Illegal miners aren't about to yield access to the international companies President Nicolás Maduro has invited in
Armed Gangs Confound Venezuela's Bid to Exploit Gold Mines
Two miners worked at an illegal gold mine in the south of Venezuela's Bolívar State last month. Photo: Fabiola Ferrero
LA PARAGUA, Venezuela—Five years after Venezuela nationalized much of its mining industry, President Nicolás Maduro is inviting multinational firms back in to try to revive the country's dying economy. But standing between the companies and the minerals are up to 100,000 illegal miners and armed gangs.
Even as the government seeks to enlist the military in clearing these gangs out, some of their leaders say they regularly pay local military commanders for protection and gasoline supplies.
In February, Mr. Maduro unveiled a plan to auction 27 million acres of new concessions in an area he designated as the Orinoco Mining Arc. The government estimates the area holds 7,000 tons of gold, which if certified would make Venezuela's gold deposits second only to Australia's.
Mr. Maduro signed deals that month with China's fourth-largest coal miner Yankuang Group, construction giant China CAMC Engineering Co. and Spokane, Wash.-based independent miner Gold Reserve Ltd. He said more contracts worth billions of dollars are coming.
ENLARGE A prolonged drought has exposed new areas for illegal gold mining in southern Venezuela, like the Arenosa mine in the Guri hydropower reservoir. Photo: Fabiola Ferrero
"This is a magnificent source of wealth that will begin substituting petroleum as our only source of foreign earnings," he said.
But at the illegal Arenosa gold mine in the heart of the Orinoco Mining Arc, gang leader Ramón said he had other plans. On a recent day, dozens of his henchmen armed with pistols, shotguns and machine guns stood guard surrounding the mines. Around them, hundreds of wildcatters dug pits with shovels amid blaring salsa music.
'The president wants to grab us and throw us out of here.'
—Ramón, a gang leader at the illegal Arenosa gold mine
Most of the workers came to the mines in the past 18 months from Caracas, regional capital Ciudad Bolívar and other cities to find work in a national economy that will shrink by 11.5% this year, according to consultancy Síntesis Financiera. They said they have no intention of returning to slums plagued by power and food shortages.
"The president wants to grab us and throw us out of here," Ramón, a nom de guerre, said amid armed bodyguards in a makeshift tent by the pits, as army helicopters flew nearby. "Here there's work, outside there's hunger. The belly is stronger than fear."
Organized gangs began to arrive at the mines in 2011, after the government nationalized gold mining and then failed to exploit the areas it seized. The trickle became a flood in the past two years, as the economy nose-dived.
Violence followed as rival gangs battled for control. The surrounding state of Bolívar is now one of the most dangerous states in the country, which itself ranks second world-wide in homicides.
On March 4, a gang gunned down 17 miners north of the town of Tumeremo, according to Venezuela's public prosecutor. That area was licensed to China's Yankuang the month before, although the government and the company declined to provide the exact location of the concession.
Local gang leaders believe the assailants acted on government orders to clear out the mines for companies to enter. A congressional committee set up by Venezuela's opposition-controlled congress to investigate the violence agrees. In a recent report, it accuses the state governor's office of arming the killers.
"These massacres will continue occurring, because how else will the government remove all these people?" said the head of the commission, Américo de Grazia. The commission estimates at least 50 miners and gangsters have died in Bolívar this year.
Spokesmen for the Armed Forces headquarters, the Guayana Military District in charge of Bolívar, the Defense Ministry, the Information Ministry, Orinoco Mining Arc head José Khan, Bolívar Governor. Francisco Rangel, local Mayor Yusleiby González, Mr. Maduro's office and Yankuang all declined to comment or didn't reply to multiple calls and emails seeking comment on the recent homicides.
'The Mining Arc [plan] is a desperate attempt to gain foreign earnings.'
—Victor Álvarez, a former minister of industry
Since the 2011 nationalization, Venezuela's official gold production plummeted. Last year, the government produced just 950 pounds of gold, a third of the 2013 levels.
The nationalization also unleashed international court cases from the expropriated companies. Last month, a World Bank court awarded $1.4 billion to Canadian miner Crystallex International Corp. for the Las Cristinas mine, a concession Mr. Maduro granted in February to Gold Reserve.
"The Mining Arc [plan] is a desperate attempt to gain foreign earnings," said Victor Álvarez, a former minister of industry under Mr. Maduro's late mentor, Hugo Chávez.
Gold Reserve representatives declined to comment. CAMC's spokesmen didn't respond to requests for comment.
ENLARGE
Venezuela's illegal gold mines have created a parallel economy in the barren savanna and thick jungle of southern Bolívar. The workers here range from former bus drivers to kindergarten teachers.
Just two years ago, Arenosa was a desert island dotted with dead trees in the vast, muddy reservoir formed by the Guri hydroelectric dam. Now it hosts a booming town with churches, brothels, a satellite-phone call center and a soccer pitch. The town is a dollarized mini-economy, where everything is bought and sold at black-market rates. Largely as a result, Arenosa boasts dozens of shops fully stocked with goods that are scarce elsewhere in Venezuela, from meat to flour.Ramón estimates there are 6,000 to 10,000 wildcatters just in the reservoir where he operates.
'Without the military there's no fuel dispatching, there's no movement. It's that simple.'
—Aireana Rodríguez, a local official in the mining town of La Paragua
"Without the military there's no fuel dispatching, there's no movement. It's that simple," said Aireana Rodríguez, a local official in the mining town of La Paragua. There are 16 army checkpoints on the nearby main road.
In two illegal mines visited by The Wall Street Journal, uniformed soldiers stood feet away from makeshift ports where wildcatters loaded boats with mining equipment. The third mine visited, Arenosa, is within a militarized zone.
The congressional report and former minister Mr. Álvarez said Venezuela's armed forces have been complicit in the illegal mines. In southern Bolívar, an area the size of Minnesota, the army controls the distribution of gasoline, which is used to power the mining pumps and generators.
Two weeks after he announced the Mining Arc plan, Mr. Maduro issued an executive decree giving the military its own mining firm to participate "in all general mining activities." Rocío San Miguel, a military analyst, said the move is a bid to create an incentive for the military to clean up the mines, by giving them a direct stake in mineral investment instead of relying on gang proxies for income.
The gangs charge wildcatters a share of production, ranging from 5% to 50% based on the richness of the vein, gang leaders said. In areas controlled by indigenous groups, the miners pay tribute to the chief. The gang leaders and chiefs in turn pay a part to local military officers, according to gang members, indigenous residents, miners, gold buyers and local politicians interviewed by The Wall Street Journal.
At least three illegal mines have been cleared since February either by uniformed soldiers or unidentified men in balaclavas and automatic weapons, said a dozen witnesses.
"Today the government has decided to take control," said ruling party lawmaker Aldrin Torres. "At some point the Armed Forces will have to exert their authority."
—Fabiola Ferrero and Mayela Armas in Caracas, Kejal Vyas in Bogotá
and María Ramírez
in Puerto Ordaz
contributed to the article.
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