Gold Reserve Inc. has raised $51 million in private placements as it prepares for the next chapter of its 15-year dispute with the Venezuelan government. 

The Canadian mining company that has its executive offices in Spokane is raising the capital in preparation for a court-ordered auction of shares in Houston-based PVD Holdings Inc., the parent company of oil refiner Citgo Petroleum Corp., which is wholly owned by Venezuela’s state-owned oil company, PDVSA. Creditors targeted Venezuela's U.S.-based refiner to pay back billions of dollars in debt owed by the South American country. The Biden administration is supporting the forced sale of the oil refiner to satisfy Venezuela's creditors and has indicated it will not block Citgo Petroleum from seizure. 

Investor relations manager Jean Charles Potvin says Gold Reserve is owed about $1.1 billion from the Venezuelan government. 

To repay Gold Reserve and other companies whose energy and mining assets were nationalized by the Venezuelan government starting in 2007, a court-appointed special master in the U.S. District Court in Delaware plans to auction off shares in Citgo’s parent company and use the proceeds to reimburse billions of dollars in judgments against the South American country, Potvin says. If Gold Reserve is chosen as a winning bidder, it would need to make a “good faith” deposit of $50 million to begin paperwork proceedings. 

Potvin claims the court indicated it would allocate proceeds depending on when the claim was filed. Gold Reserve is 12th in line of about 21 creditors. However, the special master of the court is still evaluating the claims, and how it will determine winning bids is still in flux. 

“It’s called a creditor bid, where (Gold Reserve) can apply its claim, which is $1.1 billion, toward the purchase price,” Potvin says. “We don’t know who the other bidders are, what their bids are, and how they’re structured. We must wait a few more months to reach the conclusion.” 

According to the Houston Chronicle, there are over $20 billion in creditor claims, including from Crystallex International Corp. and the ConocoPhillips Co., which is seeking to recover $11.8 billion through the process. 

Potvin declines to comment on whether winning a bid would make the company whole, stating Gold Reserve is abiding by the instructions of the court and cannot comment on the process. 

A decision by the U.S. court in Delaware is expected to be made in mid-September, Potvin says. 

Gold Reserve Inc. was formed in 1956 to acquire, explore, and develop mining projects. The company employs eight people and maintains its executive offices at 999 W. Riverside. It is a publicly traded company listed on the Toronto Venture Exchange (GRZ.V) and quoted on the OTCQX Markets Exchange (GDRZF). It owns 45% of Siembra Minera SA, a gold, silver, and copper mine in Bolivar, a state in eastern Venezuela. The mine has the potential to generate more than $20 billion in revenue during its 45-year lifespan, potentially making it one of the top five gold producers in the world. The Venezuelan government owns the remaining 55% of Siembra Minera. 

According to its first-quarter earnings report, Gold Reserve reported a net loss of $1.4 million, for the three months ending on March 31, down from a $1.1 million loss reported for the year-earlier quarter. The company had cash and cash equivalent of $8.7 million, down from $10.7 million compared with the year-earlier quarter. 

For a decade, Gold Reserve has been working to collect payments from a settlement agreement awarded by the International Centre for the Settlement of Investments Disputes in 2014. 

As previously reported by the Journal of Business, in 2008, the Venezuelan government seized control of Siembra Minera. In 2014, the ICSID tribunal ruled against the Venezuelan government and awarded $740.3 million to Gold Reserve to compensate for the loss of the mine. 

In 2016, the Venezuelan government agreed to pay Gold Reserve $1 billion to settle the award and purchase mining data from the company. The agreement also recognized Gold Reserve as a minority owner of the mine and called for joint development of the project. 

Gold Reserve received $254 million from the Venezuelan government before payments stopped. The mining company’s future payments were blocked in 2018 by international sanctions against Venezuela’s Nicolas Maduro administration, which had usurped power from the country’s national assembly. A White House statement on the situation called it a “fundamental break in Venezuela’s legitimate constitutional order.” 

Last month, Maduro again claimed victory in the country’s presidential race for the third time. The Biden administration announced that electoral manipulation discredited Maduro’s claim to victory, but didn't declare further sanctions on the country. 

Potvin says the process of seizing control of Citgo Petroleum began in 2017, when Crystallex, a Canadian company engaged in gold mining and exploration, initiated the lawsuit against Venezuela to recoup a roughly $1.4 billion award it won through the World Bank tribunal. 

“It’s quite a substantial company,” Potvin says of Citgo Petroleum. “It refined 800,000 barrels of oil a day in three refineries, and they own pipelines and so on.” 

According to Citgo Petroleum’s website, the company operates three large-scale petroleum refineries, located in Texas, Louisiana, and Illinois. It owns 34 active refined product terminals with a total storage capacity of 18.1 million barrels. The company has over 4,000 independently owned and operated Citgo-branded retail outlets, located east of the Rocky Mountains. 

According to the company’s financial reports, net income for the first quarter of 2024 was $410 million, compared with net income of $937 million for the year-earlier quarter. Full-year income for 2023 totaled $3.3 billion, with year-end liquidity of $4 billion.