China Maps Out Venezuela's Valuable Mining Resources

• by Humberto Márquez (caracas)
• Thursday, February 28, 2013
• Inter Press Service

Oil and Mining Minister Rafael Ramírez said "the mining map will be used to explore, confirm and quantify the country's mineral resources" and, over the five years in which the agreement will be implemented, some 400 Venezuelan engineers will be trained "to serve as custodians" of the data compiled by the Chinese consortium.

So far the Venezuelan government has said nothing about how the knowledge gathered by China --the world's largest consumer of raw materials-- will influence future mining decisions and whether it will entail benefits or advantages for the Citic Group.

But simultaneously with the prospecting agreement, Citic Group was awarded a concession to operate the group of gold mines Las Cristinas, which has already seen several operators since Hugo Chávez took office in 1999, including the Canadian companies Placer Dome, Vanessa Ventures and Crystallex, and the Russian company Rusoro.

Las Cristinas, in the southeast region of Guayana, has some 20 million ounces in confirmed and potential reserves, valued at about 32 billion dollars, according to current New York market gold prices.

The location of Las Cristinas, situated near a town that bears the name of the legendary lost city of gold used by indigenous peoples of South America to lure European conquistadors away in the sixteenth century, puts China almost literally at the gateway of a modern El Dorado that is no myth.

Legislator Américo de Grazia, who represents the opposition Radical Cause party in the National Assembly's Energy and Mining Committee, spoke with IPS about the agreement signed on Sep. 21, 2012 between Chávez and Citic Group President Chang Zhenming, questioning the government for not making the terms of the deal public.

"Parliament should oversee this operation -- which it was not consulted about -- because of the magnitude of what it involves and because it poses a threat to our sovereign rights over underground resources that are protected under the constitution," said de Grazia, who represents mining districts bordering with Brazil and Guyana in southeast Venezuela.

The prospecting agreement is part of a growing alliance between the two countries, which has turned Venezuela into a major source of petroleum for China, while the Asian giant is meeting the South American country's growing need for credit to finance its constant outflow of public funds.

Venezuela exports over 600,000 barrels of crude oil a day to China, according to Ramírez, although other sources put the figure at half that much. Beijing, in turn, has granted Caracas more than 38 billions dollars in credits, and at the same time it participates in energy and construction projects.

Mapping out mining resources in South America and other such activities, "are very valuable to China, which has an increasingly greater need to access dependable and lasting supply sources for all kinds of raw materials, to guarantee that it will have the basic elements necessary to implement its long-term National Development Plan," Chilean expert Chihon Ley told IPS.

With this plan, China hopes to become the world's leading economic power by 2048, or earlier, said Ley, Asia Programme director at Chile's private Adolfo Ibáñez University.

Although globally Venezuela is known primarily for its great oil production, it also has massive mineral reserves. It has enough iron reserves, for example, to supply China, the world's leading consumer of that metal. Other reserves with export potential include bauxite (the main source of aluminium), phosphates, gold, diamonds, copper, uranium and even coltan and thorium, two rising stars of technology industries.

The Democratic Republic of Congo and Brazil currently export most of the world's coltan, used in many electronic devices manufactured primarily in Asia, but reports in the Venezuelan press have revealed that unauthorised operators are already mining the ore in the southern state of Amazonas.

While thorium is presently only used in experimental reactors and not commercially, it is considered to be the energy source of the future.

It is a radioactive metal that is not fissionable like uranium, but is three times more common and can generate 40 times more energy than uranium. The United States Geological Survey estimates global reserves of thorium at 1.2 million tonnes.

According to a study by Eduardo Greaves and Haydn Barros, professors at the Simón Bolívar University in Caracas, the Impacto hill, an area six kilometres long by two kilometres wide located some 500 kilometres south of Caracas, could contain enough thorium to produce more energy than the Orinoco Belt, which is thought to be the largest petroleum reserve in the planet.

What does Venezuela get out of granting prospecting rights over all of its mineral wealth to a Chinese consortium? For Fernando Soto, a legislator of the governing United Socialist Party of Venezuela who heads the Energy and Mining Commission, the Chinese survey "would allow us to locate and quantify mineral deposits occurring at great depth," in contrast to available studies, which are relatively superficial.

But de Grazia questions the decision arguing that if that is indeed the case then the government "should have awarded this prospecting contract to the highest bidder through an international competitive bidding process."

Citic Group lacks the necessary credentials in the field, de Grazia said, and as for training, "China has five universities with geologist training programmes, while in Venezuela we have six, which were ignored, as was the experience of the public bodies operating in the sector."

Venezuela has a state mining institute, which has not commented on the agreement with China, and "there is a census of more than 1,500 geologists and post-graduate studies on the subject that was prepared two decades ago," Jean Pasquali, emeritus professor at the Geology School of the Central University of Venezuela, told IPS.

Pasquali said "it is unusual for countries to hire foreign or private companies to assess their mining potential."

In the first place "because that knowledge has many applications, in terms of selecting areas that are appropriate for deposit exploration and for detecting natural risks and planning programmes for risk minimisation and land management," Pasquali said.

In addition, research in the earth sciences "is a ongoing process that is highly dependant on scientific developments, much like population and ecological studies, which is why they are entrusted to official institutes," he argued.

Small-scale gold prospectors in southeast Venezuela, many of them members of the Pemon indigenous people, have also voiced their objection to the agreement.

In contrast, Ley said he thinks "a prospecting agreement with a Chinese company, which has the approval and support of both governments, was the best option."

"Venezuela's strategy so far has not generated a scenario in which it can negotiate and access the prospecting technologies and financial resources available to the large multinational mining companies. Enormous human, economic, financial and technological resources are needed" for such operations, he said.

For that reason, Ley believes the agreement and its implementation will be beneficial for the country, provided it meets certain conditions.

The first is that "all the data gathered through prospecting, and not just the general data, remain with the Venezuelan government for future management."

Another condition is "that the agreement must not establish any prior obligation of the state to grant the (mapped) resources to any Chinese company in particular, and that once prospecting operations are completed the state will be free to grant mining rights over those resources to the highest bidder, through a bidding process or otherwise."

Lastly, "the data gathering work and subsequent mapping must be done by a binational team of professionals, so that the technical know-how will remain in Venezuela to further (the country's) human and technological development," Ley concluded.

© Inter Press Service (2013) — All Rights ReservedOriginal source: Inter Press Service