WSJ: Rusoro Files Arbitration Case Against Venezuela Over Gold

July 19, 2012 7:39 amComments OffViews: 11

By KEJAL VYAS

CARACAS—Rusoro Mining Ltd. said Wednesday it has filed an international arbitration case against the Venezuelan government after the company failed to receive compensation for gold mining projects nationalized last year.

The Vancouver miner, controlled by Russia’s Agapov family, is likely to be one of the last companies to file a claim against the Venezuelan state at the World Bank’s International Centre for Settlement of Investment Disputes. Faced with more than 20 claims in front of the tribunal seeking billions in compensation over seized assets, President Hugo Chavez’s leftist government petitioned to exit the court in late January.

Companies like Rusoro were given a six-month time frame to file additional claims, which closes July 25.

“The Venezuelan government’s actions have resulted in significant loss to the company and its shareholders,” Rusoro Chief Executive Andre Agapov said in a statement Wednesday. He added that for several months, his company sought “an amicable resolution to the dispute” but had to resort to international arbitration due to “the government’s apparent unwillingness.”

Rusoro had been the last remaining privately traded miner in Venezuela after a number of other players had their assets expropriated at Mr. Chavez’s request in recent years. Rusoro then had its property seized in August as part of a move by the Chavez administration to give the state near-total control over gold production while promising to rewrite partnership terms with private companies.

Shortly after the government takeover, Agapov said in a telephone interview that Venezuela had pledged to pay 55% of book value plus a premium for the projects that his company owned. At the time, Agapov also said he was confident in the process, noting his father, Rusoro Chairman Vladimir Agapov, was personal friends with Mr. Chavez, and his company always had a good relationship with the government.

But payment was never made, and new terms for a joint venture were never finalized. Rusoro threatened to take its case to arbitration court as early as December.

A spokeswoman at Venezuela’s Energy Ministry, which also oversees mining projects, didn’t immediately respond to a call seeking comment.

Rusoro had two mines in production, as well as 10 exploration projects in Venezuela.

On Feb. 27, Venezuelan Oil Minister Rafael Ramirez said China’s Citic Group planned to purchase up to a 20% stake in Venezuela’s Las Cristinas gold mine and is assisting in a survey of Venezuela’s mineral deposits to certify reserves. Las Cristinas was formerly operated by Crystallex International Corp. until the Venezuelan government terminated the Canadian company’s contract. The company is now one of nearly two dozen seeking compensation at the ICSID court.

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