Rusoro Denied Appeal In Blocked Bid For Gold Reserve

VANCOUVER — The Ontario Superior Court of Justice has denied Rusoro Mining (RML-V, RMLFF-O) permission to appeal an injunction blocking its hostile takeover bid for Gold Reserve (GRZ-T, GRZ-X), handing its rival another victory over the Russian-controlled company.

The court based its decision to deny permission to appeal on the fact that Rusoro had access to, and likely benefited from, confidential information about Gold Reserve — which holds the rights to the Brisas gold-copper project in Venezuela –as a result of its relationship with Endeavour Financial (EDV-T). Endeavour was Gold Reserve’s financial adviser; it also, without telling Gold Reserve, advised Rusoro on preparing its takeover bid. The morning the bid was announced, Endeavour emailed Gold Reserve and terminated their business relationship.

Three days after Rusoro announced its takeover bid, Gold Reserve filed an action seeking to restrain Rusoro and Endeavour from proceeding. The interlocutory injunction issued in early February was an interim measure, designed to stay Rusoro’s hand until the trial. At trial, Gold Reserve says it will also seek monetary damages of $550 million.

For its part, Rusoro says it will seek $102.5 million in damages. The company withdrew its takeover bid hours after the interlocutory injunction was issued.

The injunction also forbade Endeavour from having any involvement with a hostile takeover bid for Gold Reserve. Further, the court ordered Rusoro and Endeavour to return all confidential information about Gold Reserve they held, as well as anything produced from that information.

Aside from its battle with Gold Reserve, Rusoro is not doing too badly. In mid-March, the company closed an $80-million financing, selling 133 million share for 60¢ apiece.

And in January, Rusoro produced a company record of 14,835 oz. gold at a cash cost of US$315 per oz. Rusoro is targeting 170,000 to 190,000 oz. gold production for 2009 and expects to keep its cash costs below US$400 per oz. The Venezuelafocused company plans to bring its Increible 6 deposit into production in the second half of the year and is working towards production at its San Raphael-El Placer project in the first quarter of 2010.

The company’s management has, though, been warned by the British Columbia Securities Commission to watch what it says. In a news release and an interview with Rusoro president George Salamis, the company referenced gold production, ore, and orebodies with respect to the San Raphael-El Placer property, which has not seen an economic assessment. And Salamis made an insupportable statement about increasing production at the company’s Choco 10 mine.

Gold Reserve’s share price has ranged between 75¢ and $1 since mid-February; the company has a 52-week range of 29¢-$4.30 and 58 million shares outstanding. Rusoro’s share price has moved between 45¢ and 60¢ since early March; it has a 52-week range of 23.5¢-$1.59 and 397 million shares outstanding.