Hey guys-

Hello to all my KRY friends from the years. I'm still here but watching in the background like many. I was just perusing around and found this article. Its from Oct 1, but I don't remember seeing it posted on our Forum here, so here it is. If it was posted and this is a duplicate, then deja vu. Basically, just a bunch of talk that we already know. Thanks for everyones input and a small but welcome 20% pop today. Jeff

The Economist Intelligence Unit

Country

Current policy

October 1st 2011

In line with its heterodox approach to policymaking, the government undertook two controversial initiatives concerning gold in the past month: first nationalising the gold mining sector and then announcing its intention physically to repatriate Venezuela's gold reserves. Although the measures have limited practical economic impact, both initiatives stirred up media reaction and raised questions about their actual purpose. This is especially the case with the government's plans to nationalise the gold sector in an effort to increase production. At present only one private company, Canada-listed Rusoro, is involved in gold mining activity in Venezuela, operating the Las Brisas mine. But, according to a statement by the company, the government will not seek to take over Rusoro's assets. This leaves only a handful of illegal mining projects, which produce an estimated 10-11 metric tons a year (similar to the official production number) and are insignificant to the national economy. There are also questions about the government's actual commitment to reactive the sector, as there have already been two nationalisation announcements (1999 and 2008) in Mr Chávez's 12 years in office, yet little has been achieved so far.

Although Venezuela has significant gold mining potential, its track record in developing the sector has been extremely poor, with several projects stalling for decades owing to legal disputes. The most telling example is the giant Las Cristinas mine. With estimated deposits of between 12m and 31m oz of extractable gold, it is one of the largest mines in Latin America. The first concession over the mine dates back to 1964, which ended in an acrimonious court battle in the early 1980s. Since then, a string of concessions have been granted and then revoked, hindering any attempt to increase output. At present, two separate arbitration proceedings are pending at the World Bank's International Court for the Settlement of Investment Disputes (ICSID) against the Venezuelan state arising from Las Cristinas—the latest was filed in February by a Canadian company, Crystallex (March 2011, Economic policy). Russian-financed Rusoro was in fact the latest foreign company interested in operating Las Cristinas, but it eventually failed to agree over terms with the government, which was insisting that the company limit exports to 50% of the gold produced. This failure to agree on terms has prompted doubts about whether the government's nationalisation plan is any more than a graceful exit strategy from its attempt to find foreign partners. In a statement in late August the government announced that the state-oil company, Petróleos de Venezuela (PDVSA) will now work in partnership with the state-owned regional development conglomerate, the Corporación Venezolana de Guayana (CVG) to exploit Las Cristinas. However, given that PDVSA has no operational experience of gold mining, it is unlikely that gold output at the mine will rise in the near term.