The president of Venezuela's national mining chamber (Camiven), Luis Rojas, called the country leader Hugo Chavez to boost the local gold industry, as bullion production levels are close to historic lows.
Rojas told BNamericas the state-owned gold company Minerven hit record low production and that, to normalize gold production, the government has two choices:
“[The government can] invest the amount required to kick start operations, some $300 to $500 million, or establish a reliable public-private partnership scheme,” he said.
Chavez nationalized the gold industry last year with a decree that allows the state to collect a 13% royalty on gold mining, but smaller operations would only be subject to a 3% tax. Military zones were also established to crack down on illegal mining operations.
Gold companies wanting to do business in Venezuela were force to become minority partners with the government.
The new law also eliminated the option for companies to avail themselves of international arbitration; should disputes occur, they will be solved in Venezuelan courts.
Russian-Canadian miner Rusoro Mining Ltd. (TSXV:RML), which was until recently the only private gold miner left in Venezuela, has been severely affected by the measure.
Last July, the company asked an arm of the World Bank to intercede in a legal dispute with Venezuela after the country took over the junior’s investments without compensation.
Canadian Crystallex International (TSX, AMEX: KRY) and US-based Gold Reserve (TSX-V, Amex: GRZ), respectively, are also seeking compensation after Venezuela withdrew the companies' rights to their properties.
Venezuela produces 11 metric tonnes of gold each year, compared to global production of more than 2,400 tonnes and China’s production of more than 300 tonnes.
According to The Washington Post, about $6.5 billion in non-gold international reserves, such as bank deposits and bonds, are also being “spread out” to diversify Venezuela’s assets.
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