Judge: Canadian firm can go after Venezuela’s US refineries

CARACAS, Venezuela — A Canadian gold mining company on Thursday won the right to go after Venezuela’s prized U.S.-based oil refineries and collect $1.4 billion it lost in a decade-old take-over by the late socialist President Hugo Chavez.

Chief Judge Leonard P. Stark of the U.S. Federal District Court in Delaware made the ruling in favour of Crystallex, striking a blow to crisis-wracked Venezuela, which stands to lose its most valuable asset outside of the country — Citgo.

Chavez took over the gold mining firm and many other international companies as part of his Bolivarian revolution that’s left the country spiraling into deepening economic and political turmoil.

Venezuelans struggle to afford scarce food and medicine as masses flee across the border. In a sign of rising political tensions, current President Nicolas Maduro threw an opposition lawmaker in jail this week, charged in a failed assassination plot using two drones loaded with explosives.

The latest order by the U.S. judge could set off a scramble by a long list of creditors owed $65 billion from bonds that cash-strapped Venezuela has stopped paying within the last year, said Russ Dallen, a Miami-based partner at the brokerage firm Caracas Capital Markets.

“This was the most vulnerable low hanging fruit for debtholders to go after,” Dallen said. “It looks like Crystallex is the lucky lottery winner because they got there first.”

Chavez in early 2009 announced Venezuela’s take-over of the Canadian mining operations in Bolivar state, a mineral rich region with one of the continent’s largest gold deposits. He accused mining companies of damaging the environment and violating workers’ rights.

Crystallex spent years trying to negotiate a deal with Venezuela before making its case in 2011 to a World Bank arbitration panel, which sided with the Canadian firm, despite Venezuela’s vigorous fight.

U.S.-based Citgo, part of the state-run oil company PDVSA, has three refineries in Louisiana, Texas and Illinois in addition to a network of pipelines. If the order is carried out, Crystallex won’t get all of Citgo — valued at $8 billion — but Venezuela could be forced to liquidate it to make good on the court order.

Today, the gold mining region once operated by Crystallex is largely lawless and dangerous, run by rogue miners who blast the earth with water and mercury to expose gold nuggets and sell them to government forces, often leading to deadly conflicts.

The judge’s ruling is unique, because government assets, like PDVSA, are normally protected from lawsuits against a sovereign nation. But the judge found that Crystallex can attach Citgo’s parent because Venezuela has erased the lines between the government and its oil firm, now run by a military general.

Upon issuing the order, the judge delayed enforcing it for a week, which Dallen said could be a move to give Crystallex and Venezuela time to reach an agreement, such as returning to payment terms of an earlier resolution, Dallen said.

“This gives Venezuela the chance to honour its settlement agreement,” Dallen said. “Or they’ll lose Citgo.”

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As Barry Critchley bids farewell, a humble request: Remember the shareholder

The beginning was more than three decades back; the end is Thursday, when my final column will appear and I will then be able to enjoy the benefits of a voluntary employee buy-out.

Between those book ends is my time as a journalist for this newspaper, in all of its manifestations: originally a weekly that reached a national audience, then a standalone daily financial newspaper and for the past 20 years as the business section of the National Post. And over those 35 years I have had the same job, which I hope is not a statement about inertia but rather an affirmation that the constant updating of knowledge in an area of great interest is a good thing.

It has been a wonderful time and I have been blessed, even if the media industry’s financial struggles continue to make the business more and more difficult. I am not sure how many of my junior colleagues will spend 35 years in their chosen field. Indeed there will be a special reward for a person who can develop the new model where readers will pay for content, where advertisers will pay to reach such an audience and where quality journalism is the norm.

A special thanks is owed to the many people who have helped me over the years. There have been thousands, particularly the market players who assisted with understanding, but especially the readers who are investors and who wanted attention to be focused on issues that matter. We didn’t always win but it was important to take up the fight.

When I started — and back then a new reporter was handed a manual typewriter, sheets of paper and a considerable supply of white-out — the person whose job I took offered one piece of advice: This job is “great if you like to go out to lunch 2-3 times a week.”

I took that advice literally and started a regular habit of meeting people in the financial business over a healthy lunch. In the early days, those meals came with considerable lubrication; now it is a more restrained affair, meaning the information doesn’t flow as freely as it once did.

It didn’t take long to work out which side of the investment equation, the issuer or the investor, was the good guy, even if most of the odds are stacked against them. There are no markets without investors and it is amazing the abuse this group takes.

That abuse comes from boards that don’t think it is their responsibility to make the chief executive accountable to the owners; from special committees of the board formed to consider a transaction that seem to get it wrong by either not considering enough options or by downplaying the conflicts of interest.

It’s little wonder one often hears about-to-retire executives, when asked about their future plans,  say “I hope to join a few boards.” No wonder, comes the silent reply: The cheque goes in the bank and you get a good lunch on a regular basis.

The abuse, at the retail level, comes from financial product manufacturers who continue to bring offerings that seem to suit nobody, except that they generate a revenue flow to the manager. A few years back, one such manufacturer said the products keep emerging, the need to fill up the shelf, because “I work on the assumption the adviser needs to feed the kids every month.” The chances are Warren Buffet is not buying such products.

Accordingly, advisers have a special role to play, even if the ultimate responsibility falls to the investors themselves. One solution would be retain a portfolio manager, who operates with a fiduciary duty to act with care, honesty and good faith, and always put their clients’ interests first. That’s why the recent decisions taken by the Canadian Securities Administrators — where fiduciary duty was not mandated — were so disappointing. It was nothing other than a victory for the industry, and not the clients.

That’s why this column took a special interest in shareholder activists: They do the required analysis, they buy stock, they make their position known and then defend themselves with their own money. When they win, it shows that complacency won’t be accepted.

Finally, another big thanks to those who made this space, both in the paper and online, part of their daily routine. Chances are that I will miss the work, so the hunt is on to find a suitable replacement. As a friend recently said: Work is good but life is great.

Financial Post

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Court: EPA violated law on harmful pesticide, orders ban

WASHINGTON — A federal appeals court says the Trump administration endangered public health by keeping the top-selling pesticide chlorpyrifos (clor-PEER-i-fos) on the market despite extensive scientific evidence that even tiny levels of exposure can harm babies’ brains.

The 9th U.S. Circuit Court of Appeals in San Francisco ordered the Environmental Protection Agency to remove chlorpyrifos from sale in the United States within 60 days.

A coalition of farmworkers and environmental groups sued last year after then-EPA chief Scott Pruitt reversed an Obama-era effort to ban chlorpyrifos, which is widely sprayed on citrus fruits, apples and other crops.

In a split decision, the court said EPA violated federal law by ignoring the conclusions of agency scientists that chlorpyrifos is harmful.

The pesticide is sold by Dow Agro Sciences and others.

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Credit card companies to trim merchant fees, but retailers group �underwhelmed’

OTTAWA — The federal government is announcing today that credit card companies have agreed to trim the fees they charge the country’s businesses by 10 basis pointsa.

Ottawa has reached voluntary, five-year deals with Visa, Mastercard and American Express that the feds expect will help small and medium-sized companies save a total of $250 million per year, says a government source familiar with today’s announcement.

Starting in 2020, Visa and Mastercard will reduce the fees they collect from businesses to an average annual effective rate of 1.4 per cent — down from 1.5 per cent — and narrow the gap between the highest and lowest rates they charge retailers. American Express has agreed to provide more fairness and transparency as part of a separate voluntary commitment that recognizes its unique business model.

But a spokesman for the Retail Council of Canada said he was “underwhelmed” by the scope of the expected change because it would amount to just $100 worth of savings for businesses for every $100,000 worth of credit-card sales.

“In the sense that the trajectory is in the right direction, that part’s good,” said Karl Littler, vice-president of public affairs.

“We see this as a pretty small step relative to what might have been done.”

Littler said there are far lower interchange rates in many other jurisdictions around the world.

The changes, which could help consumers, are being unveiled at an Ottawa grocery store by Finance Minister Bill Morneau and Mary Ng, the new minister for small business and export promotion.

The source, speaking on condition of anonymity to discuss matters not yet public, said the reductions could help smaller businesses save thousands of dollars over the five-year period — and the government is hoping the extra funds will encourage owners to invest, expand and create jobs.

Ottawa expects the lower interchange rates will enable smaller firms to avoid being at a big competitive disadvantage compared to larger companies, which have more leverage in negotiating with credit card firms for reduced fees.

The government also expects consumers to benefit from the changes because the lower costs to businesses will enable them to keep prices lower.

In November 2014, Visa and Mastercard voluntarily agreed to reduce their average effective fees to 1.5 per cent over five years — a period that began in April 2015.

Morneau announced in September 2016 that an independent audit found that the companies had met their respective commitments. At the time, the government also said it would conduct a review to ensure there was adequate competition and transparency for businesses and consumers when it comes to credit card fees.

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Saudi Arabia says quarrel with Canada will not stop oil shipments

DUBAI, United Arab Emirates — Saudi Arabia’s diplomatic dispute with Canada over its arrest of women’s rights activists will not affect the kingdom’s oil sales to Canadian customers, the Saudi energy minister said Thursday.

The remarks by Khalid al-Falih show the limits of the ongoing quarrel and may calm some of the bluster surrounding the dispute that suddenly erupted Monday over Canadian diplomats’ tweets asking the kingdom to release the detained activists.

Khalid Al-Falih, Minister of Energy, Industry and Mineral Resources of Saudi Arabia, said oil sales will not be affected by politics.

A statement carried by the state-run Saudi Press Agency quoted al-Falih as saying oil sales are not affected by politics as there is a “firm and longstanding policy that is not influenced by political circumstances.”

“The current diplomatic crisis between Saudi Arabia and Canada will not, in any way, impact Saudi Aramco’s relations with its customers in Canada,” the statement said, referring the state-run oil giant Saudi Arabian Oil Co.

Canada, itself one of the world’s five top energy producers, gets some 10 per cent of its oil imports from Saudi Arabia. Bilateral trade between the two nations is US$3 billion a year.

Saudi Arabia expelled the Canadian ambassador on Monday and froze “all new business” with Ottawa over its criticism of the kingdom’s arrest of women’s rights activists. Among the arrested activists is Samar Badawi, whose writer brother Raif Badawi was arrested in Saudi Arabia in 2012 and later sentenced to 1,000 lashes and 10 years in prison for insulting Islam while blogging.

Canadian Prime Minister Justin Trudeau said Wednesday that his nation would continue diplomatic talks with Saudi Arabia but wouldn’t back down on raising human rights issues.

“Canada will always speak strongly and clearly in private and in public on questions of human rights,” he said.

Saudi Arabia plans to pull out thousands of students and medical patients from Canada over the spat. Since the crisis began, Saudi state-run television and other channels backing the kingdom have been airing programs criticizing Canada and accusing it of jailing “prisoners of conscience.”

The sudden decision bore the hallmarks of Saudi Arabia’s assertive 32-year-old Crown Prince Mohammed bin Salman, who also was the architect of the country’s war in Yemen and involved in the ongoing boycott of Qatar by four Arab nations.

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Canadian Tire Q2 profit falls, revenue up but below analyst estimates

TORONTO — Canadian Tire Corp.’s second-quarter profit was down compared with last year and and its revenue growth came in below analyst estimates.

The Toronto-based retailer and financial services company reports it had $156 million of net income attributable to shareholders, or $2.38 per share, down from $195.2 million or $2.81 per share a year earlier.

Its adjusted net income was $170.6 million or $2.61 per share, down from $195.2 million or $2.81 per share.

Analysts had estimated $3.04 of adjusted net income and $3.06 of net income, according to Thomson Reuters Eikon.

Revenue was also below estimates at $3.48 billion for the three months ended June 30, up 3.2 per cent from $3.37 billion in last year’s second quarter. Analysts had estimated $3.56 billion of revenue.

The company — which operates under various retail banners including Canadian Tire, Mark’s and Sport Chek — says the quarter’s sales got off to a slow start in April because of unseasonably cold weather but picked up in May and June.

Companies in this story: (TSX:CTC, TSX:CTC.A)

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Canadian Tire profit falls 20% as it ramps up investment in stores and online

Retailer Canadian Tire Corp Ltd reported a 20 per cent fall in quarterly profit on Thursday, as the company ramped up investments in its stores and online business.

Toronto-based Canadian Tire has been spending more to woo customers who are increasingly shopping at Amazon.com Inc and Walmart, which offer options such as doorstep delivery.

The retailer’s expenses rose about 5 per cent to $831.2 million in the second quarter ended June 30.

Total comparable same store sales, excluding petroleum, rose 1.6 per cent.

Net income attributable to shareholders fell to $156 million, or $2.38 per share, in the three months ended June 30, from $195.2 million, or $2.81 per share, a year earlier.

Revenue rose to $3.48 billion from $3.37 billion.

В© Thomson Reuters 2018

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