Toronto-listed miner Gold Reserve (GRZ.V) filed a lawsuit against Rusoro Mining (RML.V), alleging the company violated its contract under a consortium agreement in a multi-billion dollar auction for the owner of US refiner Citgo Petroleum.
The under seal filing is the latest twist in a complicated legal and financial struggle over the US assets of PDV Holding, the Venezuelan-owned parent of Citgo.
The auction, which is supervised by a court in Delaware, will pay up to 15 creditors demanding payment related to expropriations and debt defaults by Venezuela.
Billion-dollar bidding battle
A $5.9 billion offer from an affiliate of Elliott Investment Management was named the preferred bidder in August over a $7.9 billion proposal by Gold Reserve.
The process is still undergoing judicial review due to objections and challenges from various parties, despite the higher bid offered by Gold Reserve.
According to Reuters, both bids contained an offer to structure financing through Rusoro’s $1.5 billion claim (in respect of expropriated Venezuelan assets).
The dispute between Gold Reserve and Rusoro over the consortium arrangement has been primarily centred around the inclusion of that claim.
Gold Reserve accuses Rusoro of violating rules surrounding that consortium agreement, therefore putting the miner at risk of being eliminated from the current sale process.
Gold Reserve seeks to block Rusoro’s participation
In its statement, Gold Reserve stated that it is seeking preliminary injunction action to prevent Rusoro from participating in the sale process while the litigation is underway, as well as other unspecified remedies.
The business claims that Rusoro’s activities violate their joint agreement to participate in a consortium bid for PDV Holding’s shares.
Given Citgo’s prominence as one of Venezuela’s most valuable foreign-held assets, the Delaware application marks a new milestone in an already acrimonious process that has garnered international attention.
Pending motions and legal manoeuvres
The complaint follows previous legal disputes between the Gold Reserve, Venezuelan authorities, and the Delaware court itself.
Just last month, the Gold Reserve and Venezuelan representatives filed motions to dismiss Judge Leonard Stark and court-appointed consultants, citing potential conflicts of interest.
These motions are still ongoing, adding uncertainty to the already delayed Citgo-related auction conclusion.
Judge Stark has yet to make a formal decision confirming the winning bidder, leaving the destiny of PDV Holding and the rival claims against Venezuela uncertain.
Rusoro’s response and legal position
Rusoro’s legal team has not yet issued a public statement regarding the new complaint.
However, over the weekend, the company’s lawyers notified the Delaware court of Gold Reserve’s submission and verified that the documents are being reviewed.
In court documents, Rusoro stated that Gold Reserve’s action is intended to “prevent Rusoro Mining from taking steps to close on the impending purchase of the shares of PDV Holding.”
The company stated that it reserves the right to take any appropriate legal action in response.
Unresolved ownership and broader implications
The Citgo auction has become a hot topic in the ongoing battle against Venezuela’s state-owned oil assets.
The Delaware court’s handling of the case is central to the discussion.
The auction seeks to reconcile long-standing claims by international creditors whose properties were nationalised or whose loans went unpaid by Caracas.
Business rivalries are simply adding to the burden on this complex process, which combines foreign sovereign debt conflicts with business skulduggery, such as Gold Reserve’s most recent litigation.
The ownership of PDV Holding and, thus, who controls Citgo’s US operations, is in limbo until the court rules on both the disqualification motions and the new complaint.
Gold Reserve and Rusoro are currently embroiled in a legal stalemate, however, and this battle could set a precedent not only for the Citgo auction but for the whole of Venezuela’s most contentious foreign asset.
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