Las Cristinas: A US$1.386 Billion Tantrum

For the last 49 years, Las Cristinas has been a highly peculiar kind of mine: instead of gold, it yields mostly lawsuits. The latest one was...expensive.

The Las Cristinas gold mine in Bolivar State, Venezuela, is pictured in this undated company photo.

Yesterday, a World Bank arbitration panel ruled that Venezuela has to pay a cool one billion, three hundred and eighty six million dollars to Crystallex, the Canadian mining firm whose rights to develop the massive Las Cristinas mine in Bolivar state were rendered worthless by chavista obstructionism back in 2008. The award piles yet more bad news onto a state hardly able to afford the bad news it already has.

Last month, another Canadian mining co., by the name of Gold Reserve, scored a similar-if-smaller win for its loss of the nearby Las Brisas mine. The government managed to jujitsu those bad news into good news by cutting a deal with Gold Reserve that gave them rights to the very same mine they’d just won a panel for losing the rights to.

Venezuela could end up paying not one but two separate billion dollar + awards…for the same mine!

So can’t they just do the same thing again? Promise Crystallex to hand them their old mine back in return for a cash injection? Nope, because the one way the government managed to turn a Las Brisas liability into an asset was by loading handing Gold Reserve rights to Las Cristinas as a kind of ñapa.

How exactly Las Cristinas was still in the government’s gift out beats the hell out of me. It’s not easy to keep up with this stuff unless you make it a full-time obsession – and trust me, some people do – but the last I’d heard the government had sold off rights to Las Cristinas to CITIC, the giant Chinese conglomerate. CITIC, by my count, thus became the tenth concessionary to Las Cristinas since the mine was first apportioned back in the late 1960s, which I guess makes Gold Reserve the eleventh.

Good times!

Amazingly, the Crystallex award isn’t even the only arbitration case proceeding from Las Cristinas. A couple of concessions ago – it really is hard to keep track of all of them – Las Cristinas was awarded to Rusoro, a Canadian-based, Russian-owned gold mining firm, and just as quickly expropriated from them. In 2012, Rusoro also went to ICSID, the World Bank arbitration panel, to seek restitution. That case is still winding itself through the ICSID bureaucracy, which is anything but speedy. Long story short, Venezuela could end up paying not one but two separate billion dollar + awards…for the same mine!

And, come to think of it, how long can it be before CITIC notices its own concession’s been snatched away as part of that Gold Reserve and files another complaint over the mine?

There’s an undeniable air of farce around the whole, six-decade saga of Las Cristinas. Geologically, the place is, well, a gold mine, with 16.9 million ounces waiting to be brought out. That’s almost $20 billion at current prices. 11 concessions and an enormous pile of litigation later, the mine has still never produced a single ounce of gold. At least not legally.

It’s like the place is cursed, I’m telling you. Which, considering it’s all just down the road from Tumeremo, might not be such a bad guess.


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  1. The critical next question is wherher or not the ICSID award is considered a “final judgement.” If it is, then Crystallex has strong leverage to collect payment, as it can force Venezuela’s bonds into default if it isn’t paid ir doesn’t settle within 60 days (thanks to the cross default clauses in the bond contracts).

    I think gold reserve scored a sweet deal (cash + concessions) because it was in this negotiating position. I also think that Exxon was actally paid the ~1.6 billion award for the same reason.

    The govenrmnet can kick the can alleging procedural violations etc all it wants, but once an ICSID award is final, they have to settle or pay up.

    • They can delay it a big before it becomes final, next year problem for a government living on the day. Another thing Crystallex as Gold Reserve, shady little known corporations that are only known for a having a concession in Venezuela and then getting billion dollar awards, its almost like a Ponzi scheme.

    • An award is not a judgment as we have learned from the process Gold Reserve has been going through for the past 17 months, so Crystallex is likely going to have to go through the same process. One should also look at the two companies. Gold Reserve is still a public company and long recognized that Brisas and Cristinas were the same mine and should have been developed as one large efficient mine versus two smaller mines. Crystallex on the other hand is in bankruptcy proceedings and most of their management team is gone, and has by way of debtor in possession financing (DIP) given away about 90% of the award to finance the arbitration. Crystallex will need more money to finance the collection process and when or if they get paid they have to pay back their $100 million in original debt plus interest9 Likely now $200 million after interest for the past 8 years they have not paid, plus interest on the loan from Tenor and they have to pay back the DIP financing and then pay any other obligations. Because they have not filed any financial statements we have no idea how much the company owes before they pay out the award. The control of Crystallex lies squarely in the hands of a hedge fund and they will look out for Tenor and no one else. They control the board so all decisions are made by them. If you want to see where KRY is going look at what GRZ has been doing for the past 17 months with respect to collections activity. That is against a backdrop of negotiating with Venezuela whereas KRY made it clear in a recent news release that they have no negotiations going on whatsoever with Venezuela.

  2. I understood the Gold Reserve deal included the handing to them not onlyof their old mining rights but also the mining rights which Crystalex had been expropriated and was claiming an indemnification for……another twist to the plot??

  3. Es que rangel gómez dijo que quería la exclusividad de las ganancias de la mina o que le mandaría a echar al topo para que los serruche en pedacitos.

  4. Dear Quico: Thanks for bringing up this matter.

    For over 15 years, I’ve owned a tiny share of common stock in Gold Reserve, the mouse that now appears to be roaring.

    Some points to consider.

    The wanton ecological destruction around Las Claritas gold country comes from traditional wild-cat garampeiros (sp?) working with mercury and pressure hoses, not from the painstaking efforts – so far unrealized – of GRZ (Gold Reserve) to establish a responsible mine at Brisas.

    Gold and copper, just like oil, are export commodities that add wealth to the nation (provided it’s sold, just like oil and cabbages) but they also demand ecological diligence.

    The permit from Venezuela’s mining ministry to build the Brisas copper/gold mine was based on “equator principles” (whatever they are) and on GRZ’s conformance with Venezuela’s then-new mining law, which appears to be one of the few smart things Chavez allowed to happen. (My guess is he didn’t even notice it until they started building).

    Nationalizing Brisas was Venezuela’s sovereign right. But to attract GRZ’s investment, Venezuela signed international agreements to pay investors for what is seized without reasonable cause.

    Perhaps 30% of the value of the Brisas gold project is in the registered “mining data” on drill cores that prove to huge banks that the gold is really there to pay off equally huge building loans a few years down the road. Because it is not located in Venezuela, that 30% is still owned by GRZ. For all practical purposes, it’s Brisas’s key to the bank. Yes, it can be replaced – but it could take 10 years to make a new key. It’s not for amateurs.

    So Venezuela legally owns Brisas – and of course Las Christinas with the same caveats – but GRZ owns the key to Brisas’s bank.

    The history of Brisas (the smaller project right next to Las Christinas), is relatively simple and was carefully cleaned up by GRZ as part of its project development. Brisas is actually ready to build today as a result of very diligent professional development over maybe 20 years.

    The history of the Las Christinas project is basically a bureaucratic nightmare, just as you cite. But it is today legally owned by Venezuela, so it can be used as Venezuela deems proper. What it owes to previous owners – including Crystallex – may be a mess – but it’s an entirely separate mess.

    The technical case for a Brisas/Christinas Joint Venture has been obvious for decades. But before they were nationalized, the long procession of Christinas claimaints and other bureaucratic matters made it impossible to govern them jointly.

    If Venezuela as a whole wants to add gold and copper to oil as export commodities anytime soon – like 2 years or less – GRZ is the only actor in the world in a position to accomplish it. Venezuela owns the gold and copper, but GRZ owns the key to the bank and the dispassionate expertise to dig it.

    Sounds like a great pitch, doesn’t it? But given Venezuela’s current “country discount” for political instability, the odds of this working out are pretty slim. What you so often referred to as “watching Venezuela circling the drain” sounds more like you’re looking at the drain from inside.

    Warmly as Ever,


  5. As the bills continue to arrive, Alo Presidente may turn out to be the most costly television show of all time. One guy and a desk.

    • No joke. The proposed Brisas/Christinas project ought to net Venezuela about $650 per Venezuelan. It’s not enough to pay for all the breakage, but it’s a start. The ICSID awards for GRZ and KRY – the cash cost of Chavez’s mistake – total a mere $2.2b of those $60b of metal in the ground. If GRZ had been allowed to mine Brisas ten years ago, Venezuela’d be making money now. Problem is who would have been in charge of spending it – and on what? All we can say is Chavez’s ego has been very very costly for Venezuela, and you have little to show for it.

  6. Very interesting work, the comments and main text signatures a cruel and sad reality.

    Last year I returned to Venezuela as a consultant for the new Mining Minister, Roberto Mirabal Acosta, my work as a Venezuelan Geologist for more than 30 years, placed me in a frame of Positive Expectations.

    I was hoping for the return of the private companies and a huge amount of field and office work, as a director and consultant of the many other projects besides Gold…

    …but NO it did not happen, instead I witnessed the incredible misery of an agonizing institution pulling Engineers, Economists, Geologists, Geographers etc. who are the Venezuelans that have not being able to leave looking for a better life away from our Country.

    Professionals that after 15, 20 or more years are making less than 200 $ a month, have to stay here feeling the failure of a government in sincere agony.

    Anyway let’s start an update of the situation as February 2017.

    I will be adding new text if I feel interest for who is going to read this and future material.

    My mail is [email protected], my cel is 058-0412-548-9120

    Please let me know who is reading this


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