LAS CRISTINAS, Venezuela (Reuters) - Four centuries after the lure of Venezuelan gold brought ruin to English explorer Sir Walter Raleigh, the riches at one giant mine some say is cursed still haunt treasure hunters from across the globe.
Located south of the Orinoco river and near a town bearing the name of the mythical golden city of El Dorado, the Las Cristinas deposit captivates miners and prospectors even though no ore has been legally dug there in two decades.
Studies show it may be Latin America's top gold deposit.
But the Las Cristinas saga, involving a ghost town, environmental devastation and fist-sized nuggets, underlines the risks of business in Venezuela, where the draw of natural wealth has been dulled by rule changes and economic turmoil.
A web of legal cases and red tape has so far stopped any big company from extracting the estimated 20 million ounces of gold that lie in Las Cristinas and its sister property Brisas -- together known as Kilometro 88.
Latin America is a major source of minerals but while countries such as Peru push mining with clear rules for investors, the potential is undertapped in Venezuela and Ecuador due to tension between governments and foreign firms.
The view that Venezuela, South America's top oil exporter, offers an unstable business climate has grown under socialist President Hugo Chavez, who has nationalized large chunks of the economy.
Game investors and poor local miners at Las Cristinas hope their luck will change after Chavez, with an eye on record gold prices and falling oil income, vowed to open the mine this year with the help of Russian tycoon Vladimir Agapov.
That promise will be hard to keep, but it has caught the eyes of locals who hope the project will bring order to chaotic camps and villages of wildcat miners where drunken machete fights take lives and mercury run-off pollutes water supplies.
"Some people were born here and 20 years on are still waiting for the mine," said Cristina Perez, who has panned gold in the area for a generation and lives in a tidy tin-roofed shack with no running water in the village of Las Claritas.
"It has to start this year," said Perez, who feels unsafe in the lawless village after a gang stole her $12,000 metal detector. "We need sewage disposal, housing and security."
Even Agapov's Vancouver-based company, Rusoro, which Chavez wants to develop Las Cristinas, says the timeline is too short. Chavez has not further explained his plans for the mine, the rights to which are now held by Canada's Crystallex.
Pessimism about the property has reached stock investors, who typically assign big discounts to shares of companies associated with Kilometro 88.
"This quagmire, and the perception of risk that comes with it, continues to be a bit of a drag on our share valuation," said Rusoro's president, George Salamisoro.
Rusoro has had success turning round two troubled gold mines in the same region but a hostile bid to take over Gold Reserve, the U.S. company that owns Brisas, was shot down by a Canadian court last month.
Thick forest around Las Cristinas has been torn by wildcat miners who stand waist deep in yellow water gathering ore from the cratered landscape with mercury droplets and strong hoses, part of a 30-year rush that ebbs and flows with gold prices.
Guards on horseback patrol a high fence around the property, trying to keep out locals who a decade ago found a gold nugget weighing one kilogram lying in the mud there.
Investors from Europe, North America and now Russia have all set their sights on the mine but no company has extracted its ore since the government expelled an Italian adventurer called Amalfi Grossi who operated the mine in the 1980s.
Old-timers such as Jorge Cordoba who use pans to squeeze grains of gold from the reddish earth say Las Cristinas was cursed by Grossi 20 years ago when the government consolidated the area's mining operations and forced him and thousands of miners working for him out of the town he built there.
Grossi died a broken man soon after and the ghost town rotted into the jungle.
"That's Grossi's curse, any company that goes in there leaves with it's tail between its legs," said Cordoba, who according to local legend once tossed wads of cash from a helicopter after hitting a rich gold vein.
A short drive from the flat-top mountains that inspired Arthur Conan Doyle's novel "The Lost World," the malaria-plagued jungle region has a history of dramatic ventures.
In 1616, Sir Walter Raleigh led his second expedition up the Orinoco river in search of the mythical El Dorado. His son died in a battle and Raleigh was beheaded on his return to England for inciting war with Spain.
Raleigh was on the right track. In the 19th century, the region briefly became the world's biggest gold producer thanks to a rich vein found near an Orinoco tributary.
Canada's defunct Placer Dome came the closest to opening Las Cristinas as a world class mine but after investing millions it sold its stake for $50 when gold prices dropped.
Frustrated with the lack of progress, Chavez kicked out Placer Dome's successor in 2002 and handed the rights to Canadian firm Crystallex, but has never given it an environmental permit to develop the property in the Belgium-sized Imateca forest reserve.
Crystallex did not respond to requests for comment, but has said it still expects the government to issue the permit.
First concessioned in 1963, Las Cristinas ore grade is low and experts say it will cost about $500 an ounce to extract. Gold now sells for close to $1,000 an ounce.
"Now is the time to develop these deposits, certainly so with oil revenues hurting Venezuela," said Salamis, who hopes Rusoro can succeed where so many have failed.
Editing by Kieran Murray and Doina Chiacu