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Spokane, Washington  Est. May 19, 1883
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Gold Reserve plans large Venezuelan mine

Gold Reserve Inc. has ambitious plans to build one of Venezuela’s largest gold mines.

The Spokane company is counting on favorable gold prices to help raise $552 million to construct the Brisas Mine, an open-pit gold and copper operation in southeast Venezuela, said Doug Belanger, Gold Reserve’s president.

“We went through the nuclear winter of gold prices, a five-year period when gold was trading below $350 per ounce,” Belanger said.

Financiers hesitated to lend money on new gold mines in that climate. Now gold is back above the $400 mark. And, said Belanger, “The market is awash in cash for projects.”

Gold Reserve is shooting for a 2007 opening for the Brisas Mine. To facilitate financing, the company is setting up a “data room” in Spokane. Independent geologists, under contract by bankers and other potential investors, will scrutinize a decade’s worth of data from drill holes and test results.

According to Gold Reserve’s estimates, the deposit contains 9.2 million ounces of gold, worth nearly $4 billion at today’s prices. About 900 people would work at the open-pit mine, which would eventually reach depths of 1,200 feet.

The Brisas deposit is part of the Guyana Shield, a mineral-rich region that lies along the northeast coast of South America. Belanger and Gold Reserve’s CEO, Rocky Timm, were interested in the region for years, but Venezuela’s tax structure kept them out of the country. Foreign firms paid heavy taxes to export natural resources out the country, Belanger said.

The government revised its tax structure about 15 years ago to encourage investment in Venezuela’s mining sector, Belanger said.

In 1991, Gold Reserve bought the Brisas deposit, after seven months of bidding against Placer Dome, a Canadian firm that owns a larger gold deposit to the north. Gold Reserve paid $2.5 million in cash for the property, which had been prospected by small miners.

“They’ve been mining the area for about 30 years,” Belanger said. “From the air, you can see where they’ve torn back the jungle for seven kilometers.”

Small miners used hydrology to separate gold and copper from the soft clay on the surface, but didn’t have the technology for a deeper mine, Belanger said.

Gold Reserve hopes to receive permits for the mine later this year. Construction would take another two years, Belanger said.

Belanger and Timm are former employees of Pegasus Gold Corp., which was headquartered in Spokane. The partners raised financing for Pegasus, but left the company in 1987, about a decade before it filed for bankruptcy.

If the Brisas project goes into production, it would be Gold Reserve’s first operating mine.

“It takes us instantly from the juniors to the senior intermediates,” Belanger said.

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