VHeadline Venezuela News: In a frank admission, Spokane (Washington-USA) based Gold Reserve's Doug Belanger has told a shareholders conference that if his company can’t arrive at an equitable solution to the current impasse on its claimed "concession" at Las Brisas del Cuyuni in southeastern Bolivar State it will exercise its "legal rights" in the Venezuelan and/or international courts, although he believes such action at this stage would be "premature" and "counter-productive." He describes the current status of the company in Venezuela as "not in a good situation right now."

Belanger says that, last quarter, his company had "the permit" and was "preparing to construct the mine" when the permit was revoked, since when Gold Reserve has been seeking clarifications. He says that he has "received one letter from the Ministry of Environment which revoked our permit" but adds "they did not revoke the approval of the environmental and social impact statement" and the Ministry of Mines (Mibam) also have the approval of our technical operating plan, which is still in place as well as compliance certificates from the Ministry ... so what we have is a project that is still approved but we don’t have the permit to construct and the action, based on advice of Venezuelan counsel is groundless and not legally supported by Venezuelan law."

"We have three decrees that support the granting of the permit last year and the
decree that is quoted in the letter to us, decree 4633, expired in June of 2007.
Beyond that, the area (based on a reaffirmation by the current administration)
decree 3110, says that mining is approved for this area."

"It is also important to say that this is a legal and administrative process which we are in ... they revoked the permit, as we say, which we believe is groundless and not legally supported. But having said that, there is a procedure, which we will follow ... regardless of the actions that the Ministry of Environment took, we will follow the procedures of the Venezuelan Government. We filed the appeal to that action with the Ministry on May 21. They have 90 days, business days, to respond, which takes us right to the end of September."

"There’s been no official comment on this issue from either the Ministry of Mines or the Ministry of Environment, other than the letter; nor has there been any official comment from the President’s office. However, as we say in our discussions with advisors to the ministers, of especially mines, that the Ministry of Environment letter does not challenge the product nor the company. It simply revokes the permit, as we say for some things that aren’t even based in law nor are factual."

Belanger adds that Gold Reserve has had a number of conversations with people at the Ministry of Mines who advise the Minister or work in the ministry and we believe that the government supports mining in this area ... and of course, we also know that the Ministry of Mines, the Ministry of Environment will apply the law equally, as is guaranteed by the constitution of Venezuela."

"It’s obviously a very challenging time for Venezuela -- the economy, inflation, unemployment ,,, mining is just one element, and quite frankly a small element compared to, as we know, the oil industry. So there is a tendency to get too much involved in I think the minutiae of politics, of conspiracy theories, for example, and not look at what is the factual situation."
"Along with the formal application of a rebuttal for the appeal, we also filed a letter to the Minister of Mines informing of the action and our response to it, and basically getting them, requesting they get involved. It is interesting that we are approaching two months since this has occurred and we still have had no official comment from anyone really in the government as to this specific, our specific issue or mining in the Imataca or mining in the Kilometer 88 region. There has been a couple of comments attributed in the press to named officials, primarily Minister [Sans] of the Ministry of Mines where he said that Kilometer 88 is approved for mining, which is correct. He also has recently said that small miners who are very concerned about losing their ability to mine in this region because of environmental reasons, or at least one indication of that based on certainly the revocation of our permit, that they are being assured that they can mine."

"I think there’s also a lot of confusion out there about the Kilometer 88 [Kueni] River Basin and the Paragua River Basin, which was this decree of 4633 that was enacted in June 26, 2006 ... it was an emergency declaration which covered a number of regions but was primarily done to stop the mining in the Paragua because the mining in the Paragua River was causing damage to the Caroni River Basins to the hydro-dams, which is obviously an important part of the government’s supplying of power to the people of Venezuela. So they are different. The [Kueni] River is not the Caroni River, so you have to always know what area people are talking about."

"Just as a simple aside, there was also -- people think the Imataca is a generic term and they’ve heard no mining in the sierra Imataca. The sierra Imataca is a specific area. We are not in the sierra Imataca. We are in an area of the Imataca Forest Reserve that is approved for mining under two separate decrees."

"We have always believed that a solution for modern mining doesn’t include small miners and I think that might be one of the cores of the problem we are faced with today, trying to resolve the substantial degradation that does occur because of the lack of environmental methodology employed by the small miners because they simply don’t know, and lack of regulation. If we can’t do that, then we do have legal rights and we can exercise those rights."

Belanger says it would require a presidential decree or a new mining law from the National Assembly specifically to change the current status quo to one where open-cast or other forms of mining would not be permitted. He again emphasizes that Gold Reserve could take the Venezuelan government through the courts if the company finds "certain legal rights" infringed. He adds that there have been many discussions about a new mining law coming under President Chavez’ current special powers, which expire some time in July amd it is known that a draft mining law has been approved. He says he has seen evidence that President Chavez may issue a decree legitimizing the new mining law before the end of July ... "but that remains to be seen!"

"Shouting at the rain doesn’t really do any good ... our people in Venezuela are dealing with a very difficult situation ... obviously we are not initiating any new capital projects or major capital or operating expenditures until we clarify the situation."

Taking questions from the floor, Belanger told John Healy from Forest Investments "right now, if nothing else happens, no clarifications, no statements, nothing by anybody, we are going through until the end of September before we will hear something official from the government. However, if they come out with a decree that bans open-pit mining ... so, should that occur, that obviously makes our decisions sooner and easier."

Asked if he saw a legal battle with Venezuela as "an opportunity," Belanger side-stepped the issue and tried to explain the divergence of Gold Reserve's "concession" as opposed to Crystallex' operating contract with the government via the Venezuelan Guayana Corporation (CVG) as different "a concession is one legal thing and a contract is another."

Answering a question from Trees Investment's Scott Newhallm Gold Reserve's Belanger finally broached the subject of a "worst case scenario" in possible dealings with Venezuelan authorities might be forced into international arbitration ... "that’s such a complex situation, that it really is hope for the best, which is plan A, and plan for the worst, and that’s what we will do. And there’s actually a number of avenues which, both nationally and internationally. I mean, we think there are certainly elements."

At Newhall's insistence: "Is international arbitration one course that you guys could go?" Belanger confessed "Well, obviously ... that’s why there’s a bilateral investment treaty between Canada and Venezuela, and that’s what protects investments that you make internationally." As to the size of an eventual claim against the Venezuelan government, Belanger was at first hesitant but clarified that there are three elements -- investment, interest on that investment over the time the investment is made, and then you have a potential claim for lost profits at the economic conditions that prevailed at the time of the action" and then drew parallels with the controversial claim waged in international courts by US oil giant Exxon-Mobil.

"It depends ... it’s obviously very sensitive but certainly it’s in the billions."