The U.S. Supreme Court denied the request by Venezuela and Petroleos de Venezuela, S.A. (PDVSA) for permission to appeal the U.S. District Court of Delaware’s decision designating companies as additional judgment creditors against seized shares of PDV Holding. PDVSA owns PDV Holding, which owns CITGO Petroleum Corp. CITGO refines Venezuelan crude and transports and sells it throughout the USA. Venezuela owns PDVSA. By connecting the dots between CITGO and the government of Venezuela, the Delaware court is allowing companies with claims against Venezuela for the nationalization of assets to collect the money they are owed.

In 2008, under the direction of President Hugo Chavez, Venezuela nationalized the Las Cristinas gold mine, which was owned by Crystallex International Corp. In 2009, Chavez formed a joint venture with Rusoro Mining to take the Las Brisas gold mine from Gold Reserve, Inc. Rusoro attempted a hostile takeover of Gold Reserve and was rebuffed by its stockholders. In 2011, Venezuela double-crossed Rusoro and seized its gold mining assets. In 2015, Gold Reserve, Inc., won $740 million in arbitration, which carries an interest rate of LIBOR plus 2%.

Realizing that it did not know how to operate gold mines, Venezuela asked for Gold Reserve’s help with its Brisas-Cristinas project. In 2016, they created Siembra Minera, as a joint venture with the government, with Venezuela holding 55% and Gold Reserve holding 45%. About two years ago, the government revoked the mining rights of Siembra Minera for alleged non-compliance with certain Venezuelan mining regulations. Gold Reserve said it is considering all of its legal options.

In 2017, Crystallex filed a lawsuit trying to attach its claim to shares of CITGO. Last summer, the Delaware court decided that shares of CITGO could be seized and sold. The court appointed a special master to organize the sale, which was accepting non-binding expressions of interest until January 22. Final bids will be submitted in the coming months and the sale of the CITGO shares is expected to net $20 billion or more.

More than 26 creditors are pursuing claims against the seized shares. The proceeds from the sale will be distributed based on the date that companies filed their attachment motions with the court. According to the special master, the first company to get paid will be Crystallex, followed by Tidewater, ConocoPhillips and OIEG. Rusoro Mining is No. 8 in the pecking order. Gold Reserve is listed as No. 11.

The total amount Gold Reserve’s outstanding judgment exceeds $1 billion. According to the information filed with the court, there is roughly $5.5 billion in judgments ahead of Gold Reserve. If the CITGO shares realize a net value of $7 billion or more, Gold Reserve should recover the full amount of its judgment.

The entire transaction, however, is contingent on the Office of Foreign Assets Control (OFAC) agreeing to provide a permit for the sale to take place. The sale could bring financial closure for mining companies trying to recoup stranded investments in nationalized assets after a decade or more of litigation. Alaska.

Steve Fiscor, Publisher & Editor-in-Chief, E&MJ