Rusoro Mining (RML-V, RMLFF-O) has dropped its hostile takeover offer for Gold Reserve (GRZ-T, GRZ-X), after the Ontario Superior Court of Justice issued an interlocutory injunction on Feb. 10 stopping it from moving forward with the bid.
The injunction was granted to Gold Reserve until a pending action started by the company — alleging that Rusoro had improper access to confidential information when it launched its bid — could be heard by the court. That action consists of a statement of claim against Rusoro and Endeavour Financial International, a company incorporated in Grand Cayman, which is affiliated with Vancouver-based Endeavour Financial (EDV-T).
Filed on Dec. 16, the action sought damages and an injunction against Rusoro’s hostile bid.
After a two-day hearing in early February, the court accepted Gold Reserve’s motion for an interlocutory injunction on the basis that Rusoro benefited from access to Gold Reserve’s confidential information through Endeavour. Endeavour has acted simultaneously as a financial adviser to Rusoro and Gold Reserve. According to court documents, Endeavour terminated its agreement to advise Gold Reserve seven minutes after Rusoro publicly announced its hostile bid on Dec. 15.
The court ordered Rusoro and Endeavour to return all of Gold Reserve’s confidential information, and anything produced from that confidential information. It also granted an injunction against Endeavour from being involved with a hostile bid for Gold Reserve until its pending action was resolved.
In a statement, Gold Reserve said the company is satisfied with the ruling.
“We remain committed to ensuring that our shareholders receive full value for their investment,” said Doug Belanger, the company’s president.
In December, the Gold Reserve board voted unanimously to reject the hostile takeover bid, launched that same month, and recommended that shareholders reject the offer.
Rusoro’s bid had offered three shares for every share of Gold Reserve.
Gold Reserve holds the rights to the Brisas gold-copper project and the Choco 5 gold exploration property in Venezuela. Brisas holds proven and probable reserves of 485 million tonnes grading 0.67 gram gold per tonne and 0.13% copper for 10.4 million oz. gold and 1.3 billion lbs. copper. The Venezuelan government issued a construction permit for Brisas in March 2007, only to revoke it in May 2008.
The next step in the takeover saga had been scheduled for Feb. 12. Rusoro was planning to apply to the Ontario Securities Commission (OSC) to cease trading Gold Reserve’s shareholders’ rights plan or “poison pill.”
However, in view of the injunction, Rusoro did not proceed with the OSC hearing.
On the news, shares in Gold Reserve closed down 4¢ to $1.24 on the TSX, while Rusoro shares were unchanged at 74¢ on the TSX Venture Exchange.
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