Gold Reserve deal with Venezuela a potential turning point for Canadian miners with arbitration wins – by Peter Koven (Financial Post – March 2, 2016)

Canadian mining companies are putting together a pretty good winning streak in international arbitration cases against foreign governments. But their record of collecting on those awards is a lot more mixed.

Late last week, a tiny firm called Gold Reserve Inc. shocked many onlookers by reaching a potentially favourable settlement with the Venezuelan government, which it has been battling in court for more than six years. On the other hand, Khan Resources Inc. and Stans Energy Corp. have won high-profile decisions against Mongolia and Kyrgyzstan and have yet to see any benefit from their efforts.

Gold Reserve spent much of the 1990s and early 2000s developing the Brisas project in Venezuela, while a separate Canadian firm called Crystallex International Corp. worked on an adjoining gold deposit called Las Cristinas. Each company invested hundreds of millions of dollars in Venezuela before Hugo Chavez’s government expropriated them both in 2008.

Both firms filed international arbitration suits. And in September 2014, Gold Reserve won an award worth more than US$740 million. (The Crystallex case is still ongoing.)

That is a major bill for Venezuela, where the economy is reeling due to weak oil prices and runaway inflation. But if the government refused to pay, Gold Reserve could potentially seize sovereign assets located outside the country. A refusal could also have a negative impact on Venezuela’s credit reputation.

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