VANCOUVER (miningweekly.com) – The government of the Bolivarian Republic of Venezuela has been ordered to pay a Russian-owned junior mining company nearly $2.2-billion in compensation and interest for illegally expropriating the company’s assets without compensation in 2011.

Following the news, Rusoro Mining’s TSX-V-listed stock on Tuesday doubled from C$0.16 to C$0.32 apiece.

Rusoro filed its request for arbitration under the ‘Additional Facility Rules’ of the World Bank's International Centre for the Settlement of Investment Disputes (ICSID) on July 17, 2012, in relation to 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 $967.77-million as of the date of the expropriation on September 16, 2011, together with interest accrued between that date and the date of actual payment, calculated at a yearly rate equal to the US-dollar London Interbank Offered Rate 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 $3.3-million towards Rusoro's costs in the arbitration.

According to Rusoro, the award is due and payable immediately and it 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 more than 150 member States party to the New York Convention.

"On behalf of Rusoro's board of directors, its management and employees, and all of its stakeholders, we are pleased that the tribunal has recognised Venezuela's breaches of Rusoro's rights in connection with its investments in the Venezuelan mining sector. The company looks forward to collecting the award on behalf of all of its stakeholders,” stated president and CEO Andre Agapov.

Calunius Capital has provided financing to Rusoro since the start of the arbitration in 2012.

NATIONALISATION
The late President, Hugo Chavez, put large parts of Venezuela's economy under State control and targeted the gold industry after his government quarrelled with foreign companies that complained about State-enforced limits on how much gold they could export, which was hurting their efforts to secure financing and develop projects.

Chavez decreed that half of all gold production had to be sold to the central bank, which some companies said made it much harder for them to get financing abroad, develop projects and create jobs.

The ruling party's economic policies have expanded the State's role in the economy through expropriations of major enterprises, strict currency exchange, and price controls that discourage private-sector investment and production as well as an overdependence on the petroleum industry for revenues. Oil accounts for up to 96% of Venezuela’s exports, and the collapse of oil prices in recent years has plunged the economy into a deep recession.

The country has faced several claims for compensation after nationalising gold mining in August 2011. It had, moreover, by February 2011, already expropriated Las Cristinas from Canadian miner Crystallex, which had tried to develop the mine since 2002, after the mine had, in turn, been confiscated from Canada-based Vanessa Ventures in November 2001. Crystallex has sued Venezuela at the ICSID for $4.3-billion.

The country has also faced multibillion-dollar claims made by US oil companies Exxon Mobil and ConocoPhillips.

Rusoro, owned by Russia's wealthy Agapov family, is the only large-scale gold miner operating in Venezuela. It produced about 100 000 oz and 80 000 oz of gold in the country during 2010 and 2011 respectively.