Toronto-based Crystallex said on its website that it received a letter from the state company Corporacion Venezolana de Guayana, or CVG, saying its operating contract for the Las Cristinas mine has been "unilaterally terminated."
The statement said that enclosed with the letter was a copy of a CVG resolution formalizing the decision, citing a purported lack of activity by Crystallex on the project for more than a year and also "reasons of opportunity and convenience."
Crystallex said it had upheld its obligations under the contract and prepared the site to a "shovel ready" state while awaiting a permit from the environment ministry. The environment ministry denied the request for a permit in April 2008 despite "Crystallex's fulfillment of the conditions to receive the permit," the company said.
Crystallex has considered the Las Cristinas mine in southern Bolivar state to be its principal asset, estimating it holds about 17 million ounces of gold.
There was no immediate comment from President Hugo Chavez's government. Chavez last year threatened to take over gold mining concessions in the country, accusing mining companies of harming the environment and violating workers' rights.
Crystallex said it was "reviewing its position in light of this correspondence" from Venezuela.
The company said it was "considering all steps necessary to protect its investment on behalf of all its stakeholders including the filing" of an international arbitration claim.