On September 10 we wrote a piece on gold mining in Venezuela that we have subsequently found contained some inaccuracies. Doug Belanger, President of Gold Reserves one of the miners mentioned in the article has put us straight on the following.
Reporting from press releases in Venezuela we wrote that the Venezuelan government had told Gold Reserves and a neighboring Canadian miner Crystallex that they should share mining rights with a third entity Rusoro. This was apparently incorrect. The government has made no such directive although comments have been made by President Chavez that both Brisas and Cristinas (Crystallex’s mine) will go to a Russian State entity but no action or moves have been made. In fact, Gold Reserves was granted a permit to develop the Brisas deposits some time ago and had invested some US$300m to develop the mine to the highest social and environmental standards only to have their authorization recently revoked by the authorities. This is now the subject of a case brought by Gold Reserves to the ICSID division of the World Bank.
Drawing on news articles inside and outside Venezuela it would appear we picked up on some misreporting of President Chavez’s speeches that had confused the reference to a Russian State entity with Rusoro. Although Rusoro has a Russian boss it is in fact a Canadian listed miner with extensive gold mining interests in Venezuela that have been subject to lengthy delays in permitting. This suggests it does not have any preferred status with the government and although their behavior has been aggressive and possibly underhanded (see the judges’ ruling here) in their hostile takeover attempt on Gold Reserves they should not be mistaken as being the same as this mysterious Russian State entity that the Venezuelans have referred too.
On one point we appear to be in agreement with Gold Reserves and probably other foreign investors – Venezuela is a challenging and frustrating place to do business, and the approach of the current regime is more likely to drive away investors than it is to create opportunities for the Venezuelan people. Our thanks to Doug Belanger for bringing us up to speed.