Venezuela Delays Vote on Proposed Mining Legislation

Venezuela Delays Vote on Proposed Mining Legislation

Venezuela will delay a final vote on legislation that would eliminate some mining concessions, seeking more time to discuss the bill with small miners, Basic Industries and Mining Minister Jose Khan said.

Khan told reporters outside a congressional ceremony today in Caracas that approval by the end of the year is possible. Legislators in the government’s ruling coalition had said several months ago that the bill would be approved by September.

“We have to hold a debate in the street about mining,” Khan said. “We have to discuss this law with miners, the families of miners, with the people who will be affected. This can’t be a law made solely in Caracas or in the National Assembly.” Khan, who was appointed minister in August, didn’t say what changes might be made.

Venezuela’s National Assembly gave preliminary approval to a reform of the mining law in late June, setting up a second and final vote. Venezuelan President Hugo Chavez, seeking to take control of idle gold and diamond fields in the South American country, sent congress the proposed draft on June 16. Backers of the president control all 167 seats.

The bill would force companies currently holding concessions on mines not being exploited to convert those concessions into joint ventures with the government, Khan said. The bill would also push up the royalties that miners pay.

“Many companies have held concessions for more than 20 years and not developed them,” Khan said. “They have used their concessions to bolster their share price.”


Deputy Angel Rodriguez, who heads the National Assembly’s Energy and Mines Committee, said in an interview outside the ceremony that legislators will meet tomorrow with Khan to map out a timetable for a vote on the bill. Rodriguez didn’t rule out a delay on approval until 2007.

Khan said the government hasn’t decided yet whether mining contracts — such as the one held by Canadian miner Crystallex International Corp. holds to develop the Las Cristinas gold tract — will also have to be converted into joint ventures, like concessions.

Crystallex President and Chief Executive Officer J. Todd Bruce said in June, when the bill was first introduced in congress, that the company’s contract was “valid” and that he didn’t expect the legislation to affect it.

Crystallex received a contract in 2002 to develop Las Cristinas, in the southeastern state of Bolivar. The tract has more than 10 million ounces of proven and probable reserves, making it Venezuela’s largest deposit.


Many companies, including Crystallex, are waiting for environmental permits to start mining operations. Khan said that all requests for permits are under investigation by the country’s Environmental Ministry and declined to give a timetable for approval.

Venezuela produced 20.5 metric tons of gold in 2004, compared with Peru, the largest in South America, which produced 173 metric tons, according to London-based GFMS Ltd., a precious metals researcher.

Shares of Toronto-based Crystallex fell 10.3 percent to C$3.24. The company’s New York shares fell 11.2 percent to $2.86. Gold Reserve Inc., a U.S. miner, fell 4.2 percent to $4.42.

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