UPDATE 1-Venezuela reviews state control of inactive mines
Tue Sep 13, 2005 10:42 AM ET
Recasts; adds comments, changes Crystallex start estimates)
By Patrick Markey
CARACAS, Venezuela, Sept 13 (Reuters) - Venezuela is reviewing taking control of inactive gold and diamond mines operated by private foreign and local companies and rescinding their contracts and concessions, a top mining official said.
Basic Industries and Mines Minister Victor Alvarez did not name any specific companies. But his remarks came as the leftist government of President Hugo Chavez campaigns against oil and mining deals he says are "stealing" Venezuela's natural resources by giving preferential terms to foreign partners.
"These transnationals stay inactive on purpose to improve their shares on the stock market," Alvarez said in a press statement.
"This forces us to evaluate the nation's interest and the need to cancel concessions, rescind contracts and suspend permit applications in cases where they have not been correctly processed, so that all this can pass into the hands of a 100 percent state company," he said.
Officials from the ministry and the state-run Corporacion Venezolana de Guayana, or CVG, did not return calls seeking more details on Alvarez's remarks.
Venezuela, the world's No. 5 oil exporter, operates gold and diamond mines in its southern Bolivar state. Several foreign and local private companies operate mining contracts with CVG.
Alvarez made his comments after small miners blocked roads and clashed with troops last week in protests for more concessions in Bolivar state. The government is currently trying to transfer small miners away from the Caroni River, where much of the country's hydro-electricity is generated.
The minister said conflicts in the mining sector can only be resolved by defeating mine "latifundios" -- the Spanish word for idle rural estates.
Chavez, a populist former soldier who has vowed to fight poverty, has made land reform and redistribution of "latifundios" the cornerstone of his self-proclaimed socialist revolution. Ranching associations and opposition leaders say his land campaign is threatening private property.
Alvarez said the government planned to create a state mining company similar to Venezuela's PDVSA state oil company, which recently has moved to review contracts and operating deals with foreign petroleum companies.
"Defeating latifundios in the mine sector will mean reclaiming national sovereignty over gold and diamond resources," Alvarez said in the statement.
"Inactivity in gold and mining reserves represents one of the principal causes for unemployment among small miners," he said.
Among major foreign companies mining in Venezuela are Canada's Crystallex (KRY.TO: Quote, Profile, Research) , Bolivar Gold (BGC.TO: Quote, Profile, Research) , U.S. firm Hecla (HL.N: Quote, Profile, Research) and China's Shandong Gold (600547.S: Quote, Profile, Research) . Hecla is the country's largest and most active gold producer.
Crystallex said it expects to start producing at the huge Las Cristinas gold mine in Bolivar 16 months after the government clears its environmental permit.
Last week local Crystallex officials estimated start-up at 22 months after permit authorization.
Shares of Toronto-based Crystallex have been hurt by delays in the permit process, but the company says authorities are in the final stages of approving the license, which was originally due to be issued in June.