Go to the Globe and Mail homepage

Jump to main navigationJump to main content


Hugo Chavez goes for the gold Add to ...

Hugo Chavez is attempting to capitalize on record gold prices with a plan to nationalize the industry in Venezuela, a move to bolster the South American country’s financial reserves.

The erratic Venezuelan president made the declaration on Wednesday by telephone, during a military ceremony, to the country’s national television broadcaster. Mr. Chavez said an official decree would soon be issued and called on the military to enforce the move.

“I have here the laws allowing the state to exploit gold and all related activities,” said Mr. Chavez in comments reported by Reuters from Caracas. “We are going to nationalize the gold and we are going to convert it, among other things, into international reserves because gold continues to increase in value.”

Venezuela produces very little gold, officially about 150,000 ounces a year, which is about 2 per cent of the output of Barrick Gold Corp., the world’s largest bullion miner. Mr. Chavez took specific aim at illegal gold mining in Venezuela. Estimates suggest such operations produce as much or more gold than legal ventures and Mr. Chavez blamed “the mafia.”

“We can’t keep allowing them to take it away,” Mr. Chavez said.

The only publicly listed gold miner doing business in Venezuela took Mr. Chavez’s plans in stride on Wednesday. André Agapov, chief executive officer of Rusoro Mining Ltd., said the nationalization call is not related to his company’s operations and is focused on illegal mining.

“This has nothing to do with Rusoro,” said Mr. Agapov, reached by telephone in Switzerland.

“What President Chavez is fighting is what he refers to as the mafia, thousands and thousands of illegal miners. There’s no control over the sale of the gold, nobody pays taxes. I think he wants to get a grip on it, all those sales, and rightly so.”

Rusoro Mining is nominally based in Vancouver, listed on the Toronto Stock Exchange and run from Moscow. It is controlled by the Agapov family. The company wants Venezuela to allow it to export more gold, to stem recent losses even as the price of gold touches new records of about $1,800 (U.S.) an ounce. Mr. Agapov recently met with Venezuela’s mining minister to make his case, as did his father Vladimir Agapov, the company chairman. Rusoro produced 102,000 ounces of gold last year, two-thirds of Venezuela’s official total.

Rusoro shares on the TSX Venture Exchange fell 17 per cent on Wednesday to 12.5 cents (Canadian). The stock had lost two-thirds of its value since December and its market capitalization is now about $70-million.

South Africa’s Gold Fields Ltd., one of the world’s biggest gold companies, owned 26 per cent of Rusoro as of last September, according to a regulatory filing. Vancouver’s Frank Giustra is also among the investors.

“All [our] concessions are obtained legally,” Mr. Agapov said. “We have the rights. We never breached our responsibilities. We’re paying royalties. We’re paying the surface taxes. It really has to do with what President Chavez refers to as the mafia.”

The nationalization announcement followed a Wall Street Journal report that said Venezuela has moved to repatriate gold and currency reserves it holds at institutions abroad. Speculation suggests Mr. Chavez wants to distance the country from the U.S. dollar or shelter assets from legal challenges.

One legal attack comes from Toronto-based junior miner Crystallex International Corp., which had attempted to develop the promising but challenging Las Cristinas property, billed as one of the biggest piles of untouched gold in the world – and site of significant illegal surface mining. Crystallex had its operating contract for Las Cristinas terminated in February by Venezuela.

The company is now suing for $3.8-billion before the International Centre for Settlement of Investment Disputes in Washington. The company has said it remains “receptive to settlement alternatives with Venezuela.” Its stock, which is listed in Toronto, has been delisted from the New York Stock Exchange and Crystallex is being sued by its bondholders. It owes $100-million due to be paid to bondholders in December and has sold $17-million worth of mining equipment to drum up funds.

It is unclear what Mr. Chavez’s latest declaration actually means for gold mining in Venezuela. Associated Press noted in a report that a 1965 law had already nationalized gold mining in Venezuela.

Report Typo/Error

Follow on Twitter: @davidebner



Next story




Most popular videos »

More from The Globe and Mail

Most popular