Venezuela pushes for mining reforms

The Venezuelan government is determined to improve the opportunities for investment in the mining sector, says Dr. Oswaldo Ruiz, director of mining and geology for the country’s Ministry of Energy and Mines.

He concedes, however, that traditionally the state’s attention has been directed at oil, rather than minerals.

“We have not created a mining culture, as has Chile,” Ruiz explains, and this situation resulted in problems when, several years ago, numerous foreign companies rushed to Venezuela to search for gold deposits similar to Placer Dome’s Las Cristinas find.

“Some of that activity was [in effect] paper mining, and very little money was put into the ground. The system we had in place at that time was not the best way to promote a gold and diamonds industry.”

The government is reviewing some of the concessions awarded in the past, particularly the 450-plus contracts awarded to third parties by Corporacion de Venezolana de Guayana (CVG). (Although CVG no longer has the right to sign contracts with third parties, most of its previous contracts will be honored.) “Companies such as Placer Dome, Bema, Bolivar Goldfields and others have put money into the ground and will [therefore] have legitimate title to the concessions that will enable them to get financing,” Ruiz says.

Ruiz adds that the Venezuelan government is working to resolve outstanding issues with Placer Dome, the majority owner of Las Cristinas. “This is one of the most important projects, and will send positive signals to international mining companies.”

Towards this end, a new mining code was recently introduced, which the Venezuelan Congress is expected to approve early this year. The proposed code, which would replace the current law (passed in 1945), is designed to encourage foreign investors to explore and develop mineral resources in the country.

Specifically, it will provide mining title rights through concessions grated by the state, as well as through strategic associations. In the first case, the concession will be granted to corporate bodies through a bidding process implemented by the Ministry of Mines and approved by the president. In the second case, a mining holding company will be set up to assume responsibility for mining activities through agreements with national or foreign companies, selected on the basis of their financial, economic and technical capabilities.

The proposed code will also provide mining companies with rights to explore and exploit all minerals selected by the holder. Currently, concession-holders can explore for and/or exploit only a single mineral, which leads to problems when, for example, gold is found to be associated with copper.

The proposed code also includes provisions that recognize the rights of small-scale miners, and designates areas for small-scale mining activity. “We are looking to make this activity more economic and [environmentally] safe,” Ruiz says. “Small-scale miners will have to organize themselves into associations and co-operatives, and come up with mining plans, with technical support from the government.”

The code also attempts to streamline the permitting process, and unify mineral rights to surface and underground deposits.

In addition, the government hopes to change a law that requires gold producers to sell 40% of their production to the Central Bank. “We hope this will soon change so that producers can export 100% of their production, making Venezuela competitive with other countries.”