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Gold Reserve gets $740-million decision for Venezuelan expropriation

September 22nd, 2014

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.

Week in review

January 18th, 2013

A mining and exploration retrospect for January 12 to 18, 2013

by Greg Klein

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Colombia kidnap victims still missing

By press time Friday, little was known about the five people abducted earlier in the day from Braeval Mining’s TSX:BVL Snow Mine gold project in northern Colombia. The three employees and two consultants included a Canadian, two Colombians and two Peruvians. The Peruvian consulate identified two victims as Javier Leandro Ochoa and Jose Antonio Mamani. The other names haven’t been released.

Colombian kidnap victims still missing

Military sources say the victims were abducted
in a rural area of Norosi municipality, in Bolivar department.

The hostages were taken by members of the National Liberation Army (ELN) in a region described as a traditional ELN stronghold, the Globe and Mail reported. With an estimated 1,500 members, the ELN is much smaller than the Revolutionary Armed Forces of Colombia (FARC), news reports stated.

Although FARC holds peace negotiations with the government, “the ELN has been seeking peace talks … without success. Unlike the FARC, it has not renounced ransom kidnappings,” according to the G&M.

“Miners in Colombia have traditionally paid tributes, or ‘war taxes,’ to rebels and other illegal armed groups,” the paper added.

Geologist gets jail

A Vancouver court handed former mining executive John Gregory Paterson a six-year prison sentence for his faked assay scam, the CBC reported on Friday. Paterson pleaded guilty last September to four counts of fraud.

As CEO of Southwestern Resources and a qualified person, Paterson signed off on 433 assays that he invented between 2003 and 2007. His make-belief numbers were used in a 2005 PEA for the Boka Gold Project in China.

According to the CBC, Paterson’s lawyers told a sentencing hearing that “he suffers from severe depression and argued he didn’t carry out the fraud to line his pockets. Instead, Paterson was motivated by wishful thinking and a crippling fear of failure.”

But the Crown prosecutor told court how investors suddenly lost their savings. “Really, the floor fell out from underneath them,” the CBC quoted him. “It was an absolute shock and a terrible loss.”

Read more about Paterson’s Boka gold scam here.

Land claims clash with claim-staking

A possible overhaul of British Columbia’s claim-staking process could give natives more power to block early-stage exploration on Crown land. A Monday Vancouver Sun article discussed implications of a December decision by the Yukon Court of Appeal, which ruled that the territorial government must consult and “accommodate” the Ross River Dena Council before awarding mineral claims within the Ross River area.

So far the ruling concerns a region surrounding one native band. But it might have wider repercussions within the Yukon and B.C. As the Sun pointed out, the three judges behind the decision also sit on the B.C. Court of Appeal, “meaning they could rule similarly in any separate B.C. case.”

Mining Association of B.C. spokesperson Zoe Younger told the Sun that B.C., unlike the Yukon, doesn’t automatically approve exploration once a claim has been staked. Different circumstances “have different trigger points and thresholds,” she said.

Nevertheless the Sun stated that Andrew Gage, a lawyer with West Coast Environmental Law, “called the Yukon decision ‘hugely significant’ and urged the B.C. government to take notice or face the prospect of more litigation with the same results in this province.”

In a statement issued Monday, the Association for Mineral Exploration B.C. said, “We are encouraging the Yukon government, First Nations and Yukon Chamber of Mines to work together to resolve this issue in a practical way that brings certainty to everyone. AME BC is supporting YCM and following this important file closely. The government of Yukon has been given 60 days to determine if it will appeal the decision to the Supreme Court of Canada.”

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Fortnight in review

January 4th, 2013

A mining and exploration retrospect for December 22, 2012, to January 4, 2013

by Greg Klein

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To accommodate the Christmas/New Year publishing schedule, this review covers two weeks.

From risk to risk

“Although some companies and the province laud Ontario as being one of the best mining-friendly jurisdictions in the world,” that reputation is changing, according to a Thunder Bay-based drilling contractor. In the January 2 edition of Northern Ontario Business, Barb Courte, president of Cobra Drilling and North Star Drilling, said the province is facing a downturn in early-stage exploration.

The article stated, “In conversation with her industry colleagues, Ontario is considered a ‘risk area’ for investment, based on some high-profile First Nations-industry conflicts, along with the uncertainty of how the new Mining Act plans and permits regulations will play out.”

Regulations that take full effect in April will give native bands more power to block drilling on Crown land.

A mining and exploration retrospect

Courte told Northern Ontario Business her companies did well in 2012 but business has now dropped by about 50%.

A supplier dates the drilling downturn to last April. Hugh Paxton, GM of Wire Rope Industries Distribution, told the paper, “It’s the lowest numbers we’ve seen for drilling supplies since we’ve been [in] it for the last four years.”

Courte, meanwhile, hopes to make up for lost business in the Caribbean. Unigold TSXV:UGD has contracted her to send four drills to the Dominican Republic in autumn and she’s getting inquiries from other companies operating in the country, the story stated.

Unigold calls the country a “premier mining destination.” The company’s most recent (November 28) news release stated the government “supports development and exploration in the mining sector. In addition, the country has well-established mining laws and environmental laws.”

Two days later, however, Mining Weekly offered a different perspective. A spokesperson for the Xstrata Nickel subsidiary Falcondo told the publication, “Security in the country has seen a gradual deterioration, which has forced us to significantly increase our security costs. They have tripled in the past few years.”

Mining Weekly added, “Dominican President Danilo Medina has acknowledged the problems and promised in a televised speech to the nation on [November 27] to improve security and reform the country’s police force. According to the World Economic Forum’s latest Global Competitiveness Index released in October, the Dominican Republic ranked 143rd out of 144 countries worldwide in reliability of its police force.”

New mega-company consolidating China’s rare earths production

A planned 12-company takeover could mark the first step in creating “a massive rare earth enterprise that will integrate light rare earth resources” in northern China. According to a December 28 China Daily article, newly signed framework agreements would have the companies and their shareholders hand over a combined 51% interest for free to the Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co (REHT). In return, REHT would provide management, technology and funding, while setting production and export quotas. The agreement allows one year for the deals to be consummated.

“If the first step goes well, REHT will eventually team up with major rare earth producers in Gansu, Sichuan and Shandong provinces to form the China North Rare Earth Hi-Tech Co,” China Daily reported. “Authorities expect bigger enterprises to churn out products with higher added value and shoulder more responsibility in environmental protection.”

With just 23% of the world’s rare earths reserves, China supplies over 90% of global demand, the paper added.

Can placer miners meet B.C.’s environmental code?

An enduring legacy of the Fraser and Cariboo gold rushes, placer mining remains a British Columbian institution. But now that a forgotten 2011 environmental report has come to light, the miners are worried.

An audit from B.C.’s Ministry of the Environment found 74% of 23 placer operations inspected in 2010 didn’t comply with land restoration requirements and 43% of miners “were also working in streams without authorization,” the Vancouver Sun reported on December 26.

“The placer mines range from one-person operations to larger operations that employ dozens of people and use heavy equipment to extract gold from sand and gravel,” said the story.

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Venezuela to nationalize Gold Mining

August 17th, 2011

Resource Clips - essential news on junior gold mining and junior silver miningVenezuelan President Hugo Chavez today announced plans to nationalize the country’s gold mining sector, Bloomberg reports. Chavez stated the decision was necessary to control illegal mining. Details of how and when the plan will proceed are still to come.

The country currently faces international arbitration from three gold miners. Last February the state-owned Corporacion Venezolana de Guayana terminated its operating contract with Crystallex, ending the Canadian company’s nine-year struggle to develop Las Cristinas gold project. Another Canadian, Gold Reserve, has launched a $2.1-billion claim after similar action was taken against its Brisas Project. Gold Reserve had invested $300 million in the gold-copper deposit.

Rusoro Mining, with offices in Vancouver, Caracas and Moscow, has criticized Venezuela’s gold export limits.

Last April Chavez referred to miners as “crazy people” and stated, “We cannot allow national and transnational mafias to continue destroying our homeland.” The following month Venezuela’s state-run gold mining company called for a $70-million government bailout.

In 2008, political interference and nationalization in different countries prompted Canaccord Adams analyst Wendell Zerb to say three factors determine a mining company’s success: “Location, location, location.”

by Greg Klein