President Hugo Chavez's government formalized the nationalization of Venezuela's gold industry on Monday with a decree that prohibits exports of the metal and gives the state 55 percent of joint ventures.

The new law, published in the Official Gazette with the aim of overturning the serious impact of the capitalist mining model, also fixes the royalty rate for gold mine projects at 13 percent in general.

That can, however, fall to as low as 3 percent for some small operations of social interest such as the participation of indigenous communities or small miner cooperatives.

Socialist leader Chavez, who has nationalized big swathes of the OPEC member's economy, targeted the gold industry last month after his government quarreled with foreign miners over limits on how much they could export.

The latest takeover fits with the president's broader plan to repatriate Venezuela's bullion and shift most of its cash reserves out of Western nations to political allies including China, Russia and Brazil.

Venezuela 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 move is bad news for foreign companies like Toronto-listed Rusoro -- owned by Russia's Agapov family and the biggest gold miner operating in Venezuela -- which had been pushing for greater export limits.

All the gold obtained by mining in national territory must be sold and handed over to the Bolivarian Republic of Venezuela, the decree said, using the full name Chavez has given Venezuela in honor of independence hero Simon Bolivar.

Rusoro has said it plans to stay in the South American country, but it is unclear exactly in what conditions.

An executive at one foreign consulting firm, which gives recommendations on investment opportunities, said it would not be encouraging miners to look at Venezuela despite its proven gold reserves of some 4,636 tonnes.

Only a country very antagonistic to foreign investment would do what Venezuela is doing in relation to property and royalties, said the executive, who asked not to be named.

The law set a 90-day period for a government committee to negotiate with existing gold concession-holders.

It also stipulated the creation of a military district in the mineral-rich south to combat informal miners estimated to produce about 12 tonnes a year.