Rusoro down 40% on Venezuela decision

Rusoro Mining Ltd. [RML-TSXV] shares tumbled in heavy trading Wednesday following news of an unfavourable court decision related to a US$1.2 billion arbitration award that followed the expropriation of mining properties in Venezuela.

Rusoro said the Paris Court of Appeals, in a decision dated January 29, 2019, has partially annulled the arbitral award issued in favour of the company in August 2016 by a tribunal constituted pursuant to the Canada-Venezuela bilateral investment treaty and the rules of the Additional Facility of the International Centre for the Settlement of Investment Disputes.

While the Paris Court of Appeals upheld the tribunal’s finding on the merits that Venezuela is liable for the unlawful expropriation of Rusoro’s investments, it annulled the award’s finding on damages.

Rusoro said the French court decision does not seek to determine the damages that Venezuela must pay to Rusoro for its breach of the treaty.

Investors reacted by sending Rusoro shares down 40% or $0.04 to $0.06 on volume of 11.5 million, making the company the most actively traded stock on the TSX Venture Exchange on Wednesday.

The 52-week range is 6.5 cents and 41.5 cents.

In August, 2016, Rusoro was awarded US$967.77 million by a 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 the Bolivarian Republic of Venezuela.

The tribunal awarded the company damages of US$967.77 million, plus pre-and post-award interest, which at the time equated to in excess of US$1.2 billion.

Rusoro filed its request for arbitration before ICSID in July, 2012 under the Canada-Venezuela Bilateral Investment Treaty. In its award, the Tribunal upheld Rusoro’s claims that Venezuela breached its obligations under the Bilateral Treaty by unlawfully expropriating the company’s investments without paying compensation and by imposing certain restrictions on the export of gold.

In addition to payment of damages, the Tribunal ordered Venezuela to contribute US$3.3 million towards Rusoro’s costs in the arbitration.

On Wednesday, Rusoro said it intends to vigorously pursue all available remedies to reinstate the award’s finding on damages in full or otherwise obtain a fair compensation for the unlawful expropriation of its investments in Venezuela, including the appeal of the French Court Decision before the French Supreme Court.

It may seek other possible remedies, including the resubmission of the case to arbitration to re-determine the amount of damages owed to Rusoro.

Rusoro also said the French Court decision does not impact Venezuela’s obligation to pay Rusoro at least US$100 million as partial payment for the expropriated investments under an agreement executed in October, 2018.

News of the latest court decision comes just three months after the company said it has agreed to a settlement proposal with the Bolivarian Republic of Venezuela, by which Venezuela agreed to pay Rusoro over US$1.28 billion to acquire the company’s mining data and for full release of the August, 2016 arbitral award.

At the time, Rusoro said it was contemplated that the parties wouldl constitute a commission to access the current status of Rusoro’s Choco 10 and San Rafael – El Placer gold projects. It said the assessments may lead to a partnership between the parties that will lead to the exploitation of those projects.