August 28, 2011 in Business

Chavez formalizes nationalization of gold industry

Associated Press

CARACAS, Venezuela – President Hugo Chavez signed a decree last week formalizing the nationalization of Venezuela’s gold mining industry, a move aimed at giving the government total control over gold produced in the South American country.

During a televised speech, Chavez also announced the repatriation of $11 billion in Venezuelan gold reserves currently held in U.S. and European banks would begin within several weeks.

Chavez did not offer details how the new decree differs from a 1965 law that nationalized gold mining. In 1977, the government granted itself exclusive rights to extract gold. But he suggested it would give authorities increased powers to evict wildcat miners from illegal mines.

The president said officials have contacted representatives of the company Rusoro Mining Ltd., the one private company with significant mining operations in Venezuela, to continue joint gold mining operations.

Rusoro produces gold both at an open-pit mine and an underground mine that is a joint venture with the government. The company, based in Vancouver, B.C., has said it has had no indication from the government “of any changes to the company’s operations.”

Rusoro paid $25 million in 2008 for Hecla Mining Co.’s Venezuelan gold properties. Coeur d’Alene-based Hecla said at the time its decision was prompted by rising costs at its Venezuelan mines, as well as investors’ concerns about Chavez’s leftist government.

In February, Venezuela’s government canceled the gold mining concession of a Canadian company, Crystallex International Corp.

In addition to repatriating gold reserves, the president of Venezuela’s Central Bank has said the government plans to move other international assets to buffer the country against economic woes in the United States and European countries.

Some analysts have said moving Venezuela’s reserves will make investors see the country as riskier.

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