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Gold Reserve gets $740-million decision for Venezuelan expropriation

by Greg Klein | September 22, 2014

An international tribunal has awarded Gold Reserve TSXV:GRZ $740.3 million for the seizure of its Brisas gold-copper project in Venezuela. While company president Doug Belanger expressed hope the country will pay up promptly, his September 22 statement warned, “Should they fail to do so, we are prepared to pursue all available means to ensure that the amount awarded to the company is recovered in full.”

The World Bank’s International Center for Settlement of Investment Disputes evaluated the project’s market value at $713 million and awarded an additional $22.3 million interest and $5 million for the company’s legal and technical expenses. Payment comes due immediately “with any unpaid amounts accruing interest at Libor plus 2% per annum,” Gold Reserve stated.

Gold Reserve gets $740-million decision for Venezuelan expropriation

The three-person panel, with representatives from Italy, France and New Zealand, based its decision on the Canada-Venezuela Bilateral Investment Treaty.

The company had spent about US$300 million on the project before the government revoked permission to build a mine. However Gold Reserve stated the award “is less than the value of the Brisas project at today’s gold and copper prices and Venezuela will substantially benefit from the development of the mine.” The company describes Brisas as “one of the largest undeveloped gold-copper deposits in the world, [with] reserves of 10.2 million ounces of gold and 1.4 billion pounds of copper.”

In a revised claim submitted in July 2011, Gold Reserve priced the Brisas and early-stage Choco 5 projects at about $2.1 billion.

Venezuela confiscated the project in a series of actions during 2008 and 2009, part of a wave of expropriations of mining, oil and gas, and other assets under now-deceased president Hugo Chavez. In 2012 he pulled his country out of the arbitration process but dozens of previous cases are still pending. Anglo American went to the World Bank last April after Venezuela cancelled its Loma de Niquel concessions in 2012.

Gold Reserve stated it has already taken steps to ensure collection of the award, “which is immediately enforceable in any of the 150-plus member states party to the New York Convention.” But the company also offered an olive branch of potentially mutual benefit. Venezuela’s acquisition of Gold Reserve’s engineering work “would both expedite and reduce the cost of the project’s development,” the company added. “If requested, Gold Reserve would also be prepared to assist in the fast-track development of the Brisas project.”

The company, which had a press time market cap of $330.17 million and about $8.8 million in cash, said it would distribute “a substantial majority of any proceeds” to its shareholders.

At one point Venezuelan media had reported the country would develop Brisas, and Las Cristinas, then held by Vannessa Ventures, in a joint venture with Rusoro Mining TSXV:RML, which attempted a hostile takeover of Gold Reserve in 2008 and 2009. But in March 2013 Rusoro launched its own US$3.03-billion expropriation claim against Venezuela.

In January 2013 a World Bank tribunal ruled in favour of the 2011 expropriation of Las Cristinas, then held by Crystallex International.

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