SANTO DOMINGO (miningweekly.com) – The mining sector in Venezuela is expected to continue declining as a result of minimal private participation after the government nationalised gold mining and discouraged other private mining, industry officials say.
“There’s no major private mining company today,” says Luis Alejandro Rojas Machado, president of Venezuela’s mining chamber Camiven.
In 2010, Venezuelan mining accounted for 27% of the gross domestic product (GDP), according to the United Nations Economic Commission for Latin America and the Caribbean (Eclac). That was the highest rate in Latin America. However, it marked a decline from the 2005 level of 30.3%. Meanwhile, Venezuela’s GDP shrank in both 2009 and 2010.
Earlier this month, the government took over the nickel concession of Anglo American after it expired. Production at its Loma de Nickel mine stopped in September.
After the forced exit of several foreign mining companies, the only significant foreign company now active is CITIC, a State-owned Chinese conglomerate that will develop the Las Cristinas gold mine, one of the world’s largest gold deposits. “Las Cristinas will take between seven and ten years to develop,” Rojas estimates. “The Chinese might use their financial muscle to accelerate that, but you can’t develop a good mine in a day or two.”
Meanwhile, Rojas fears that the State dominance will result in inadequate investments for the development of the sector. “If we don’t see investments, there won’t be production,” he says.
Last year, the mining sector contracted – a trend expected this year as well. “We have a legal environment that doesn’t permit development,” Rojas says. “This will keep the local mining sector in recession.”
The Venezuelan government nationalised gold mining in August 2011, but by February it had expropriated Las Cristinas from Canadian miner Crystallex, which had tried to develop the mine since 2002, after it was confiscated from Canada-based Vanessa Ventures, in November 2001.
Crystallex has sued Venezuela at The World Bank's International Centre for Settlement of Investment Disputes (ICSID) for $4.3-billion. The ICSID hearing is scheduled a year from now – in November 2013 and the company has no further comments on the dispute.
“The company’s position is to not comment on the case or proceedings,” VP for investor relations Richard Marshall told Mining Weekly Online.
Another company that was affected was Canadian-Russian miner Rusoro Mining, which also saw its assets nationalised without compensation. In July it filed an arbitration claim at ICSID.
“The Venezuelan government's actions have resulted in significant loss to the company and its shareholders,” Rusoro president and CEO Andre Agapov said in a statement at the time. “In light of the government's apparent unwillingness to look for an amicable resolution, it became the company's sole recourse to commence international arbitration.”
Agapov did not respond to several interview requests from Mining Weekly Online, but according to Venezuelan newspaper El Mundo, the company is still hoping to reach a friendly solution with the Venezuelan government, which includes the right to develop mines in the country and recover its $1-billion investment.