INTERNATIONAL. Venezuela more than doubled the amount of gold that local producers must offer to the central bank in a bid to increase its reserves of the metal and reduce reliance on supporting them with US Dollars.
The Finance Ministry said today that 70% of gold produced in Venezuela must be sold domestically, and 60% must be offered first to the central bank, in a resolution published in the Official Gazette. The remaining 30% can be exported. Previously, 20% had to be offered to the central bank.
The resolution affects Vancouver-based Rusoro Mining, said Andre Agapov, the company’s CEO. Rusoro will still have the right to sell its gold elsewhere should the central bank refuse to purchase it, he said today in a telephone interview.
“It’s a political decision,” he said. “Why ship it from Brazil when you could buy it from local producers?”
Agapov said that his company always sells to local buyers because the central bank hasn’t ever exercised its right to purchase 20% of Rusoro’s production. Buyers of the company’s output pay in local currency, he said.
Rusoro plans to increase production to between 250,000 and 270,000 ounces by next year, as it brings two new mines into production in the first quarter. The company is reviewing investing in more deposits and mines in the South American country, which would be developed through joint ventures with the government, Agapov said.
Rusoro aims to produce between 175,000 ounces and 195,000 ounces of gold in Venezuela this year, he said.
Gold futures for June delivery jumped US$14, or 1.6%, to US$902.20 an ounce on the Comex division of the New York Mercantile Exchange. That’s the biggest gain for a most-active contract since 23 April. The price fell 2.8% last week, the most since the first week in April.
The Venezuelan resolution may be a first step in a regional trend to rebuild government gold reserves on expectations that the US Dollar will weaken, said Philip Gotthelf, President of Equidex Brokerage Group in the US.
“Venezuela has decided to take a lead in rebuilding government gold reserves,” Gotthelf said today in a telephone interview. “If we see this as a catalyst for other emerging economies we will probably see the value of gold rise.”