Gold Reserve Shares Surge on $770 Million Venezuelan Settlement

(Bloomberg) -- Gold Reserve Inc. will get about $770 million as part of a settlement with Venezuela for the 2008 seizure of its Brisas gold and copper project in an arrangement that depends on the country securing financing. Shares surged.

Payment is expected to be made in two installments: $600 million by the end of October and the rest by year-end, the Spokane, Washington-based company said in a statement Monday. Venezuela also agreed to buy the company's mining data for $240 million and enter into a jointly owned company with Gold Reserve for a 18,000-hectare claim including the Brisas Cristinas deposit.

The statement didn't say where Venezuela, whose oil-dependent economy has been pummeled by slumping energy prices, would obtain the funding.

“Venezuela will use the proceeds from any financing it closes after the execution of this agreement to pay Gold Reserve the amounts owed under this agreement in preference to any other creditor,” Gold Reserve said.

The company's shares jumped as much as 28 percent in New York after a trading halt was lifted.

The mixed company will be owned 55 percent by Venezuela, which will put up mineral rights under a 40-year arrangement, and 45 percent by a unit of Gold Reserve, which will provide engineering, procurement and construction services. The two parties will work together on financing the estimated $2.1 billion cost of developing the Brisas Cristinas project, Gold Reserve said.

Mining Boost

Venezuelan President Nicolas Maduro announced the joint venture last week, without giving details. His government is turning to mining as a way to boost one of the fastest-shrinking economies in the world.

His predecessor Hugo Chavez nationalized energy and mining assets to increase state control over the economy before he died in 2013. The slump in oil prices since then has slashed government revenue, contributing to chronic food shortages.

A World Bank arbitration court ruled in 2014 that Venezuela must pay $740 million to Gold Reserve for its seizure of the Brisas gold and copper project in 2008.

--With assistance from Nathan Crooks and Noris Soto To contact the reporter on this story: Andrew Willis in Bogota at awillis21@bloomberg.net. To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Steven Frank