Venezuelan National Assembly to Pass Law to Partly Nationalize Mines

On Tuesday, the Venezuelan National Assembly took the first steps towards passing reforms on the Venezuelan Mining Law, which could force companies with abandoned mines to form joint ventures with the Venezuelan state.

Caracas, Venezuela, June 23, 2006—On Tuesday, the Venezuelan National Assembly (AN) unanimously took the first steps towards passing reforms on the Venezuelan Mining Law, which could force companies with abandoned and idle mines to form joint ventures with the Venezuelan state. The move is similar to this past year’s shift in Venezuelan hydrocarbon policy, which forced oil companies to form joint ventures with Venezuela’s state oil company PDVSA.

With the unanimous passage out of the opening discussions of the AN on Tuesday, the reform now enters in to a national consultation process focused on the mining regions of Zulia, Táchira, and Bolívar. José Ramón Rivero, President of the AN subcommision on Mines stated this week that the results of the discussions will be incorporated in to the other two current mining proposals, and the corresponding reform will hopefully officially pass the AN in one month.

According to the daily Carabobeño, Rivero said that they are attempting to eradicate the mining latifundio (large idle estates), because “they are worse than the land latifundios.” He stated that there are more than a million hectares (2.5 million acres) that are frozen from exploitation because they are in the hands of concessionaries that do not take advantage of the resources. “We propose that we give urgent priority in approving [the reform] before this period of Congressional sessions is over.” The Venezuelan National Assembly recess is scheduled to begin August 15.

The reform approved during Tuesday’s opening discussions, proclaims to recover national sovereignty over mining resources by eliminating concessions for inactive mines, and by creating a new legal and regulatory framework to benefit Venezuela’s small miners who have found it hard to compete with transnational mining corporations.

It proposed, “the eradication of the latifundio, through the elimination of the system of concessions and the creation of the figures of operative contracts and joint ventures, as new modalities for the practice of mining activity… The consolidation of the small mining interests under the principles of sustainable development, which will be carried out through the National Mining Enterprises of Social Production; the possibility of creating mechanisms of cooperation geared towards international equilibrium and which guarantee the transfer of advanced technology in agreement with the principles of State planning and functioning for the good of the people.”

One of the more important features of the reform is the creation of the joint mining ventures, whereby private companies with idle concessions would be forced to form enterprises with the Venezuelan state (who is by law given majority share), if they want to continue to have a mining stake in Venezuela. According to the reform, this is to take back control over the nation’s mineral resources and to eliminate the profit driven bottom-line only search for wealth without the input from the state and the good of the people.

However, El Universal reported over the weekend that according to the President of the Mineral Chamber of Venezuela (CAMIVEN) Gilberto Sánchez Albornoz, the creation of the joint ventures was entirely permitted under the 1999 Mining Law. “Either they haven’t read it, or they didn’t know how to interpret it”, he said. The CAMIVEN board will meet this week to analyze the official proposal and its implications,

Crystallex International

Crystallex International is a Canadian mining company, which became one of the largest mining concession holders in Venezuela, when it bought 40,000 hectares of exploration rights from Bolivar Goldfields in 2000. As of 2002, it held 77,410 hectares, including the rights to develop Las Cristinas, in southeastern Bolivar state, which could hold more than to 10 million ounces of gold reserves. According to Forbes, however, after two years and $94 million dollars, the company is still awaiting the environmental permits from the Venezuelan government, to begin exploration. According to Bloomberg, Crystallex believes that their contract is valid and that “the draft mining law is completely consistent with the validity of [their] contract.” But, Bloomberg reported last week that according to Rivero, if this bill is passed, it would force Crystallex to convert its operations to joint ventures (although they would have a transition period to adapt to the changes).

"The reform is to rescue areas which aren't in operation, where they haven't finished exploration, where they haven't initiated mining," said Victor Alvarez, Minister of Basic Industries and Mining (MIBAM) last week during a press conference. According to Bloomberg, Alvarez added that non-producing areas include those awaiting state permits, “Too often the permit process is used as an excuse and a pretext for inactivity."

Venezuelan Mines

According to MIBAM statistics, there are currently 760 active mining rights, of which 413 represent concessions, 327 are contract miners and 20 are contracts granted under the old Ministry of Energy and Mines, totaling a surface of 1,363,005 hectares, of which 600,000 hectares where handed over to small miners organized in cooperatives and Social Production Businesses in May.

According to El Universal, in Venezuela there are 7 large gold mines, 14 metallic mines, and 7 non-metallic mines. Venezuelan minerals include, Aluminum, bauxite, carbon, diamonds, iron, nickel and gold as well as various no-metallic resources.

According to a report by the World Resources Institute, as of 1999, Venezuela’s production in Aluminum, bauxite and iron was in the top 15 countries of the world, although diamond and gold production places far behind. Nevertheless, in the last 6 years, Venezuelan gold production has almost quadrupled, to 22 million tons a year in 2005. This increase has gone hand in hand with a large increase in the price of gold after years of stagnation. Gold now stands around $643 per troy ounce (31.1 grams), which is up 24% from the beginning of this year.