Rusoro buys Gold Fields’ Venezuelan portfolio

Vancouver – Rusoro Mining (RML-V, RMLFF-O) is jumping to producer status in a deal to purchase all of Gold Fields‘ (GFI-N, GFI-J) mineral projects in Venezuela, including the producing Choco 10 gold mine.

Rusoro is paying the South African major US$150 million in cash plus US$30 million in a convertible vendor take-back loan for the portfolio. It is also issuing 140-million shares making Gold Fields its largest shareholder at 38%.

To fund the deal, Rusoro has an underwriting agreement to sell 87.5 million subscription receipts at $2.40 apiece raising $210 million. Upon completion of the Gold Fields acquisition, subscription receipts will exchanged for units comprised of a common share and a warrant. Warrants will be exercisable at $5.00 for five years.

Besides propelling Rusoro to producer status, the deal significantly increases the junior’s current footprint of four project areas (Increible 6, San Rafael-El Placer, Valle Hondo and Km 88) in eastern Venezuelas Bolivar State that sit in close proximity to Hecla Mining‘s (HL-N) Isidora and La Camorra underground gold mines, Gold Reserve‘s (GRZ-T, GRZ-X) Brisas development project and Crystallex‘s (KRY-T, KRY-X) large Las Cristinas gold deposit.

Having commenced production in 2006, Gold Fields’ 95%-owned Choco 10 mine churned out about 55,000 oz. gold at total cash costs of US$523 per oz. in its latest fiscal year. Operations have been beset by difficulties including labour issues, a ball mill drive train failure that interrupted production for about one month and water shortages hampering the plants ability to run at full capacity. Proposals to extract water from the Yuruari River have been lodged and await permit approval.

Proven and probable open pit reserves at Choco 10 stand at 15.4 million tonnes grading 3.4 grams gold per tonne for about 1.7 million contained oz. Measured and indicated resources come in at 56.1 million tonnes of 2.5 grams gold (about 4.45 million contained oz.) along with a further 40.8 million inferred tonnes of 2.2 grams gold for 2.9 million contained oz.

Rusoro feels its management’s Venezuelan operating experience can solve many of the issues experienced by Gold Fields and ramp up mine output from Choco 10.

The company’s Increible 6 development project hosts an indicated resource of 23.5 million tonnes of 2.1 grams gold (about 1.6 million contained oz.). A further 17.5 million tonnes at 2 grams gold was also reviewed — adding 1.1 million contained oz. gold. Rusoro has modeled an open pit operation at Increible 6 that could now possibly share certain infrastructure and feed ore to Choco’s processing circuit located about 4 km away.

Earlier this year Rusoro consolidated interest in its Venezuelan property portfolio through a merger with project-partner Mena Resources.

Assuming regulatory and shareholder approvals Rusoro anticipates closing the business combination by December 2007.

“This transaction will dramatically expand and accelerate Rusoro’s production growth profile and offers an excellent opportunity to fast track production at the Increible 6 project, while moving us significantly closer to positioning ourselves as an intermediate gold producer,” stated company president George Salamis in the announcement.

Gold Fields’ Venezuelan divestiture comes almost in unison with an agreement to sell its 60% stake in the Essakane project in Burkina Faso to partner Orezone Resources (OZN-T, OZN-X) for US$200 million.

As the world’s fourth largest gold producer, Gold Fields is focusing on its South Deep mine complex in South Africa where it expects to spend several hundred million dollars in infrastructure development and expansion over the next several years. South Deep holds 29 million oz. of gold reserves plus some 67 million contained oz. of resource.

Shares of Rusoro slipped about 8% on the acquisition and financing news, closing off 20 at $2.20 apiece in October 12th trading. The stock has a 52-week trading range of $1.58-$4.50.