| | |  Editorials | Issues | December 2008 
Who Owns Las Cristinas Gold?
 Michael Werbowski - PVNN
| | A miner illegally pans for gold at Las Cristinas mine near Ciudad Dorada, Venezuela. (David Rochkind/Polaris) | |
One of the world's largest untapped gold mines and its endless ownership battles.
References to "El Dorado" or the golden land go back centuries. A mythical, magical place, with great mineral wealth. A fictional place Spanish conquistadores dreamed about. Voltaire's classic book "Candide" describes with jocular cynicism such a paradise , where the hapless protagonist going by the same name, and his faithful valet Cacambo arrive, only to be awed by diamond covered columns, rising to the sky and town squares paved with gold. Today, El Dorado is a real location, within the "Guyana shield" an area comprising southern Venezuela, Guyana, Surinam, French Guyana and Northern Brazil.
It is still a gold miner's paradise. There in the Bolivar province of Venezuela lies the site of one of the world's largest undeveloped gold reserves known as: Las Cristinas. But the story of our modern day "El Dorado" is a darker tale, of greed, deception, betrayal, and ruthlessness which rival even the most complex and convoluted plots of a John Le Carre novel. The intricate web like interplay spun by this true story is not easily disentangled.
In a 2002, blog which appeared in the "Caracas Chronicles" website under the first name of Francisco, the blogger wrote this:
"The juiciest scandal nobody is writing about... Ask people in Caracas what or where Las Cristinas is, and mostly you'll get blank stares back. It's a specialist concern, this Las Cristinas thing, with most Venezuelans totally unaware that one of the four or five biggest gold-mines on earth is right here in Southern Bolivar state. Much less have they heard about the titanic 16-year legal saga over control of the mine, or the incredible tales of corruption that emerge when you even scratch the surface on this story."
Digging Into a Bottomless Pit
As the blogger mentioned, despite decades of legal wrangling and discreet - deals involving shadowy figures, Las Cristinas remained out of the international media spotlight for some time. Yet the election of Hugo Chavez changed all that. Chavez adopted a nationalist policy promising to make his people the owners of the vast mineral and oil wealth of the country.
This, not surprisingly, sent shock waves throughout many northern boardrooms of both mining and petroleum corporations ( or the so called extraction industries). In the case of the Las Cristinas concession, the government's mining permits which would allow the Canadian mining company, which supposedly owns the mine, the right to exploit the site, were withheld. And, thus, to both the company's and shareholders' dismay, the project was indefinitely delayed, until today. Gold prices, over the years, meanwhile, have risen and rise further.
The Las Cristinas Profile
The mine according its present operators and nominal owners, Crystallex corp.(KRY) has an estimated gold reserves of 11 million ounces, which amounts to, at current gold prices of around US$850 per ounce to around $9.3 billion; a big bundle of potential cash indeed. But besides its untapped wealth, the tale of this huge mine which involved at various stages, everyone from foreign mining interests to Venezuelan strongmen, coup plotters and even to a widow cheated out of her share of the mine's wealth, is a very colorful and worth telling to all. And greed is the main theme.
The second largest gold mine in Latin America in terms of potential reserves is supposed to be owned and operated by Crystallex (listed on the stock market in Toronto as KRY). The company in question obtained the mining concession officially, but not the key permissions to operate it, and has yet to dig the gold out of the ground. This "golden goose" hasn't yet laid one single golden oval shaped nugget for investors. Why? Because for decades it was unclear who actually owns the mine. Las Cristinas has been mired in endless legal battles over who the mine really belongs to.
Since the early 1960s, bureaucratic delays, speculative shenanigans, sprinkled with swindles, further confused the ownership rights issue. But more recently, its fate hung in the balance, due to the pugnacious Bolivarian politics of Hugo Chavez. In September of 2005, the Venezuelan president made a rousing speech, reasserting Venezuela's right to control its own oil and mineral wealth.
This added further uncertainty over the mine's future. Meanwhile, the government has withheld any permit to operate the mine on environmental grounds. However, the future operations at the mine looked more promising, at one point, after both a feasibility and environmental impact assessment or EIA study was done by a Canadian engineering firm based in Montreal, SNC Lavalin, for Crystallex. Nevertheless, the actual extraction of the gold at the site was delayed by two key ministries which refused to grant any permit to operate on the site. So the site remained idle subsequently until today that is. Meanwhile, millions of dollars of earth moving equipment at the mine rusted in the searing sun. And many investors have been unnerved. The Toronto based company's stock value has rollercoasted up and down to add to the thrill.
To compound it all, in September of 2005, locals and artisan miners exasperated by the ongoing delays and successive legal battles over ownership of this site, invaded the mine but were later pushed back of government troops.
Clashes between the miners and soldiers in mining areas are not uncommon in the region. And as is usually the case, to add an ecological dimension to this mining mess, Las Cristinas like many other open pit mining sites in Latin America is located near a nature reserve, in this case the Canaima National park.
"The Curse" of Las Cristinas or 25 Years of Bitter Legal Wrangling, Corruption
Both the real and the fictional "El Dorado" is a colorful backdrop to tales of thousands of gold hunters, adventurous and intrepid explorers searching for lost, then found and later lost again fortunes. Such is the tale of Las Cristinas. The real story started like this. The untapped mine's wealth was parceled off as mining concessions in 1963 and the concession titles for Las Cristina's lots 4, 5, 6 and 7 were issued in 1964 for a 25-year period to Mrs. Dot Culver-Lemon. Her husband along with the pilot, Jimmy Angel apparently discovered, one of the world's highest waterfalls, "Angel Falls," about 80 miles west of El Dorado in an area not far from the Las Cristinas site.
Mrs. Culver-Lemon was a resident of the United States who also spoke no Spanish. So she was quick to get help and advice on what to do with the property and entered into a series of contracts and lease agreements, promising great riches to her, through the exploitation of the mining concessions. She surrounded herself by unscrupulous profiteers, made up of local experts and lawyers; a dependency that would eventually deprive her of any meaningful income from the concessions and would finally lose her the rights over the mining titles themselves. A synopsis unburdened with legal terminology goes like this:
The first lawsuit filed in the Las Cristinas ownership saga was in 1982, when Mrs. Lemon sued a business partner over an alleged breach of contract. In 1984, the case went to a regional state courthouse. Then another suit followed. Her lawyer at the time sued her for unpaid legal fees incurred during the course of the case.
As Mrs. Lemon was unable to pay those fees, so her attorney filed a claim in the same court for the unpaid fees and effectively became her creditor. Subsequently, Mrs. Lemon found a new lawyer, to help her fight and gain the definitive ownership to her portions of the Las Cristinas concessions. Then in an unexpected turn of events, Mrs. Lemon's second lawyer apparently acting with her full consent sold- or transferred his widowed client's remaining concessions to a local miner, by the name of Ramon Torres. Obviously, both lawyers did not act in their client's best interest. In another transaction, Torres then relinquished, for a generous sum, (without notifying any state mining officials) his new mining titles over to the company Inversora MAEL C.A.
In 1985, a battle weary widow, Mrs. Lemon, reattempted to regain her ownership rights to the mine. However, a year later in 1986, she died without any inheritors. Her passing prompted a decade long saga of incredibly arcane, and mind boggling in their complexity machinations and actions designed to gain control of the Las Cristinas mine. In 1989, 25 years later after the original title was granted to Mrs. Lemon, its owner at the time, Inversora MAEL C.A., the latest and apparently legal title holders to the mine, lost all rights to its claims over Las Cristinas due to more court battles far too arcane to mention.
What ensued was a bewildering succession of suits and counter suits and lengthy legal wrangling fit for a Harvard law professor's case study. Meanwhile, the ghost of Dot Culver Lemon hovered over the mine, seeking redemption for the original swindle which cheated the American widow, casting a curse on any mining company which tried to gain access to it riches in the future. Each new investor whether an individual or foreign company had to contend with the fallout from previous rounds of courtroom confrontations . All this led to the La Cristinas unexploited gold mine becoming a murky bog filled with unresolved lawsuits, questionable ownership claims over the mine and dirty deals.
Then as if to save the day, a "major" Canadian mining company at the time called Placer Dome appeared on the scene. After a decade of being in legal limbo, which effectively paralyzed any development mine, in 1996, the Canadian company, along with its subsidiary Placer Dome de Venezuela and the Venezuelan government entity ( MINCA, Mineria las Cristinas), entered into their first "joint venture" along with the state owned mining administrative entity CVG. The result of this unlikely union was a co ownership deal, with a 70 percent stake in the mine controlled by Placer Dome and the government holding was 30 percent. All seemed to be going smoothly at last. Until another twist occurred.
The seemingly cursed mine with its heavy historical baggage and mired in legal and unresolved conflicts dating back to the Dot Culver -Lemon chapter did not deter then KRY President Marc Oppenheimer. This so called "venture capitalist" entered into the fray and in 1998, and launched a law suit against the newest owners of the mine, based apparently on subjective evidence and assertions which challenged the ownership of the mine. This latest legally halted planned operations at the mine in early 1998. Later a Caracas court ruling dismissed the Oppenheimer's acquisition attempt and ruled in favor of Placer Dome and its Bolivarian state partners.
However, it was a hollow victory; low gold prices made the mine an unprofitable investment and once again operations were suspended. And once more, like a lingering, festering wound the mine was plagued with ongoing problems; a lack of proper finances to develop the mining. Compounding this as time passed, frictions emerged between the two partners who ran the gold venture: Placer Dome (MINCA) and CVG and the Corporacion Venezuelana de Guyana an affiliate of the state mining ministry. This further hobbled the project.
Enter Vannessa Ventures...
In 1999, Placer Dome declined to put the project into production after nearly a decade of legal battles and costly lawyer fees, over the mine's ownership. Placer officially claimed the project was no longer economically feasible due to falling gold prices back then. So in another twist, in the already bizarre and convoluted tale, it sold its stake for $50 to a new aspiring proprietor to the mine: the "junior" Canadian miner, Vannessa Ventures. Selling the entire concessions of one of the world's largest gold mine deposits for such a ridiculous sum, without a hint of profit for the state, rightly enraged the Bolivarian authorities.
Henceforth, the Venezuelan government then proceeded to file charges against Placer Dome for its tacky move. And, lo and behold, another ugly legal battle ensued. Furthermore, in 2002 and in retaliation to Placer's $50 humiliating "sell off" of the seemingly inoperable and unprofitable gold mine, a presidential decree expropriated Las Cristinas and the National Guard seized control of and overran the property. Moreover, the state owned CVG was given the authority to determine the fate of the property and Vannessa Ventures became another victim of the Mrs. Culver Lemon's hex.
Vannessa Ventures Goes to Washington
The "junior" mining company contested the government "illegal" takeover of the mine and filed several lawsuits and then appeals, against the action in the Venezuela state courts. Yet with the rising tide of nationalist fervor in the country, it had little chance of winning any compensation for the expropriation. And they knew it. So the company dropped its lawsuits in Venezuela and took the case and its grievances to Washington. The Las Cristinas case, which was until then, merely a domestic dispute between the government and foreign mining companies, went on to another , much higher and more visible level; in front of International Centre for Settlement of Investment Disputes (ICSID), a Washington, DC-based organization which is backed by the World Bank, for arbitration.
The escalation of the dispute drew unwanted attention to the issue and created a diplomatic chill between the Canadian government (which assisted with some diplomatic clout, Vannessa in sponsoring the compensation claim in front of the WB tribunal) and the Venezuelan government. This put pressure on Caracas 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 and so to might Ottawa in the form of bilateral aid and trade, as a sort of chantage, 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 reexamine Vannessa's compensation claim and consider the company's demands for financial compensation. Yet, due to the resilient popularity of President Chavez's "21 first century Socialism," for the most part, Vannessa venture's remaining compensation claims against the Venezuelan government, for the most part ,have either been dropped or delayed . After the mine was effectively nationalised in 2002, Crystallex corporation (KRY) was then granted "exploitation rights" to the gold mine by the Venezuelan government. But to this day, the mining company has still not received all permits needed to open, dig in, haul out and run the mine.
In the latest chapter of this epic tale, officials within the Venezuelan government have been rumored to be considering withdrawing all of Crystallex's claims and current titles to the mine. Crystallex, like all of Las Cristina's formerly deposed owners, might file a lawsuit action, to regain possession of the mine, and thus launch another legal offensive against Chavez's government. Meanwhile, shareholders at Crystallex aren't holding their breath. This saga is far from over it seems.
Mr. Werbowski currently writes for several internet news Web sites among them Worldpress.org, OhMyNews International and UpsidedownWorld.org mainly on environmental topics in Latin America. His articles have appeared translated from English into Spanish and French in magazines and newspapers and Web sites world wide. Contact him at vrat25(at)yahoo.com |
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