UPDATE 2-Gold Reserve says Venezuela seized Brisas mine

* Says government takes possession of Brisas site

* Government stripped rights earlier this year

* Company filed arbitration last week, seeks billions

* Stock down 13 percent (Adds background, details; in U.S. dollars unless noted)

TORONTO, Oct 27 (Reuters) - Gold Reserve (GRZ.TO) said on Tuesday that Venezuela had seized control of its Brisas gold property, deepening a dispute between the miner and Hugo Chavez's government and pulling the company's shares down 13 percent.

Gold Reserve's rights to much of the deposit were taken away by the Venezuelan government earlier this year, and the Toronto-listed company filed for international arbitration last week, seeking to win billions of dollars in damages.

The Spokane, Washington-based miner said government personnel arrived at Brisas on Monday to deliver notification of the takeover of the property and to take physical possession of it.

Brisas and its sister project Las Cristinas -- whose license is held by Canada's Crystallex International (KRY.TO) -- are estimated to sit on well over 20 million ounces of gold.

Crystallex struggled for years to gain permission to mine Las Cristinas, but its and Gold Reserve's chances of ever pulling gold out of the site appeared to evaporate late last year, when Chavez said Venezuela would develop the mines with Russian-backed companies, including Canadian-based Rusoro Mining (RML.V).

"The government's actions are a continuation of its wrongful treatment of Gold Reserve and its investments and a further demonstration of the government's earlier decision to expropriate the entire Brisas project," Gold Reserve President Doug Belanger said in a statement on Tuesday.

Shares of Gold Reserve were down 16 Canadian cents at C$1.03 on the Toronto Stock Exchange.

On Monday, Gold Reserve had said a group claiming to represent Venezuelan state-owned mining company CVG Minerven showed up at Brisas last week, claiming they were sent to take control of the concession. Gold Reserve said the action did not appear legal.

It also said a group of illegal miners had been encroaching on the property in the past few weeks, which the government has been slow in removing.

The government's moves in the mining sector follow a series of nationalizations across several industries by Chavez.

Representatives of Gold Reserve and Crystallex were not immediately available for comment.

In its arbitration claim, Gold Reserve is seeking to recover $300 million in investments it says it made in Venezuelan concessions as well as $5 billion in compensation for estimated future profits. (Reporting by Cameron French; editing by Rob Wilson)