Gold Reserve Inc. (GRZ) is seeking $1.9 billion in damages for what the mining company calls an illegal expropriation of its assets by the Venezuelan government.

In April 2008, Venezuelan authorities canceled the Spokane, Wash. company's permits to construct a mine at the big Brisas copper-gold deposit in the southeastern part of the country. This deposit, one of the country's largest, was Gold Reserve's main mining asset.

In an arbitration claim filed last year with the World Bank's International Centre for Settlement of Investment Disputes, Gold Reserve alleges violations of international investment treaties. On Tuesday, the company specified the compensation it seeks for all its losses at the Brisas development and in the Choco 5 gold exploration property, as well as other damages, which it values at about $30 a share.

An hearing of the company's case is scheduled to start Dec. 5, 2011.

The Brisas project contains 10.2 million ounces of gold and 1.4 billion pounds of copper, according to reserve evaluations. Gold Reserve says it spent nearly $300 million to explore and develop the project before Venezuela revoked its rights.

Gold Reserve shares were trading at nearly $6 a share in the months before it ran into trouble with the Venezuelan government. In New York Tuesday, shares of Gold Reserve were recently up 5.9% at $1.25 apiece.

"We believe even a return of our basic investment would bring us close to $5 a share," Gold Reserve President Douglas Belanger said in a telephone interview. "But it's pretty easy to demonstrate that mining properties that are this advanced have a great deal more value than just the initial investment."

Belanger said Venezuela was looking to continue development of the Brisas project without Gold Reserve, possibly in partnership with a Russian company, but hadn't made any progress yet.

Although governments tend to settle cases like Gold Reserve's, companies usually don't get "anywhere near the full amount that they claim in investor-state arbitrations, even when they win," said Anthony Sinclair, a specialist in state arbitration cases for Allen Overy LLP in London.

"For some states, the final award against them is just the starting point for further negotiations as to how much they'll actually pay," said Sinclair, who successfully represented a North American energy company in recovering tens of millions of dollars from Venezuela.

Chris Dugan, a partner with the Paul Hastings law firm in Washington, said Gold Reserve was likely to get "hundreds of millions" in damages at the end, but added that it could take several years for the company to go through the legal process to collect the assets if Venezuela decides to resist paying immediately.

"The case on the merits is pretty open and shut; I mean, Venezuela has been expropriating (assets) for the last two or three years," Dugan said. "But collecting on it is much harder than getting a judgement."

Gold Reserve is one of several companies that have filed arbitration requests against Venezuela's government in the wake of President Hugo Chavez taking control of numerous assets. Oil and gas companies such as Exxon Mobil Corp. (XOM) and ConocoPhillips (COP) have filed cases, as have international cement manufacturers Cemex (CX) of Mexico and Holcim Ltd. (HCMLY) of Switzerland.

-By Edward Welsch, Dow Jones Newswires; 403-229-9095; edward.welsch@dowjones.com

(Judy McKinnon in Toronto contributed to this article.)
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