One of the multiple maps pointing to the location of El Dorado
When I was an elementary school student, I always admired how the natives of South America invented and propagated the Legend of El Dorado in order to distract and mislead the Conquistadores. Not only did they succeed, but they did it for centuries, deceiving well learned and well educated men and inducing expeditions from Venezuela to Peru, looking for this mythical place of wealth and riches. The myth was developed so well, that there are many maps like the one above, purporting to indicate where El Dorado was located. Even Humboldt took some time away from his erudite pursuits to look for El Dorado in Guyana, to say nothing of Sir Walter Raleigh.
All of this comes to mind, because the saga of the Las Cristinas mine in Bolívar State, seems to be turning into a sort of Legend of El Dorado, except backwards, as the announcements surrounding the mine seemed oriented more towards dazzling and distracting the natives and expropriating foreigners, than about producing gold.
The story starts from what I understand, in the sixties, when the wife of one of the people that helped Jimmy Angel explore Venezuela’s Guyana region, obtained a mining concession to exploit Las Cristinas. The concession was the subject of numerous lawsuits, until the concession ran out.
From here, the story is clearer, Canada’s Placer Dome, signed an agreement with the Corporación Venezolana de Guayana (CVG) in 1990 or 1991, whereby Placer Dome would exploit the mine and give some percentage of the profits to CVG.
But then Crystallex, another Candian company claimed to have a concession to part of the mine, which stopped the project and later forced Placer Dome to sell rights to the mine for US$50, according to lore, when gold dropped in price to a company named Vanessa Ventures. The Government was not happy and expropriated Las Cristinas, giving it back to CVG.
Then in 2002, the Chávez Government awarded the mine to Crystallex and Vanessa sued the Government at the World’s Bank ICSID arbitration panel in Washington DC. But it was not until 2007 that Crystallex satisfied all of the requirements of the Government, including an Environmental Impact Statement and posting the bond required by CVG. But the Government denied the permit, despite all of the legal authorizations and approvals being present. Crystallex also sued in the World Bank’s ICSID arbitration Court.
In 2011, the Chávez Government nationalized the gold industry, prompting Rusoro, which exploited the El Callao mines and Gold Reserve, which had the rights to the Las Brisas mine to sue the Government at the ICSID.
In 2012, the Chávez Government assigned China’s CITIC to the rights to develop Las Cristinas (So much for reserving it for the Government two years earlier).
Don’t know what type of contracts or agreements were signed with the Chinese, if any.
As far as I know, the only company that produced any important amount of gold in all these years was Rusoro, which reportedly produced close to 100,000 ounces in 2010.
So, much like the mythical El Dorado, Las Cristinas, El Callao, Las Brisas have all been but a myth, Venezuela has huge gold deposits, but other than illegal miners, and Rusoro for a while, not many ounces have come out it.
You can say that the politicians have turned it into a myth to defend sovereignty, promote the idea that Venezuela is rich and soon we will be even richer. Except that very little has happened.
And a new chapter in the myth was born last week, when, after Gold Reserve had won its suit at the ICSID and any Court in the world that was needed to enforce an award of US$ 740 million plus interest, that the Minister of Mines and President of PDVSA announced an MOU (Memorandum of Understanding, a piece of paper in which we agree to sign a contract, if we agree again later on the details) with Gold Reserve that apparently settles the case.
Or does it? Or did we just see a new El Dorado legend just being born?
Because this week, the Government issued a somewhat confusing MOU with Gold Reserve claiming:
-A joint venture with Gold Reserve (45%) and the Government (55%) will be created.
-The project “implies” and investment of US$ 5 billion in a win-win relationship
-The MOU puts and end to the legal situation at the ICSID.
-The investment in the project includes US$ 2 billion for the exploitation of the mine and US$ 2 billion in loans to the country, as well as the resources to get the company going.
Then the shares of Gold Reserve were suspended from trading, awaiting for the company’s interpretation of the agreement, which came out yesterday, in which the company said:
-They have signed an MOU with Venezuela that contemplates settlement, including payment and resolution, of the arbitral award of the ICSID.
-Venezuela would proceed with payment of the Award including accrued interest and enter transactional (settlement) and mixed company (“joint venture”) agreements, which are expected to be executed in approximately 60 days.
– It is anticipated that Venezuela, with the Company’s assistance, would work to complete the financing to fund the contemplated payments to the Company pursuant to the Award and for its mining data and $2 billion towards the anticipated capital costs of the Brisas-Cristinas Project. Upon payment, the Company will cease all legal activities related to the collection of the Award.
-The Brisas and Cristinas properties, together with the technical data with respect to the Brisas project owned by Gold Reserve, would be transferred to a Venezuelan mixed company, which is expected to be beneficially owned 55% by Venezuela and 45% by Gold Reserve
The differences are clear: First of all, Gold Reserve gets both Las Cristinas and Las Brisas, not just Las Brisas, which was the mine they sued for. Second, “Upon payment, the Company will cease all legal activities” and third, Gold Reserve will provide only “assistance” to obtain the funding. No more, no less.
But many people read all of this like a new El Dorado legend: Venezuela will get a US$ 2 billion loan, we have huge gold reserves, we are going to produce gold like crazy. And Gold Reserve will produce all this.
We shall see, but I doubt it.
A new El Dorado legend is born, but this time aimed at distracting mostly the locals, rather than the invaders…just like El Dorado, but turned backwards.
Note added on March 2nd.: The only way this could receive financing, in the absence of financials and an ongoing concern, is that Gold Reserve will “facilitate” transferring the 45% rights to the Chinese in exchange for US$ 2 billion loan to the Venezuelan Government and/or the project.