Vannessa drops all Las Cristinas Venezuelan appeals

posted 2-August-2004

MineWeb.Net | South Africa

Vannessa drops all Las Cristinas Venezuelan appeals

Dorothy Kosich
31-JUL-04

RENO (Mineweb.com) — In order to meet the requirements to submit its Las Cristanas dispute to international arbitration, junior explorationist Vanessa Ventures [VV] of Calgary, Alberta, has dropped five appeals to Venezuela’s Supreme Tribunal of Justice.

The International Centre for Settlement of Investment Disputes (ICSID), a Washington, D.C.-based organization which is backed by the World Bank, will be used for the arbitration process. The dispute involves the termination of the mining rights of Placer Dome’s Venezuelan subsidiary for the Las Cristinas property, which is believed to have proven and probable reserves of 10.2 million ounces of gold. Placer Dome secured those rights after a lengthy battle with Toronto-based junior Crystallex [KRY].

In 1999, Placer Dome declined to put the project into production after holding the mining rights for more than a decade. Placer claimed the project was no longer economic. It sold its stake for $50 to Vannessa Ventures. As a result, CorporaciĆ³n Venezolana de Guyana (CVG), a branch of the Venezuelan government representing the Venezuelan Minister in charge of mining, filed criminal charges against Placer. 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. CVG cancelled Vannessa’s rights to exploit the property. By September 2002, CVG had awarded the Las Cristinas concession to Crystallex.

Vannessa challenged the cancellation of its concession and the failure of CVG to compensate the junior exploration company. Vannessa had filed several suits against CVG, accusing it of theft and abuse of authority. Several of those were before the high court when the request for arbitration was approved. They included overturning the mining contract awarded to Crystallex in September 2002, the April 29, 2002, presidential decree expropriating Las Cristinas, and other decisions involving the case. Vannessa claims the Government of Venezuela and CVG breached the Bilateral Investment Treaty between Venezuela and Canada. Vannessa is requesting reinstatement of Vannessa’s right to develop Las Cristinas and the return of all property confiscated by CVG and the government. If restitution is made, Vannessa is asking for $50 million in damages plus interest. If not, Vannessa wants $1 billion plus interest. Not surprisingly, several mining analysts are skeptical that Vannessa will prevail in arbitration. A July 13th report issued by Orion Securities referred to "Vanessa’s legal moves as distractions in the development of Las Cristinas." Sprott Securities declared that "Given that Vanessa has been unsuccessful in numerous suits in Venezuela, we believe it is unlikely it will be successful in this arena..."

Analysts insist that Vannessa is taking a risk by withdrawing its legal challenges and putting all of its eggs into the arbitration basket. However, the World Bank is the one external organization who can get the attention of the Venezuelan government should Vannessa triumph.

Despite the positive predictions of the analysts, Venezuelan President Hugo Chavez Frias, who issued the Presidential Decree expropriating Las Cristinas for the state, faces a recall referendum August 15th. If recalled, Chavez is not expected to go quietly. Recent polls show that the race is tight. Nonetheless, it is believed that Chavez will be ousted and an opposition candidate will easily win elections which are constitutionally mandated to be held a month later. Chavez insists he can run again. Critics charge Chavez is a dictator who is taking political control of public institutions such as the courts and the electoral council. He insists he is the first president to try to more fairly distribute the nation’s huge oil wealth. Chavez has been accused of packing the Venezuelan Supreme Tribunal of Justice with his own supporters. A recent Washington Post editorial declared "Mr. Chavez does not genuinely accept democracy or the rule of law ... he delayed the referendum for a year through legal manipulation and political dirty tricks."

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