SPOKANE, WASHINGTON -- Gold Reserve Inc. (TSX.V: GRZ) (OTCQX: GDRZF) announced that Venezuela has deposited the $29.5 million November payment on Gold Reserve's $1 billion settlement with Venezuela -- but the money is deposited in "a 'trust' account for the benefit of the Company at Banco de Desarrollo Económico y Social de Venezuela (“Bandes”), a Venezuelan state-owned economic and social development bank."
"As a result of the sanctions issued in August 2017, the U.S. government restricted the Venezuelan government’s access to the U.S. financial markets by filing executive orders barring, among other things, dealings in new bonds and stocks issued by the Venezuelan government and the state oil company and prohibiting Americans from doing business with them. Subsequent to the U.S. actions, Canada imposed its own sanctions," Gold Reserve said in a statement.
"The sanctions imposed by the U.S. and Canada subsequently led international intermediary banks, which previously facilitated the transfer of funds from Bandes to the Company’s United States bank accounts, to decline to facilitate such transfers or put significant limitations on their participation. The Company and Venezuela have been working with various international banks to accomplish these transfers."
Including the November 2017 payment, Gold Reserve has received an aggregate of US $187.5 million in payments on the Settlement Agreement, of which only $99 million has been transferred to its U.S. bank account.
$88.5 million remains in the state-run Bandes account.
Venezuela's Finance Minister Simon Zerpa, who also is the CFO of state oil company PDVSA, is also the head of state-owned bank BANDES. Zerpa was sanctioned by the U.S. Department of Treasury and placed on its "Specially Designated Nationals" (SDN) list in July. U.S. companies and U.S. citizens are prohibited from dealing with SDNs.
"Also as a result of the U.S. sanctions, the US$350 million in face value of debt securities that were intended to be pledged as collateral for a portion of the Settlement Agreement payments were not on the exempt list, and are therefore no longer marketable. The Venezuelan government is working to replace this collateral with something that is both acceptable to Gold Reserve and permitted under the sanctions," said Gold Reserve.
Gold Reserve President Doug Belanger stated that “The government of Venezuela has assured the Company that it remains committed to the Siembra Minera Project and the terms of the Settlement Agreement with Gold Reserve and we are hopeful that the Company can work within the restrictions of the U.S. and Canadian sanctions to resolve the current situation.”
As part of its settlement with Venezuela, Gold Reserve embarked on the Siembra Minera S.A. gold/copper/silver project, owned 45% by the Company and 55% by the Bolivarian Republic of Venezuela.
Gold Reserve, Siembra Minera S.A. and their technical consultants are working to complete the Preliminary Economic Assessment (“PEA”) in accordance with National Instrument 43-101. This study will include an up to date resource estimate, a mine plan including gold, copper and silver production, estimated capital and operating costs, and overall project schedule for both the planned early production 15,000 tonnes per day saprolite mill and the longer term 140,000 tonnes per day hard rock mill.
Gold Reserve also reported net income of US$34.3 million (US$0.36 per share) for the third quarter ended September 30, 2017, versus a US$5.6 million net loss (US$0.06 per share) for the same period in 2016.
Revenues for the third quarter 2017 were US$88.5 million versus no revenues in the same period of 2016. For the nine months ended September 30, 2017, Gold Reserve's net income was US$81.8 million versus a net loss of US$15.1 million for the same period of 2016. Revenues for the nine months were US$187.5 million versus no revenues in the same period of 2016. THE SETTLEMENT AGREEMENT
Under the terms of the Settlement Agreement, Venezuela agreed to pay Gold Reserve a total of approximately US $1,037 million, comprised of approximately US $797 million to satisfy the arbitral ICSID Award granted in favor of the Company and US $240 million for the Company’s technical mining data related to the Brisas property.
Gold Reserve is scheduled to receive 20 monthly payments of US $29.5 million and three monthly payments of US $40.8 million on or before the 10 of each month, totalling approximately US $712 million. The final payment of US $285 million is scheduled to be paid on or before June 10, 2019. In addition, Venezuela placed Venezuelan financial instruments with a face value of US $350 million in trust as collateral for the future payments.
Gold Reserve will refrain from enforcing the Award as long as Venezuela is current in its obligations to the Company. In addition, Venezuela has agreed to permanently withdraw all legal proceedings seeking annulment.
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