Welcome to Rusoro Mining
Rusoro Mining Ltd. (the “Company”), was incorporated under the laws of the Province of British Columbia on March 1, 2000. The registered office of the Company is 3200-650 West Georgia Street, Vancouver, British Columbia, Canada and the corporate headquarters is located at 3123-595 Burrard Street, Vancouver, British Columbia, Canada. The principal business activities of the Company are the operation, acquisition, exploration and development of gold mining and mineral properties.
The Company received mining concessions in Venezuela for the exploration, development and exploitation of alluvial and vein gold. Until March 14, 2012, the Company owned two producing gold mines in Venezuela. It held a 95% ownership interest in the Choco 10 mine (the “Choco Mine”) which was acquired on November 30, 2007 and a 50% ownership interest in the Isidora mine (the “Isidora Mine”) which was acquired on December 23, 2008. The Company operated the Isidora Mine under a joint venture agreement with the Venezuelan government.
On September 16, 2011, the Venezuelan government, through publication in the Official Gazette of Venezuela, enacted a law-decree (the “Decree”) reserving the government of Venezuela exclusive rights over the extraction of gold in Venezuela (the “Nationalization”). The Decree mandated the expiration of all mining concessions held by the Company and their reversal to the Venezuelan government except for those in which the Company and the Venezuelan government agree to continue operating jointly in the form of a mixed-interest enterprise (the “Mixed Enterprise’’) and in which the Company could not own more than a 45% share participation.
The Company was unable to agree with the Venezuelan government upon the terms and conditions of the migration of its mining assets to the Mixed Enterprise within the designated time periods. Therefore, effective March 14, 2012, in accordance with the procedures outlined in the Decree, all of the Company’s mining concessions expired by force of the Decree and all of its assets and operations reverted to the Venezuelan government who took possession and control of the assets and operations in accordance with Venezuelan law, thereby becoming the new operator and employer.
Management determined the Company’s sole recourse was to file a Request for Arbitration under the Additional Facility Rules of the International Centre for Settlement of Investment Disputes (“ICSID”) against the government of Venezuela alleging violations of the provisions of the Bilateral Treaty for the Protection of Investments entered between the governments of Canada and Venezuela (the “Treaty”). This request was filed on July 17, 2012. The Treaty provides that the Venezuelan government must pay a fair, prompt, and timely compensation to the Company as a result of the Nationalization. In parallel, the Company continued to seek an amicable resolution with the Venezuelan government.
In June 2012, the Company entered into a Creditors and Shareholders Agreement (the “CSA”) with significant equity holders and creditors who agreed not to take any steps or actions to exercise their rights and remedies against the Company until the expiration of a standstill period, subject to various clauses.
Also in June 2012, the Company entered into a litigation funding agreement (the “Litigation Funding Agreement”) with a subsidiary (the “Funder”), of the Calunius Litigation Risk Fund LP (the “Fund”). Calunius Capital LLP is the exclusive investment advisor to the Fund, which specializes in funding commercial litigation and arbitration claims. Under the terms of the Litigation Funding Agreement, the Funder agreed to assist in the funding of Rusoro’s legal costs in relation to the international arbitration proceedings against the Republic of Venezuela (the “Respondent” or “Venezuela”) on a non-recourse basis. Rusoro continued to have complete control over the conduct of the international arbitration proceedings, insofar as the proceedings relate to the Company’s claims, and continued to have the right to settle with the Respondent, discontinue proceedings, pursue the proceedings to trial and take any action Rusoro considers appropriate to enforce judgment.
The Litigation Funding Agreement provides contingent consideration to the Funder and other select parties.
On August 22, 2016, the Arbitral Tribunal (“Tribunal”) operating under the ICSID Additional Facility Rules, awarded (“the Award”) the Company compensation of $967.77 million plus pre and post award interest which combined equates to in excess of $1.87 billion as of December 31, 2023.
In its Award, the Tribunal upheld the Company’s claims that Venezuela breached its obligations under the Treaty by unlawfully expropriating the Company’s investments without paying compensation and by imposing certain restrictions on the export of gold. As a result of these breaches, the Tribunal ordered Venezuela to pay compensation of $967.77 million as of the date of the expropriation (September 16, 2011), together with interest accrued between that date and the date of actual payment, calculated at a rate p.a. equal to US$ Libor for one-year deposits, plus a margin of 4%, to be compounded annually. The amounts awarded must be paid net of any taxes imposed by Venezuela. The Tribunal also ordered Venezuela to contribute $3.3 million towards Rusoro’s costs in the arbitration.
In October 2016, Rusoro received notice that the Bolivarian Republic of Venezuela (“Venezuela”) had brought an application before the Paris Court of Appeals to set aside (“recours en annulation”) the Award, which was filed by Venezuela in 2017. Rusoro had instructed Freshfields Bruckhaus Deringer and Teynier Pic to represent it in these proceedings, with the support of a special correspondent.
In October 2018, the Company executed a settlement agreement (“Settlement Agreement”) with the Venezuelan government whereby the parties agreed that the Company would receive over $1.28 billion in monthly instalments through 2023 in exchange for the Company’s mining data and full release of the Award. Under the Settlement Agreement, the Venezuelan government agreed to pay an initial payment of $100 million in November 2018, and upon completion of this initial payment, the Company would suspend legal enforcement of the Award and deliver the Company’s mining data to the Venezuelan government. The Company would be entitled to resume legal enforcement of the Award if payment due under the Settlement Agreement is not received by the Company within the periods provided, and the Company is able to terminate the Settlement Agreement under certain default scenarios. The Venezuelan government retained the right to continue proceedings to set aside the Award at the seat of arbitration in Paris.
The Company has not received the payment of $100 million.
In September 2021, the Supreme Court of the State of New York granted the Company’s motion to enter a default judgment for $100 million plus interest in favor of Rusoro against Venezuela for breach of the Settlement Agreement dated October 5, 2018 (with further interest at the statutory rate of 9% per annum from the date of judgment to the date of payment). Rusoro will take the necessary steps to enter the order as a judgment, serve it on Venezuela, and vigorously pursue its payment or enforcement as partial payment for the unlawful expropriation of its investments in Venezuela.
In January 2019, the Paris Court of Appeals partially annulled the Award (the “French Court Decision”). Whilst the Paris Court of Appeals upheld the tribunal’s finding on the merits that Venezuela is liable for the unlawful expropriation of the Company’s investments, it annulled the Award’s finding on damages. The French Court Decision did not seek to determine the damages that Venezuela must pay to the Company for its breach of the Treaty.
In March 2021, the French Supreme Court overturned the French Court Decision, therefore reinstating the arbitral Award in full and will allow the Company to continue to vigorously pursue recognition and enforcement of the Award.
In September 2021, Venezuela voluntarily dismissed its appeal of the Award judgment rendered by the U.S. District Court in Washington DC in favor of Rusoro, and against Venezuela.
In March 2023, U.S. District Court for the District of Delaware issued Rusoro a conditional writ of attachment fieri facias regarding the shares of PDV Holding, Inc. (“PDVH”), a subsidiary of Petroleos de Venezuela (“PDVSA”) and the indirect parent of Citgo Petroleum Corp., the fifth-largest independent oil refiner in the United States. In issuing the writ, the court found that Rusoro had proven that PDVSA is the corporate “alter ego” of Venezuela, and that Rusoro’s arbitration award, which including interest exceeds $1.7 billion and which a U.S. court in Washington DC has already confirmed and converted to a court judgment, may be enforced against PDVSA’s assets. The court’s alter ego finding was based on an evidentiary record demonstrating that the Venezuelan government effectively dominates PDVSA and treats its assets as its own. The court’s attachment order is conditional and will not be executed unless and until the U.S. Office of Foreign Assets Control (“OFAC”), which administers the current U.S. sanctions regime against Venezuela and PDVSA, authorizes the attachment and sale of PDVH shares in satisfaction of Rusoro’s judgment and judgments issued to various other creditors of Venezuela. If OFAC permits the sale to go forward (or if Venezuelan sanctions are lifted or modified in such a way that OFAC permission is no longer required to conduct it), a federal marshal will serve the attachment order, which will allow the sale process to move forward. In preparation for this, Rusoro has asked the Delaware court to find that its judgment is an “Additional Judgment,” i.e., one that may be satisfied through the court-ordered sale of PDVH shares.
A court-appointed special master is continuing his work developing sales procedures that will govern the sale of the PDVH shares, using criteria that are designed to maximize the proceeds of the sale. PDVSA and Venezuela had sought to have the special master disqualified from the case on grounds that the special master had been communicating with OFAC. On March 30, 2023, the Delaware court rejected the Venezuela parties’ efforts to disqualify the special master, allowing him to continue his work on the process for auctioning the PDVH shares.
On August 14, 2023, the Company submitted to the United States District Court for the District of Delaware a statement (the “Additional Judgment Statement”) setting forth the current value and certain other information concerning the Federal Court judgment issued on March 2, 2018 by the United States District Court for the District of Columbia in favor of Rusoro and against the Bolivarian Republic of Venezuela (the “U.S. Judgment”). In the Additional Judgment Statement, the Company reported the amount of the U.S. Judgment as US$1.48 billion, inclusive of federal post-judgment interest accruing from the date of the U.S. Judgment (March 2, 2018) to August 14, 2023. Because the U.S. Judgment accrues interest at a different rate than the arbitral award that the U.S. Judgment recognized (the “Award”), the current value of the U.S. Judgment does not capture the full value of the Award, which is now US$1.84 billion, as of October 25, 2023. The Company intends to pursue any difference in value between the U.S. Judgment and the Award in other appropriate jurisdictions. Although the Delaware Court has not issued a final determination on the relative priority of the various judgments, based on the guidelines set forth by the Delaware Court on July 27, 2023, Rusoro is seventh in order of priority behind approximately US$3.6 billion in claims from other claimants, plus US$1.95 billion in PDVSA 2020 bonds.
On January 9, 2024, the U.S. Court of Appeals for the Third Circuit ruled that various parties holding judgments against the Republic of Venezuela, including Rusoro Mining Ltd., were entitled to enforce their judgments against property owned by PDVSA, on the grounds that PDVSA was the corporate alter-ego of the Venezuelan state. On this basis, the U.S. District Court for the District of Delaware has commenced a sale process whereby the shares of PDV Holding, Inc., a company 100% owned by PDVSA and the indirect owner of CITGO Petroleum Corporation, are to be sold in satisfaction of the Venezuela creditors’ judgments. Venezuela and PDVSA asked the U.S. Supreme Court to review this ruling, and on January 8, 2024, the Supreme Court refused to hear the case, meaning that the Third Circuit’s ruling is final and unappealable.
Further, on January 8, 2024, the Delaware court designated certain of the judgment creditors in the case, including Rusoro, to be “Additional Judgment Creditors”, meaning that they are entitled to share in the proceeds of the sale of the PDV Holding, Inc. shares when they are auctioned. Non-binding bids were submitted on January 22, 2024, and the auction is scheduled to take place in July 2024.
The Non-Binding Indication of Interest is not binding and is revocable, and does not require the Company to take any further actions or to submit any final bid. Prior to submitting a final bid, if at all, the Company shall, among other things, obtain all necessary and advisable consents and approvals of its stakeholders.
