A Spokane mining company emerged as the winner in a multimillion-dollar dispute with Venezuela over the government’s decision to revoke the firm’s permits to build an open-pit gold mine in the South American country.
Gold Reserve Inc. was awarded $740.3 million by the three-member tribunal at the World Bank’s International Center for the Settlement of Investment Disputes in late September. The award is one of the larger ever issued by the tribunal.
Doug Belanger, Gold Reserve’s president, said he feels vindicated by the tribunal’s “clear conclusion that the Venezuelan government acted unlawfully” by terminating the project.
He said the company expects to collect the money. The tribunal’s awards “have a lot of teeth,” he said.
Countries honor them because not paying has implications on their creditworthiness as a country, Belanger said. If Venezuela doesn’t pay, Gold Reserve will pursue legal options to seize Venezuelan assets in other countries, he said.
Gold Reserve is an Alberta company with its headquarters in Spokane. Since 1992, company officials have been working to develop the Brisas gold mine in eastern Venezuela’s Bolivar state. The project has the potential to be one of Venezuela’s larger open-pit mines, employing 1,000 workers to extract 10 million ounces of gold, as well as copper.
Gold Reserve’s officials spent about $300 million to bring the project to the construction stage. But in April 2008, Venezuela’s government revoked previous authorization to start building the mine, according to Gold Reserve’s website. It was the beginning of several actions taken by the government that eventually led to nationalization of Venezuela’s mining industry.
Gold Reserve filed a request for arbitration with the international tribunal in 2009. The case was decided under the terms of an investment treaty between Venezuela and Canada, where Gold Reserve is incorporated.
The award represents the fair market value of the Brisas project, plus interest and legal costs.
In its 226-page ruling, the tribunal found that Gold Reserve held valid rights to the mining concessions and parcels required to develop the Brisas project. Tribunal members also determined that Venezuela failed to meet treaty obligations to afford the project “fair and equitable treatment,” and called the violations “particularly egregious.”
Gold Reserve had annual compliance certificates from Venezuela’s ministry of mines, indicating that the company was operating within the law. So, “it was hard to come back and say we’d done something wrong,” Belanger said.
The Venezuelan government plans to build the Brisas Mine and has hired a Chinese contractor, Belanger said. For an additional fee, Gold Reserve is willing to sell the government technical information that would speed up the mine’s construction, he said.
Gold Reserve plans to distribute a substantial amount of any proceeds from the award to its shareholders, Belanger said.
Subscribe to the Morning Review newsletter
Get the day’s top headlines delivered to your inbox every morning by subscribing to our newsletter.