Rusoro Mining awarded US $1.2 billion for expropriation

Rusoro Mining Ltd.  RML-TSXV; RMLFF-OTC] reported the August 22, 2016 award by the Arbitration Tribunal operating under the Additional Facility Rules of the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID) in the arbitration brought by the company against Venezuela. The Tribunal awarded Rusoro damages of US $967.77 million plus pre and post-award interest which currently equates to over US $1.2 billion.

Rusoro filed its request for arbitration before ICSID on July 17, 2012 under the Canada-Venezuela Bilateral Investment Treaty (BIT). In its award, the Tribunal upheld Rusoro’s claims that Venezuela breached its obligations under the BIT by unlawfully expropriating Rusoro’s investments without paying compensation and by imposing certain restrictions on the export of gold. As a result of these breaches, the Tribunal ordered Venezuela to pay damages of US $967.77 million as of the date of the expropriation (16Sept2011), together with interest accrued between that date and the date of actual payment, calculated at a rate p.a. equal to US$ Libor for one year deposits, plus a margin of 4%, to be compounded annually. The amounts awarded must be paid net of any taxes imposed by Venezuela. The Tribunal also ordered Venezuela to contribute US $3.3 million towards Rusoro’s costs in the arbitration.

The award is due and payable immediately and Rusoro expects that Venezuela will comply with its international obligations and make prompt payment of the award. The award is immediately enforceable in any of the over 150 member states party to the New York Convention.

Andre Agapov, President and CEO of Rusoro said, “On behalf of Rusoro’s board of directors, its management and employees, and all of its stakeholders, we are pleased that the Tribunal has recognized Venezuela’s breaches of Rusoro’s rights in connection with its investments in the Venezuelan mining sector. The company looks forward to collecting on the award on behalf of all of its stakeholders.”

According to the Rusoro Mining website, the company has two mines and 10 exploration projects (including development and exploration around the mines) which range from early stage to advanced/development stage gold projects.

In a similar development, on 5 April 16, Crystallex International Corp. [KRY-TSXV] was awarded damages of US $1.202 billion for the Venezuelan government’s expropriation of the company’s Las Cristinas mining project. The Tribunal has ordered Venezuela to pay damages currently amounting to US $1.386 billion, based on a value for Crystallex’s investment in the Las Cristinas Mine of US $1.202 billion on 13Apr08 – the date when an environmental permit was denied by Venezuela – together with pre- and post-award interest from that date.

Venezuela is in dire economic straits. On July 5, The Atlantic magazine reported that Venezuela declared a state of emergency in May as inflation reached 180%, supermarket shelves emptied out, and food shortages became rampant, resulting in food riots and people storming grocery stores in desperation.

Now some economists speculate that the country could default on its $125 billion debt – $10 billion of which is due this year – that could lead to an economic collapse. There is also a referendum to recall President Nicolas Maduro with 2 million signatures on it.

Venezuela has substantial oil reserves upon which the country relied too heavily when the price of oil was high. Indeed, oil accounted for 95% of the country’s exports earnings and nearly half of its government’s income. As noted by The Atlantic, in 2015, revenue from oil exports and of Petróleos de Venezuela – the state-owned oil-and-natural-gas company -plummeted by more than 40%.

Between the government’s generous socialist policies and the large-scale importation of necessities, plus related economic problems such as black markets, it’s hard to see how the government can rescue itself. Meanwhile, it’s an agonizing situation for the Venezuelan people.