Toronto-listed miner Rusoro appeared unfazed on Thursday by President Hugo Chavez's move to nationalize Venezuela's gold industry, saying it believed the decision only targeted illegal miners.

In a typically combative step ahead of a re-election bid next year, Chavez said on Wednesday he would put the industry under state control, partly to boost the South American country's international gold reserves.

The president also said Venezuela was shifting its reserves of bullion and cash from Western nations with mounting debt worries back home and to politically aligned states including China, Russia and Brazil.

Rusoro, the only big gold miner operating in Venezuela, said in a statement it had received no word from the government about the nationalization plans. It said it continued to produce gold from two projects and was developing two others.

The company, owned by Russia's Agapov family, said it believed the announcement targeted illegal mining operations that it said were causing significant damage to the environment through indiscriminate deforestation and the use of mercury.

Gold produced by these illegal operations is often smuggled out of the country or sold illegally, and the government is now taking action, Rusoro's chief executive, Andre Agapov, said in the statement.

Rusoro shares fell by as much as 20 percent on Wednesday to 12 Canadian cents a share, before ending the day at 12.5 Canadian cents a share. They were up slightly at 14 Canadian cents a share on Thursday.

Chavez has put large parts of Venezuela's economy under state control. He targeted the gold industry after his government quarreled with foreign companies including Rusoro which complained that limits on how much gold they could export hurt their efforts to secure financing and develop projects.

CONCESSIONS ELIMINATED

The authoritarian but charismatic socialist leader did allude to illegal miners on Wednesday, calling on Venezuela's armed forces to help him root out smuggling mafias.

But he also appeared to leave little doubt that he was planning a state takeover of the whole industry, including extraction and processing.

Mining and Basic Industries Minister Jose Khan provided a few more details on Thursday, saying the new legal framework would eliminate concessions and the handing over of mining areas to private foreign companies.

We will provide an exploration license only if there is a strategic partnership in which the state has a majority stake, Khan said in a statement.

Rusoro operates the open pit Choco 10 mine and the high grade underground Isidora mine, which is a 50/50 joint venture with the government. The company produced about 100,000 ounces of gold in Venezuela last year.

The OPEC nation has been relatively small in the gold world, with formal mining producing about 6 tonnes a year. But it boasts some of Latin America's biggest gold deposits, buried below the jungles south of the Orinoco river.

The government agreed last year to let gold miners export up to 50 percent of production, up from 30 percent previously. The other 50 percent had to be sold to the central bank.

But that did not satisfy foreign companies including Rusoro, which said the limits made it much harder for them to get financing abroad, develop local projects and create jobs.

Gold Russia China OPEC