Crystallex International

Global miners eye Venezuela's gold
2009-03-27 16:30:00

By Geena Paul
GUYANA: Venezuela is known for its biodiversity, petrochemicals, gold reserves
and tourist potential. Even as the country sells world's cheapest petro products
due to heavy subsidies, there is not much heard about the gold treasure hidden
in the country.

However, when gold prices are soaring above $900 per ounce, it is natural that
gold miners across the globe will look for places where they can dig out the
yellow metal.

And, when crude prices are crashing Venezuela has hardly any choice but to look
for other options to find enough money. And, this was the opportunity gold
miners have been looking for. Crude prices crashed and gold prices soared.
Venezuela was bound to turn to gold to make some money, which will fund various projects.

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So, in January 2009, President Hugo Chavez awarded a valuable gold mining
concession to a joint venture between a Russian-financed company and the
Venezuelan government, in an apparent bid to secure new sources of state income as oil prices fall. Venrus, a joint enterprise formed last year between Rusoro Mining Corp and a Venezuelan state holding company, will begin developing the country's largest gold mine, Las Cristinas, later this year.

The move would boost Venezuelan state control over the country's gold reserves,
a potentially lucrative resource. Those reserves could, in time, compensate for
falling oil income and allow Chavez to continue his broad public spending.

Venezuela depends on its vast oil resources for half the federal budget and 94
per cent of exports, and Chavez has said he hopes to use other resources to
diversify the main sources of state funding. But the country's precious metal
sector has been largely controlled by a handful of private foreign companies.

He said the venture would help double Venezuelan gold production to 9 tonnes in
2009. South Africa, one of the world's top sources of gold, produced to 275
tonnes in 2007.

Venezuela also plans to rejoin the Kimberley Process — an international accord
to stem the flow of conflict diamonds — in order to exploit its diamond
reserves. Venezuelan diamonds have been barred from mainstream world markets since it abandoned the agreement last year. But, in this charming country, if you are hunting for spots where you can find gold, then you have to just head for Guyana region. However digging gold here is not easy. Rules are very strict because of the environmental damage caused by the mining activities.

Like the rest of the Amazon river basin, the Guyana area has unique biodiversity
characteristics whose preservation is vital and where human intervention must be
measured against the highest standards in order not to upset the balance of this
greatest example of natural complexity in the world and which makes Venezuela
the fourth country in the world with regard to bio diversity.

The mining potential of Guyana (gold, diamonds, bauxite, iron, radioactive
materials, titanium etc) has been known about and exploited for some time but
the areas where these activities have taken place, the methods used to pursue
them and their impact on the ecosystem has scarcely affected this vast area.

But conflict over mining in lands claimed by native groups has been a continual
problem since the conquest by the Spaniards brought gold-seeking men into the
forests of the tropics. The problem has become worse since the beginning of the
1980s, when prospecting groups projected that the Guyana area could contain the legendary `El Dorado', between 8 and 12 thousand tonnes of gold.

There is specific environmental and health damage caused by hydraulic mining,
which involves blasting soil with powerful jets of water to clear the soil from
the rocks underneath. When hydraulic mining is done away from the rivers (which
are often the source of the water the miners use), it leaves huge pools of still
water that become breeding grounds for malaria-carrying mosquitoes. When
hydraulic mining is done along the riverbanks, it increases sedimentation in the
rivers, which destroys fish breeding habitat and plant life along the edges of
the rivers. A side effect of sedimentation which will affect more than just the
local groups is the gradual silting up of hydroelectric dams on the major
rivers, which disrupts power supplies and can eventually cause damage to the
turbines themselves.

Analyses by the Venezuelan National Guard show high levels of mercury
contamination in the Caroni, and more than half the people living near the lower
Caroni basin were contaminated by mercury. The state of Bolivar has the
country's highest incidence of children born with Down syndrome and other birth
defects, the Venezuelan Mining Chamber says.

The profit flow among the Venezuelan government, the wildcat miners and the
multinational corporations pushes the three of them to promote exploitation of
the Guyana natural resources. The local indigenous groups have continued to make claims against the government, trying to stop the influx of miners, both legal and illegal. The multinational corporations and the Venezuelan government have responded to indigenous protest groups with violence, especially against those groups which are working to actively block miners from tribal areas.

A web of legal cases and red tape has so far stopped any big company from
extracting the estimated 20 million ounces of gold that lie in Las Cristinas and
its sister property Brisas.

Thick forest around Las Cristinas has been torn by wildcat miners who stand
waist deep in yellow water gathering ore from the cratered landscape with
mercury droplets and strong hoses, part of a 30-year rush that ebbs and flows
with gold prices.

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