Venezuela
It's been a while since Venezuela has been the epicenter of news. There have been two main problems. One, after paying US$60 million for its Oro Uno property in Kilometer 88, Vengold came up empty from its drilling. Two, last year's elections installed an old line thug (Rafael Caldera) as president, and he's engaging in all manners of economic stupidities, the likes of which haven't been fashionable on this continent for close to a decade.
The relapse was set off by a banking collapse (itself caused because the banks are so politically managed). Instead of letting imprudent depositors and investors eat their losses, the government bailed them out with an infusion of over US$8 billion, or close to 15% of Venezuela's GNP. The bolivar collapsed, and the government responded with price controls (resulting in shortages and arrests of accused violators). Capital rushed to the exits, and the government, in a further bout of insanity, countered with foreign exchange controls. Getting dollars is a very complex process requiring everything from one's tax returns to proof that prices being paid are fair. This in a country that imports 70% of its food, and nearly everything else other than petroleum.
To counter black market activities, the government fines newspapers and others who report real world prices, or the existence of the black market. New government ministries have been set up. Privatization has been halted. The country's leading Marxist has been appointed head of the Central Bank. All in all, the country has become a dog's breakfast.
As a result, all the Venezuelan gold stocks have been hammered: Carson from C$7.50 to C$1.30 (C$1.13 per share in cash); Bolivar from C$6.50 to C$1.65 (C$0.68 per share in cash); El Callao from C$5.90 to C$0.75 (C$0.02 per share in cash; Consolidated Gold Vessel (renamed since it's been consolidated I for 10) from C$6 to C$0.50 (negligible cash) and Queenstake from C$4.75 to C$0.75 (C$0.32 per share in cash). Notes Most of these have rebounded about 50% in the last month.
When I first recommended the Guyana Shield play in Venezuela, I expressed some hesitancy about Venezuela, because the place had become extraordinarily corrupt due to its oil revenues. Those revenues had forestalled any serious reforms since they artificially maintained the standard of living. I've long preferred places that were completely run into the ground. I went ahead, however, in the belief that the wave of reform sweeping the rest of the world would triumph here as well. And for a while it looked like that was really the case. I clearly didn't adequately credit the stupidity of the average voter, when blandished with envy-rousing rhetoric from a skilled politico at the peak of a crisis.
It's hard to say when things will turn around in Venezuela itself; probably not until Caldera goes, and that's unlikely to be for a few years, barring a military coup. Nonetheless, my guess is that the pricing of the Venezuelan gold stocks will improve by summer, entirely apart from a likely strengthening in the gold price. When the feasibility study on Placer Dome's US$400 million mine in K88 is released, it will address the financial costs of the country's current bout of political insanity, as well as the geological realities of this property. I presume that that study will give a green light to building the mine. That will undoubtedly refocus investors' attention on the fact that the geology of the region hasn't changed, even though their sentiments have.
The world megatrend is still towards free markets. In that light, I believe you should use the current crisis in Venezuela as a buying opportunity.
P.S. Blood in the Streets Dept: Taking advantage of the situation in Venezuela, several friends have purchased a ranch in the El Callao area, not far from the Orinoco. It's a pleasant part of the country, with rolling, grassy hills and patches of forest. For about 20,000 acres, including several houses and a bunch of accouterments, they paid US$100000.