The "Joint Ventures" of the Mining Arc come from Barbados

Hurried by the drop of oil prices and the collapse of oil production, Nicolás Maduro bets on the Orinoco Mining Arc as a formula to increase the resources that are so scarce in the national coffers. Under the "joint venture" system, the Government has ended up agreeing with companies insufficiently known in the extra-activist industry, like Corporación Faoz. Among the beneficiaries is Gold Reserve, the Canadian mining company that Hugo Chávez expelled from Venezuela years ago. The Paradise Papers filtering shows that both have registered companies in that tax haven called Barbados.
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The
largest mining deposit in Venezuela and the small island of Barbados are
connected. Though separated by more than a thousand kilometers (621.37 mi), both
geographical points are united in the business that emerged from the
delimitation of the "Orinoco Mining Arc" by the government of Nicolás Maduro in
February 2016. If smuggling, and small-scale and informal mining governed the
south of Venezuela for years, now the foundations of a rushed exploitation with
"joint ventures" between the State and private companies with companies in the
Caribbean island are being built.
For
some reason, not entirely clear, this activity —in an area of ??almost 112
thousand square kilometers (43243.44 square miles) to the north of the state of
Bolívar and south of the Orinoco River—according to presidential decree 2.248
issued in Official Gazette 40.855 of February 24, 2016, with which the
Venezuelan government aims to make up for the drop in oil prices and the
collapse of oil production, is now linked to companies registered in that small
tax haven called Barbados. This is the case of Corporación Faoz, an unknown
Venezuelan company that in August 2016 signed an agreement with the national
Executive for the exploitation of Coltan, a strategic mineral known as "blue
gold," and wanted by industries like the telecommunications
industry.
"In
2013-2014, they participated in the exploration of phosphate deposits in the
state of Táchira, and in 2016, they presented the joint venture project with the
Bolivarian Republic of Venezuela for the exploration and exploitation of the
tantalum and niobium deposit in the state of Bolívar," the presenter said, as a
justification, about Corporación Faoz in a ceremony held on August 5, 2016, at
the Central Bank of Venezuela (BCV).
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The
Paradise Papers leak, containing millions of documents from the Appleby law firm
in the Bermuda archipelago and company registers in several tax havens —obtained
by the German newspaper Süddeutsche Zeitung and shared by the International
Consortium of Investigative Journalists (ICIJ)—, now allows knowing that three
years before it was named Corporación Faoz, it had created a homonymous company
in Barbados, as if anticipating what was to come. The company is Faoz Corp,
registered on May 13, 2013, just two months after the death of Hugo Chávez and
one month prior the election of Nicolás Maduro as president of the Republic,
after beating Henrique Capriles by a narrow margin. The Orinoco Mining Arc was
not yet on the horizon.
In Search of Coltan
On
August 5, 2016, Luisa Herminia Alcalá Otero signed on behalf of the company an
agreement with the Government, represented by the then Minister for Ecological
Mining Development, Roberto Mirabal. That agreement became official almost three
months later with presidential decree 2.359, published in Official Gazette
41.026. Company Empresa Mixta Minera Ecosocialista Parguaza (Emmepsa) born
there, with a 55% share capital that belongs to the state-owned Corporación
Venezolana de Minería (Venezuelan Mining Corporation) and the remaining 45% to
Corporación Faoz. Another member of the Alcalá family, Rafael Enrique Solórzano
Alcalá appears as the director of the company in Barbados.
Based
on the registration papers, the company was created to engage in consulting,
investments, and project development in the mining industry. The company did not
respond to the request sent by email or to the one made at the offices of
Emmepsa in Torre Hener, in El Rosal, a financial area of Caracas. At that point,
they redirect those who arrive to Torre Teaca, in the same area of the capital,
and where the offices of Corporación Faoz are located, according to their
website. "As a joint venture, we must request authorization from the ministry,"
warned one of the employees.
A
resolution of the Ministry for Ecological Mining Development, published on
December 6, 2016 in Official Gazette 41.046, determined that the new joint
venture would have the right to "explore and exploit mines and deposits of
tantalum-niobium (coltan), ilmenite, cassiterite, tin, zircon, quartz, granite,
diamonds and gold, including its use" in an 10,201-ha area in Cedeño
municipality of the state of Bolívar. According to the minutes of the
shareholders' meeting published in that Official Gazette, it was also clear that
Corporación Faoz just had to inject 450 thousand bolivars - 45% of the share
capital of the joint venture - to enter the business.
Precisely
in this and other minutes of the shareholders' meetings, striking aspects of the
now partner of the Venezuelan state are evident. Originally Corporación Faoz,
created in 1992, it was called Construcciones Faría and adopted the new name on
July 29, 2016, just days before closing the agreement with the Venezuelan
government to enter the Orinoco Mining Arc. On its website, the company simply
explains that "we are a company founded in 1992, engaged in ??construction. We
soon diversify our operations into the mining sector, carrying out research,
exploration and exploitation of metallic and nonmetallic
minerals."
The
business of Corporación Faoz does not end there. It is also related to the Joint
Mining Company of Nueva Esparta (Ecomine), which in the event held on August 5,
2016, at the BCV, sealed another agreement with the national government. This
time, another Alcalá, Félix Angel Oliveros Alcalá, who also appears as president
of Corporación Faoz in some minutes of the shareholders' meetings of Emmepsa,
signed on behalf of Ecomine. A report by efectococuyo.com, published in last
year’s September, showed that link between Corporación Faoz and Ecomine, and
that both had the same office in Torre Exa, another office complex in El Rosal
area of Caracas.
On
September 9, the news agency of Venezuela Agencia Venezolana de Noticias (AVN)
reported that joint venture Emmepsa was able to produce the "first ton of
coltan," which was also reported by Corporación Faoz on its website. According
to the report, the thousand kilograms of the mineral were extracted "while
calibrating the machinery and the mechanical system used in the mine operations
in Los Pijiguaos area, in the state of Bolívar."
As
to the marketing of the mineral, the president of the company, César
Sanguinetti, told the state agency that "we are waiting for the legal aspect to
proceed with the first sale that is a historical event of the Venezuelan people,
since we are venturing for the first time into this field of the coltan
mineral." Years ago, in 2009, Hugo Chávez admitted that they discovered mafias
involved in smuggling the mineral. "Now, a strategic mineral called coltan has
appeared, and we have militarized the area because they were smuggling it to
Colombia, exploiting it illegally. We still do not know how much reserve we
have, but based on the information, it is a large reserve," Chávez said eight
years ago.
A
report signed by journalists Joseph Poliszuk and Emilia Díaz-Struck, published
on March 4, 2012 on Armando.info,
proved that the mineral was being illegally marketed on internet platforms. "In
Paguaza, in the state of Bolívar, at the foothills of the Guyanese massif, you
can see the first signs of coltan fever," he says. According to court records,
from 2009 to 2011, the National Guard seized almost two tons of coltan to seven
people.
The
issue does not seem to be fully resolved yet, despite the government's rush to
obtain through mining exploitation the resources that could not be obtained
through oil to contribute the diminished Venezuelan coffers. "Palestine is
investing in coltan," Nicolás Maduro said in early December while announcing a
"zoning plan for the Orinoco Mining Arc". "Come! Diamond, gold. Palestine, come
to work gold, diamond, oil, gas, coltan, come. Palestinian entrepreneurs and
from around the world, come to Venezuela, this is your homeland, this is the
Jerusalem of America, Venezuela," insisted the head of
state.
The
rush showed by the President of the Republic of Venezuela since that last year
to exploit one of the most important natural areas of Venezuela has been
fervently questioned by environmental movements and officials of the Chavez
government, like former ministers Ana Elisa Osorio and Héctor Navarro, or former
commander of the Strategic Integral Defense Region (REDI) of Guyana, Clíver
Alcalá Cordones, who has unsuccessfully tried legal actions before the Supreme
Court of Justice against presidential decrees associated with the Orinoco Mining
Arc. "On August 5 (2016) the country saw the most opprobrious act of the last
200 years," said Alcalá Cordones in a television interview about the agreements
between the government and companies like the unknown Corporación
Faoz.
Chávez expelled them, Maduro negotiated an agreement
Curiously,
Corporación Faoz is not the only company favored by the national government that
has registered companies in Barbados. Canadian gold miner Gold Reserve also went
to that jurisdiction. In 2009, Hugo Chávez suspended a concession to this miner
to exploit the Las Brisas and Las Cristinas mines in the state of Bolívar, to
form the Empresa Mixta Ecosocialista Siembra Minera. That company was part of
the agreement reached by the administration of Nicolás Maduro after the mining
company obtained in 2014 at the International Center for Settlement of
Investment Disputes (ICSID) an arbitration award for just over 700 million
dollars as compensation for that decision of Chávez.
"From
a conflict and a lawsuit we had, we are now partners for the development of a
project of over 5 billion dollars," Maduro argued in February last year when he
approved the decree of the Orinoco Mining Arc. The pact, in fact, forces
Venezuela to settle the award, which amounted to almost 800 million dollars for
the interest accrued until 2016, with monthly payments until mid-2019. In
addition, Venezuela must pay another 240 million dollars for the technical
information of the mines that Gold Reserve gathered for years, which will be
useful for the operation of Empresa Mixta Ecosocialista Siembra
Minera.
Formally,
the company was incorporated on September 30, 2016, according to presidential
decree 2.465 published in Official Gazette 41.000, whereby it was established
that the alliance was between the Venezuelan Mining Corporation and company GR
Mining Inc of Barbados.
The
Paradise Papers show that that company was created on the Caribbean island on
April 15, 2016, and its directors are Alexander D. Belanger and Robert A.
Mcguinness, both managers of Gold Reserve. On that same day, the Canadian mining
company also registered GR Engineering Inc. in that jurisdiction. "GR
Engineering Inc provides engineering, procurement and construction services to
Siembra Minera with a 5% tariff on all construction and development costs, and a
5% commission on operating costs during operations," explains the Gold Reserve
website.
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As
of June 30, 2017, Gold Reserve had spent approximately 7 million dollars in the
process of forming Empresa Mixta Siembra Minera. A resolution of the Ministry
for Ecological Mining Development, of November 2, 2016, confirmed that the
company would have the right to mining in an area of 18,951 hectares in the
Sifontes municipality of the state of Bolívar. Finally, in March of this year,
another presidential decree ended up confirming the right of the company to
extract from gold mines in the defined area.
While
the Government and the companies are committed to attract resources.
Organizations like the Venezuelan Society of Mining and Metallurgical Engineers
(SVIMM) recently warned that the Orinoco Mining Arc is "wandering," and that it
is necessary to prepare a "legitimate and indisputable long-term national mining
plan.”