Venezuela to take over inactive mines

CARACAS, Venezuela, June 16 (Reuters) - Venezuela plans to take over all inactive mining areas to form new joint ventures with a state majority stake and state-backed small mining groups foreseen under a mine law reform, Mining Minister Victor Alvarez said on Friday.

The mine reforms follow measures by Venezuelan President Hugo Chavez to increase state control over the energy industry of the world's No. 5 crude exporter, where foreign and local companies were this year forced to accept new joint ventures giving the state oil firm PDVSA majority control.

"The areas that are inactive are going to be recuperated and rescued by the Venezuelan state," Alvarez told reporters outside the Congress where he handed over the proposed reforms to lawmakers.

Chavez, an ally of Cuba who says he is constructing a socialist revolution for the poor, has attacked oil contracts signed before his 1998 election for "robbing" Venezuela's resources by giving preferential terms to foreign operators.

Alvarez refused to comment directly when asked whether the reforms would affect Canadian gold miner Crystallex International (KRY.TO), which is waiting for the government to approve a final environmental permit to start proper mining.

Crystallex has said its operating contract for the huge Las Cristinas gold mine will not be affected by the mine law reforms. But one lawmaker in the congressional mining commission said he believes the Canadian miner would be included, without giving more details.

"Sometimes the process of getting permits is used as an excuse and a pretext to justify inactivity," Alvarez said, without naming any mine operations.

He said miners in production and with their affairs in order would not be included in the changes.

Earlier this year, former paratrooper Chavez said his government would no longer authorize new mining concessions and ordered a review of the industry, sparking market jitters as investors fretted over foreign gold miners such as Crystallex.

Mining will be carried out through operating contracts with the state mining company, though joint ventures where the state has majority control and through small mine operations such as cooperatives, according to a draft of the law reforms.

The proposal says current contracts can continue working unless they break the law or their production halts for more than a year or they fail to pay taxes or do not comply with social spending requirements demanded by the government.

Lawmakers loyal to Chavez control all 167 seats in the congress after opposition parties boycotted a December legislative ballot to protest what they said was bias by election officials - source