Venezuelan President Hugo Chavez ordered the nationalization of the gold industry and gave companies 90 days to form joint ventures with the state as he seeks to boost control over the nation’s metals producers.
The government will hold at least 55 percent of any joint ventures, according to a decree in today’s Official Gazette. The decree sets a royalty rate of 10 percent to 13 percent and says that all Venezuelan gold production will be sold to the state.
Chavez first announced the nationalization of the industry and plans to repatriate Venezuela’s foreign gold reserves on Aug. 17. Petroleos de Venezuela SA, the state oil company, is forming joint ventures with both state and publicly traded companies to operate mines including Las Cristinas, which Chavez confiscated from Canada’s Crystallex International Corp.
“The government will have a monopoly of gold production and sales,” according to the decree. “All the gold that is produced from mining operations in national territory will be turned over to the Republic.”
Rusoro Mining Ltd., a Vancouver-based company that produces 100,000 ounces a year of gold, said on Aug. 30 that it would transfer its assets to a joint venture controlled by PDVSA, as the Caracas-based company is called.
Venezuela produces 11 metric tons of gold a year, and illegal miners extract an additional 10 to 11 tons a year, Chavez said in May.
Chavez, who is currently in Cuba being treated for an undisclosed type of cancer, on Sept. 17 approved $130 million of new funding for the country’s state mining holding company Corporacion Venezolana de Guayana.
The funds will be used to pay salaries and overtime owed to workers, many of whom have been participating in strikes in recent months, the ministry of mining and basic industries said in a statement today.
“It’s clear that the mining industry is not producing any dividends for the state at the moment,” Chavez said on Sept. 17.
Of 18 arbitration cases pending against Venezuela in the World Bank’s International Centre for Settlement of Investment Disputes, at least three of them are mining ventures including Crystallex’s claim for almost $4 billion. Gold Reserve Inc., a Spokane, Washington-based mining company, is seeking $2.1 billion in damages after its Las Brisas gold and copper project was seized in May 2008.
The South American country, in an effort to boost stalled production and take advantage of rising prices, last year relaxed restrictions on gold exports to allow some companies and joint ventures with the government to send as much as 50 percent of their output abroad.
Gold futures for December delivery declined $38.50, or 2.1 percent, to $1,776.20 an ounce at 1:40 p.m. on the Comex in New York.