https://www.miningweekly.com

Venezuela unrest may hurt Crystallex bid to reclaim $1.2bn

18th April 2019

By: Bloomberg

  

Font size: - +

WASHINGTON – Confusion over who’s in charge in Venezuela may keep Crystallex International from collecting a $1.2-billion arbitration award.

Crystallex, a bankrupt gold producer, is trying to seize shares of the US unit of Venezuela’s State-owned energy company that controls Citgo Holding. An appellate judge in Philadelphia indicated at a hearing Monday that the matter may get sent back to a lower court to revisit a 2018 decision allowing the seizure.

That would mean more delays for Crystallex, which has been seeking compensation for a Venezuelan gold mine seized in 2011 by the government. Since Crystallex’s court win, Venezuela has been mired in turmoil with President Nicolas Maduro and opposition leader Juan Guaido both claiming to be the country’s legitimate leader, raising questions whether it was fair to allow Crystallex to seize shares of PDV Holdings if Guaido is the new head of the country.

“All the different permutations indicate this case will have to be sent back’’ to the trial court in Delaware for further review, Judge Joseph Greenaway Jr. said Monday during a four-hour hearing. The three-judge panel will rule later on the appeal.

Brian Maddox, a spokesman for Crystallex, couldn’t immediately comment on whether the case was likely to be sent back to the trial court for further review. Joseph Pizzurro, a lawyer for Petróleos de Venezuela, didn’t immediately return a call for comment. Mark Yalowitz, an attorney representing Guaido and Venezuela, declined to comment.

Crystallex has been trying to seize control of Citgo, which claims to be the US’s top-ranked gasoline supplier, so it can sell the stake to cover the arbitration award. Other creditors, including oil company ConocoPhillips, have settled debt-collection actions against the country.

Toronto-based Crystallex targeted the shares of Citgo’s US parent -- incorporated in Delaware -- in compensation for the loss of the Las Cristinas gold reserve. Venezuela’s former leader, Hugo Chavez, nationalised the asset and turned it over to PDVSA. Lawyers for the bankrupt miner won the $1.2-billion arbitration award in 2016. It’s grown to $1.4-billion with interest.

Crystallex’s attorneys filed a motion in federal court in Delaware to seize the shares of PDV Holding as an asset of Venezuela. US District Judge Leonard Stark found that since oil company PDVSA was an alter ego of the country, the Canadian miner had a right to the shares.

Venezuela sought to settle the dispute with Crystallex and paid a total of $500-million as the first installment of that resolution. But the economically ravaged country hasn’t been able to come up with the rest of the award and faces the loss of the refiner.

The socialist nation, mired in a massive economic crisis exacerbated by the collapse of its all-important oil industry, counts on Citgo’s refineries to handle Venezuelan crude that brings in desperately needed hard currency.

Guaido, head of Venezuela’s National Assembly, claims Maduro is violating the country’s constitution by refusing to give up power after fraudulently winning re-election. The US has recognised Guaido as Venezuela’s legitimate leader and is providing support, but the Venezuelan army continues to back Maduro.

The Trump administration and Guaido want Citgo to stay off the auction block so it can generate revenue to help the new government rebuild. Yalowitz argued Monday that allowing a Crystallex sale could impact US foreign policy and have a detrimental effect on the country’s future.

Greenaway pointed out it’s difficult for a US court to “take judicial notice’’ of a change of government given that Venezuela’s politics are in flux. Still, Stark may have to take another look at his decision in the wake of political shifts within the country, the judge added.

Miguel Estrada, Crystallex’s lawyer, argued it didn’t make any difference who leads Venezuela when it came to satisfying the arbitration award handed down against the country.

“When we filed the seizure motion, Citgo was an asset of Venezuela,’’ and it remains one even under a Guaido-led government, he said.

The case is Crystallex International Corp. v. Bolivarian Republic of Venezuela, No. 18-2797, US Court of Appeals for the Third Circuit (Philadelphia).

Edited by Bloomberg

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION