Caracas, February 25th 2016 (venezuelanalysis.com) - Venezuela and Canadian gold mining firm Gold Reserve signed a deal on Wednesday, creating a joint venture in the South American country’s Brisas and Las Cristinas goldmines.
The new project is part of a settlement in the arbitration case brought before the World Bank’s International Center for Settlement of Investment Disputes (ICSID) by the mining company in 2009, after its Las Brisas concessions were terminated by the Venezuelan government.
The deal includes a US$ 2 billion loan to economically-struggling Venezuela, as well as an undisclosed amount in compensation to Gold Reserve, according to company bosses.
“We have signed a US$5 billion investment deal, which are divided amongst; the resolution of the dispute, a US$2 billion investment in the gold mines, and a US$2 billion loan to the country,” confirmed Venezuelan Minister for Petroleum and Mining Eulogio del Pino on Wednesday.
Although Gold Reserve was initially awarded US$750 in indemnity by ICSID, Venezuela challenged the decision, stalling the resolution of the dispute.
Nonetheless, Wednesday’s agreement appears to bring the seven year case to a mutually-agreed conclusion, with Venezuelan President Nicolas Maduro now referring to the company as a “partner”.
According to government sources, the Venezuelan state will own 55% of the project, whilst the remaining part will go to Gold Reserve.
“We arrived at a final agreement on the dispute. This demonstrates before international investors the country’s commitment to resolving the discrepancies that have taken place,” added Del Pino.
In other statements, Maduro indicated that the move to expand mining in the country is part of the government’s broader strategy to diversify the economy.
Over the past two years, resource-rich Venezuela has been cast into economic disarray by a massive drop in global oil prices– decimating the country’s main source of income.
The crisis has prompted the government to look elsewhere for vital revenue, including increasing taxes and raising the domestic price of gasoline.
Now it is opening up the country’s 114,000 kilometre stretch known as the “Orinoco Arc” to international mining companies which are interested in working in partnership with the Venezuelan state.
The development of the country’s mining sector was recently revealed as one of the 14 “economic motors” that will be put into action by the government this coming year to overcome its recent economic woes.
“We have a clear national project which integrates all the wishes of the country, we are building the right to the future, for a powerful Venezuela,” stated Maduro, who ordered the Orinoco Arc’s mineral reserves to be officially certified and quantified as part of the mining drive.
Aside from having the world’s largest petroleum resources, Venezuela is also estimated to possess the planet’s second greatest gold reserves, as well as diamonds, iron and aluminium.
The gold industry was previously nationalised by former president Hugo Chavez in 2011, after a slew of illegal mining was reported.
Nonetheless, the move still allowed for the development of joint ventures between the private sector and the state, with the latter as majority stake-holder.