/CVG contract was rescinded (Resolution 35) after a years-long default for non-production and after two one-year extensions had been granted by CVG to Placer. All Las Cristinas assets were returned to the nation by legislative action and National Executive decree (No. 1757) in April of 2002. Las Cristinas was then once again awarded to the CVG which entered into a new MOA with Crystallex in September 2002.

Vannessa Ventures Ltd. [TSXv:VVV]: Canadian exploration company now based in Calgary, formally from Vancouver. Antagonistic to Crystallex. John Morgan, President. Very large shareholder is reported billionaire Ron Mannix of Calgary who controls over 50% of VVV through Corel Holdings. VVV purported to gain control of Las Cristinas by buying a partial interest (one of two classes of stock) of Placer Dome de Venezuela (PDV) from Placer Dome for $50 hours before the Placer/CVG mine operating agreement through MINCA was set to expire for non-production in 2001. (See Placer Dome). A separate $50 transaction occurred reportedly for Placer’s PDV debt. PDV held the Placer interest in MINCA, a joint venture of the CVG and Placer for the exploitation of Las Cristinas. Importantly, neither Vannessa nor Placer sought the required permission from the CVG and the then MEM (now MBIM) for the transaction.

From that tenuous toehold Vannessa went on to file a bevy of lawsuits in the Venezuelan courts and wage a public war of words in dozens, if not hundreds of shots in the press largely ignored by Crystallex. Despite the obvious, that the Placer contract was being terminated in 2001, through MINCA, Vannessa sought to become a party to the now cancelled Placer/CVG contract and to gain rights to mine Las Cristinas. However, the Venezuelan government never recognized that claim. Last year Vannessa withdrew its lawsuits and decided to try its luck with arbitration at the International Centre for Settlement of Investment Disputes (ICSID) at the World Bank in Washington D.C. While few take the Vannessa challenge to Crystallex’ rights seriously, the conflict has been and could continue to be a useful tool for stock manipulators as long as it lasts.

Small Miners or “garimpiros.” Small scale gold prospectors and operators who work in and around the gold fields in the greenstone belts surrounding Las Cristinas and other well-known mining areas in Venezuela. Many are illegal aliens to Venezuela. Many use crude and destructive methods and live in appalling conditions. Sometimes called subsistence miners.