TORONTO — On the surface, Gold Reserve Inc.’s US$770-million arbitration settlement with the government of Venezuela appears to be a huge win for the Toronto-listed company. But there is an important caveat: Venezuela has to raise the money and pay it out, even as it deals with a massive economic and humanitarian crisis.
Gold Reserve unveiled a firm settlement agreement with the government on Monday, which follows a signing ceremony late last week. Under the terms of the deal, Venezuela agreed to pay US$600 million to the company by the end of October, and an additional US$170 million by the end of December.
The socialist government will also buy Gold Reserve’s technical mining data for US$240 million, and the two sides will form a joint venture to develop the Brisas-Cristinas gold project, which is expected to cost US$2.1 billion.
“We want to turn mining into one of the great development motors in the country,” Venezuelan President Nicolas Maduro said on state television, according to a report.
In return, Gold Reserve agreed to drop its US$740-million international arbitration claim against Venezuela. The company won the award in court last year after its Brisas project was expropriated.
Investors were very happy with the settlement. Shares of Spokane, Wash.-based Gold Reserve soared as much as 28 per cent on Monday. They closed at $6.72, up 17 per cent, giving the company a market value of $529 million.
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