Venezuela to free up Palmar bauxite mine-official

Reuters, 06.10.03, 4:12 PM ET  By Pascal Fletcher CARACAS, Venezuela, June 10 (Reuters) - Venezuela plans to free up this year a large bauxite deposit in which diversified miner BHP-Billiton <BHP.AX> has expressed an interest to develop a project to mine bauxite and produce alumina, an official said on Tuesday. Gen. Francisco Rangel, president of Venezuela's state industrial holding CVG, told reporters that before the El Palmar deposit could be offered for development, CVG first had to rescind an existing exploration contract held by Delta Minerals, a small privately held British firm. Rangel said Delta Minerals had held the El Palmar contract for more than a decade, but had failed to carry out any work. "What we have is a lack of compliance (of a contract), nothing was done for 12 years," he added. CVG, which handles mining contracts in Venezuela's mineral-rich southeastern Bolivar state, was negotiating with Delta Minerals to end the contract, in accordance with existing Venezuelan laws. "We will undoubtedly be making a decision on this case this year," Rangel said. He added that BHP-Billiton had asked to participate in the development of El Palmar. The initial $1.3 billion project foresees the construction of a bauxite mine and an alumina plant. It could also be expanded to include a primary aluminum smelter, which would increase the total projected investment to an estimated $4.3 billion. Rangel said Venezuela would award the new El Palmar contract either through a tender or selection, as suitable. Armando John, CVG's director of mining, said El Palmar, located in the northeast part of Bolivar state, contained estimated bauxite reserves of 150 million tonnes. Rangel told Reuters that CVG had drawn up a new national aluminum development plant which foresess a primary aluminum output goal for the future of three million tonnes. Venezuela's total aluminum output last year was just over 607,000 tonnes. But the CVG president declined to give a time frame or details of the ambitious expansion plan. CVG's Alcasa aluminum smelter has just signed a $650 million project with a consortium led by Swiss-based commodities group Glencore International AG to build a fifth production line that will more than double the plant's capacity to 450,000 tonnes.