Crystallex in the news, will get some exposure

By KEJAL VYAS

CARACAS–Venezuelan President Hugo Chávez said Wednesday he plans to nationalize the country's gold industry in bid to take over production and ramp up international reserves, a day after plans to bring home billions in bullion held overseas were divulged.

Speaking on state television via telephone, the leftist leader said he would be introducing a new decree in the coming days to put exploration and extraction of gold into the government's hands.

Venezuela's gold sector still remains in the hands of a "mafia and smugglers," Mr. Chávez said. "We don't only have oil wealth, we have here one of the largest reserves of gold in the world ... Let's convert it into our international reserves because gold is increasing in its value."

The announcement comes one day after documents reviewed by The Wall Street Journal showed that the Venezuelan government plans to transfer billions of dollars in cash reserves held abroad to banks in Russia, China and Brazil and tons of gold from European banks to its own central bank vaults. According to the documents, the South American country aims to move 211 tons of gold it keeps abroad and values at $11 billion to the central bank in Caracas, where the government keeps its remaining 154 tons of bullion.

Mr. Chávez, who has already nationalized many key sectors of the Venezuelan economy as part of his self-styled "21st century socialist revolution," hinted most recently in May that he may soon centralize control over gold. During a televised address at the time , Mr. Chávez said he wanted to boost production and would establish a new law using decree powers granted to him last year to make the precious metal "a highly strategic resource for the country."

At the time, he also said he wanted to create a "national" entity for gold, much like state oil monopoly Petróleos de Venezuela, or PdVSA.

Years of insufficient investment and red tape from the government have limited extraction of the precious metal. The government also has said in recent years that it wants to clamp down on the illegal smuggling of the metal into neighboring countries, though critics say that little progress has been made on that front.

Private companies, meanwhile, argued that strict limits on how much gold can be sold abroad have hampered development of the industry, while the Venezuelan government also has overturned mining contracts.

Most recently, in February, Canada's Crystallex International Corp. had its contract to develop the Las Cristinas gold fields terminated by the government. The company is now seeking arbitration and is looking to get nearly $3.8 billion in compensation from Venezuela. Officials at Crystallex couldn't be reached for comment.

A year ago, the state allowed gold-mining companies to export up to half of their product, softening an earlier law that required companies to sell 70% of their product domestically and export only 30%. But pressure from Russian firm Rusoro Mining Ltd. convinced the government to relax the rules. Rusoro officials didn't respond to call seeking comments to the announcement Wednesday.