Rusoro Mining Ltd. (TSX VENTURE: RML) ("Rusoro" or the "Company")
announced today that its offer to acquire all of the outstanding
Class A common shares and equity units of Gold Reserve Inc.
(together, the "Gold Reserve Equity") on the basis of three Rusoro
shares for each Gold Reserve share or equity unit (the "Offer") has
been extended to 5:00 p.m. (Eastern time) on February 18, 2009 (the
"Expiry Time").
Based on the closing price of Rusoro shares on January 19, 2009
on the TSX Venture Exchange, the Offer represents a value to Gold
Reserve shareholders of C$2.01 per Gold Reserve share. Rusoro urges
Gold Reserve shareholders to not only evaluate the merits and value
inherent in the Offer, but to also evaluate what it believes to be
the lack of credible strategic alternatives for the creation of
Gold Reserve shareholder value offered by Gold Reserve
management.
A Notice of Variation in respect of the Offer will be mailed to
Gold Reserve Equityholders and will be filed with the applicable
securities authorities in Canada and the United States and will be
made available on www.SEDAR.com and www.sec.gov, respectively. In
addition to extending the Offer to the new Expiry Time, a condition
of the Offer in respect of the GRZ Notes (defined below) has been
revised to include an alternative to the execution of a
supplemental indenture which does not require the consent of Gold
Reserve management.
Offer now a "Permitted Bid" under Gold Reserve Shareholder
Rights Plan
As a result of extending the expiry date, Rusoro believes the
revised Offer will qualify as a "Permitted Bid" under Gold
Reserve's shareholder rights plan. If Gold Reserve does not agree
that the Offer is a "Permitted Bid", Rusoro plans to request a
cease trade order from the Ontario Securities Commission in respect
of the shareholder rights plan to eliminate any uncertainty that
the plan might be triggered by the take up of Gold Reserve Equity
by Rusoro under the Offer.
Condition Related to the GRZ Notes
Rusoro also announced today that it has amended the condition in
its Offer related to Gold Reserve's 5.50% Senior Subordinated
Convertible Notes due June 15, 2022 (the "GRZ Notes"). As stated by
Gold Reserve in its Directors' Circular, completing the Offer would
trigger an obligation to repurchase the GRZ Notes unless either:
(a) a supplemental indenture is entered into to allow the Offer to
proceed or (b) the Rusoro shares are listed on the TSX. Gold
Reserve's directors have stated in their circular that they do not
intend to grant Gold Reserve's consent to enter into a supplemental
indenture. Rusoro has therefore amended the condition that a
supplemental indenture be executed to include, as an alternative, a
condition that Rusoro complete a TSX listing prior to the Expiry
Time. As such, the condition will now be met if either: (a) a
supplemental indenture is entered into excluding the Offer from the
definition of "Fundamental Change" under the terms of the indenture
governing the GRZ Notes or (b) Rusoro completes a TSX listing prior
to the Expiry Time. Rusoro believes that the amendment of the
supplemental indenture condition removes significant uncertainty
from the Offer, as the new condition provides a method of
completing the Offer that does not require the consent or approval
of the Gold Reserve board of directors, should that not be
forthcoming.
Gold Reserve Court Application
On December 30, 2008, Gold Reserve's management filed a court
application for an injunction that, if granted, would prevent
Rusoro from moving forward with the Offer. The court hearing for
that injunction is scheduled for February 4, 2009. The extension of
the Offer allows Rusoro to provide clarity to Gold Reserve
shareholders by dealing with the injunction application, and Rusoro
expects that the Offer may then proceed without delay.
Developments since the Offer was Launched
Since Rusoro commenced the Offer on December 15, 2008:
- Rusoro achieved positive Q4 2008 quarterly cashflow at the
Choco 10 mill, which processes ore from both the Choco 10 mine and
the Isidora mine.
- Record quarterly production levels at the Choco 10 mill have
been achieved with 38,868 ounces of gold produced in Q4 2008.
- Record low cash costs at the Choco 10 mill have been achieved
for Q4 2008 at US$358 per ounce of gold produced.
- Venezuela's Ministry of Basic Industries and Mining (MIBAM)
has approved the Company's study on the technical, financial and
environmental aspects of Rusoro's Increible 6 Gold Project. This
approval is a further step in implementing the Rusoro's strategy
where it expects to expand its Choco 10 operations by processing
ore from the Increible 6 deposit at the Choco 10 mill, which are 6
km away from each other. Details of this approval as well as
Rusoro's Choco 10 mill positive quarterly cashflow, record
production levels and record low cash costs can be reviewed in
Rusoro's press release dated January 14, 2009.
Gold Reserve Management's Proposed Alternative for Shareholder
Value
- By press release dated January 14, 2009, Gold Reserve advised
its shareholders to reject the Offer and went on to refine its
forward-looking plan to "realize considerable value related to its
Brisas investment" by either (a) negotiating a beneficial offer for
the Brisas Project with the Venezuelan government or (b) seeking
recovery from the Venezuelan government under Venezuela's domestic
legal system or under bilateral investment treaties to which
Venezuela is a party. Rusoro believes the Offer would provide
significantly more value to all Gold Reserve shareholders than Gold
Reserve's refined plan for many reasons, including:
-- Rusoro believes that Gold Reserve has not demonstrated
sufficiently constructive relationships with the Venezuelan
government to negotiate a reasonable offer for the Brisas
Project.
--- Since acquiring the Brisas Project approximately 16 years
ago, Gold Reserve has been unable to secure the necessary permits
and approvals from the Venezuelan government to bring the Brisas
Project into production.
--- Having had their preliminary construction permit revoked in
May 2008, Gold Reserve decided to sell equipment designed for the
Brisas Project in October 2008. Rusoro believes this shows a
decision not to proceed with the Brisas Project.
--- In their directors' circular dated December 30, 2008, the
Gold Reserve board confirmed that they "have been evaluating other
opportunities outside of Venezuela". Rusoro believes this shows a
reluctance to proceed with the Brisas Project or any other
opportunity in Venezuela.
--- Rusoro does not believe that the Gold Reserve management
team has established a constructive working relationship with the
relevant Venezuelan authorities. In this regard, Rusoro notes that
the Gold Reserve management team has not been able to obtain a
single meeting, despite repeated requests, with the Minister of
MIBAM through 2008. This fact was sworn in an affidavit provided by
A. Douglas Belanger, President of Gold Reserve, in connection with
the injunction mentioned above and included in a letter from Gold
Reserve to the Minister of MIBAM dated November 7, 2008 which was
filed as Exhibit "V" to that affidavit.
-- Rusoro believes that suing the Venezuelan government for
monetary damages in connection with natural resources physically
located in Venezuela is a failing proposition, a long-term
detriment to the Gold Reserve share price, and highly unlikely to
create any near or medium term value for Gold Reserve
shareholders.
--- Legal and arbitral disputes are often challenging,
complicated and drawn-out processes with no certainty of success on
the merits, and potentially even less success in exacting payment
from sovereign entities.
--- Throughout any legal actions and arbitration proceedings
against the Venezuelan government, the Gold Reserve management team
will still have to pay interest and, in certain circumstances, the
principal in connection with its US$103.5 million worth of GRZ
Notes. Gold Reserve currently has no gold production nor any near
term prospects for gold production. As a result, Rusoro believes
that the Gold Reserve management team has no reasonable basis to
raise additional financing and will therefore have to continually
draw on its cash balances to service the debt represented by the
GRZ Notes. Rusoro understands that the GRZ Noteholders may force
Gold Reserve to redeem the GRZ Notes on June 15, 2012.
- On January 14, 2009, certain news outlets attributed
Venezuelan President Hugo Chavez with remarks that the Venezuelan
government plans to jointly develop the Las Cristinas deposit and
the Brisas deposit. These news outlets also reported that President
Chavez referred to the formation of Venrus C.A., described as a
joint venture between Rusoro and the Venezuelan government, to
develop and exploit these projects. As disclosed in the Company's
Offer and Circular dated December 15, 2008, filed with Canadian
securities regulatory authorities and included as part of its
Registration Statement on F-10 and Tender Offer statement on
Schedule TO filed with the SEC in the United States, Rusoro has
formed a mixed enterprise joint venture with the Venezuelan
government in connection with the Isidora gold mining assets
acquired by Rusoro from Hecla Mining Company. The terms of this
joint venture, which has been named "Minera Venrus, C.A.", were
filed on December 5, 2008 on the Company's SEDAR profile. Rusoro
cautions that no agreement regarding the development or joint
development of the Cristinas or Brisas deposits currently exists
between Rusoro and the Venezuelan government and there is no
guarantee that any such agreement will be entered into.
As of the close of business on January 19, 2009, 1,615,433 Gold
Reserve shares and 420 Gold Reserve equity units have been tendered
to the Offer. Rusoro believes this reflects the market uncertainty
related to the Offer resulting from the litigation and Tender
conditions discussed above. Gold Reserve Equityholders may tender
to the Offer at any time prior to the new Offer expiry time of 5:00
pm (Eastern time) on February 18, 2009.
About Rusoro Mining
Rusoro Mining is a junior gold producer with a large land
position in the prolific Bolivar State region of Venezuela. The
Company operates the Choco 10 and Isidora mines, processing the ore
through the Choco 10 mill facility near the town of El Callao. The
Company produced over 100,000 ounces of gold in 2008 and is on
schedule to have two additional mines (Increible 6 and SREP) in
production by Q4 2009 and Q1 2010 respectively.
ON BEHALF OF THE BOARD
George Salamis, President
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE
COMPANY'S INFORMATION AGENT:
Georgeson
North American Toll Free Number: 1-888-605-7615
Banks and Brokers call collect: 1-212-806-6859
Cautionary Note Regarding Forward-Looking Statements
This press release, the Take-Over Bid and Circular, including
the schedules attached therein, the pro forma consolidated
financial statements of the Company, and some of the material
incorporated by reference into the Circular, contain certain
forward-looking information and forward-looking statements, as
defined in applicable securities laws (collectively referred to as
"forward-looking statements"). Forward-looking statements include
possible events, statements with respect to possible events, the
proposed transaction, related litigation, the business, operations
and financial performance and condition of each of Rusoro and Gold
Reserve and the proposed combined company, the future price of
gold, the estimation of mineral reserves and resources, the
realization of mineral reserve and resource estimates, the timing
and amount of estimated future production, costs of production,
expected capital expenditures, costs and timing of the development
of new deposits, success of exploration, development and mining
activities, permitting time lines, currency fluctuations,
requirements for additional capital, government regulation of
mining operations, environmental risks, unanticipated reclamation
expenses, title disputes or claims, and limitations on insurance
coverage. The words "plans", "expects", "is expected", "scheduled",
"estimates", "forecasts", "intends", "anticipates", or "believes",
or variations of such words and phrases or statements that certain
actions, events or results "may", "could", "would", "might", or
"will be taken", "occur" and similar expressions identify forward
looking statements.
Forward-looking statements are necessarily based upon a number
of estimates and assumptions that, while considered reasonable by
Rusoro as at the date of such statements, are inherently subject to
significant business, economic, social, political and competitive
uncertainties and contingencies and other factors that could cause
actual results or events to differ materially from those projected
in the forward-looking statements. The estimates and assumptions of
Rusoro contained or incorporated by reference in the Circular which
may prove to be incorrect, include, but are not limited to, (1)
that Rusoro will be successful in acquiring 100% of the outstanding
Gold Reserve Equity, (2) that all required third party regulatory
and governmental approvals to the Take-Over Bid will be obtained
and all other conditions to completion of the transactions will be
satisfied or waived, (3) there being no significant disruptions
affecting operations, whether due to labour disruptions, supply
disruptions, power disruptions, damage to equipment or otherwise;
(4) permitting, development, expansion and power supply proceeding
on a basis consistent with Rusoro's current expectations; (5)
permitting and development proceeding on a basis consistent with
Rusoro's current expectations; (6) the exchange rate between the
Canadian dollar, the Venezuelan Bolivar and the U.S. dollar being
approximately consistent with current levels; (7) certain price
assumptions for gold; (8) prices for and availability of natural
gas, fuel oil, electricity, parts and equipment and other key
supplies remaining consistent with current levels; (9) production
forecasts meeting expectations; (10) the accuracy of Rusoro's
current mineral reserve and mineral resource estimates; and (11)
labour and materials costs increasing on a basis consistent with
Rusoro's current expectations.
Known and unknown factors could cause actual results or events
to differ materially from those projected in the forward-looking
statements. Such factors include, but are not limited to, risks
related to litigation; fluctuations in the currency markets;
fluctuations in the spot and forward price of gold or certain other
commodities (such as diesel fuel and electricity); changes in
interest rates; disruption to the credit markets and delays in
obtaining financing; inflationary pressures; risks arising from
holding derivative instruments (such as credit risk, market
liquidity risk and mark-to-market risk); changes in national and
local government legislation, taxation, controls, regulations and
political or economic developments in Canada, Venezuela or other
countries in which Rusoro does or may carry on business; business
opportunities that may be presented to, or pursued by Rusoro,
Rusoro's ability to successfully integrate acquisitions; operating
or technical difficulties in connection with mining or development
activities; actual results of exploration activities; the
possibility of cost overruns or unanticipated expenses; employee
relations; the speculative nature of gold exploration and
development, including the risks of obtaining and renewing
necessary licenses and permits; the impact of Venezuelan law on
Rusoro's operations; diminishing quantities or grades of reserves;
adverse changes in our credit rating; contests over title to
properties, particularly title to undeveloped properties; and the
occurrence of natural disasters, hostilities, acts of war or
terrorism. In addition, there are risks and hazards associated with
the business of gold exploration, development and mining, including
environmental hazards, industrial accidents, unusual or unexpected
formations, pressures, cave-ins, flooding and gold bullion losses
(and the risk of inadequate insurance, or inability to obtain
insurance, to cover these risks).
The following factors, amongst others, related to the business
combination of Rusoro and Gold Reserve could cause actual results
to differ materially from forward-looking statements, including
those contained in the Circular: the Rusoro shares issued in
connection with the Take-Over Bid may have a market value lower
than expected; the business of Rusoro and Gold Reserve may not be
integrated successfully or such integration may be more difficult,
time-consuming or costly than expected; and the expected
combination benefits from the combination of Rusoro and Gold
Reserve may not be fully realized or not realized within the
expected time frame. All of the forward-looking statements made in
the Circular are qualified by these cautionary statements and those
made in the Circular itself. These factors are not intended to
represent a complete list of the factors that could affect Rusoro
and the combination of Rusoro and Gold Reserve. Additional factors
are noted elsewhere in the Circular and in the documents
incorporated by reference therein. Although Rusoro has attempted to
identify important factors that could cause actual results or
events to differ materially from those described in forward-looking
statements, there may be other factors that could cause results or
events not to be as anticipated, estimated or intended. There can
be no assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
undue reliance should not be placed on forward-looking statements.
Rusoro undertakes no obligation to update publicly or otherwise
revise any forward-looking statements or the foregoing list of
assumptions or factors, whether as a result of new information or
future events or otherwise, except as may be required in connection
with a material change in the information disclosed in the Circular
or as otherwise required by law.
MORE INFORMATION AND WHERE TO FIND IT:
This press release does not constitute an offer to buy or an
invitation to sell, any of the securities of Rusoro or Gold
Reserve. Such an offer may only be made pursuant to a registration
statement and prospectus filed with the U.S. Securities and
Exchange Commission (the "SEC") and an offer to purchase and
circular filed with Canadian securities regulatory authorities.
Rusoro has filed with the SEC a Registration Statement on Form
F-10, a Tender Offer Statement on Schedule TO and other documents
and information, and has mailed an Offer and Circular (which is
filed as an exhibit to the Registration Statement and Tender Offer
Statement) to Gold Reserve shareholders and equity unitholders
(collectively, the "Equityholders") concerning the Offer and the
proposed combination of Rusoro and Gold Reserve. GOLD RESERVE
EQUITYHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, THE
TENDER OFFER STATEMENT AND OFFER AND CIRCULAR AND ANY OTHER
RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC, BECAUSE THEY
CONTAIN IMPORTANT INFORMATION. Investors and Gold Reserve
Equityholders may obtain the documents free of charge at the SEC's
website, www.sec.gov. In addition, documents filed with the SEC by
Rusoro are available free of charge from Rusoro. You should direct
requests for documents to the Corporate Secretary, Rusoro Mining
Ltd., Suite 2164, 1055 Dunsmuir Street, Vancouver, British Columbia
V7X 1B1, telephone (604) 632-4044.
The TSX Venture Exchange has not reviewed and does not take
responsibility for the adequacy or accuracy of this release.
Contacts: Rusoro Mining Ltd. George Salamis President (604)
632-4044 or Toll Free: 1-800-668-0091 Email: gsalamis@rusoro.com
Rusoro Mining Ltd. Ross Gatensbury Investor Relations (604)
632-4044 or Toll Free: 1-800-668-0091 (604) 632-4045 (FAX) Email:
gates@rusoro.com Website: www.rusoro.com
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