JUNIOR MINING

Rusoro Mining launches hostile bid for Gold Reserve's Las Brisas project

After its courtship overtures were rejected by Gold Reserve, Rusoro Mining has launched a hostile takeover bid for Gold Reserve for its Las Brisas project and a larger presence in Venezuela's Km88 Mining District.

RENO, NV - 

In an interview with Bloomberg News, Gold Reserve President Doug Belanger Monday suggested that a $49.8 million hostile bid by Rusoro mining "really can't proceed because it's tainted" because merchant banker Endeavour Financial Corp., which is advising Rusoro, also performed work for Gold Reserve this year.

Vancouver-based Rusoro is offering three Rusoro shares for each Gold Reserve share. The offer values Gold Reserve at Cdn$1.08 per share, representing a premium of 140% based on the December 12, 2008, closing price for Rusoro and Gold Reserve on the TSX-V and the TSX, respectively.

Rusoro claims the acquisition of Gold Reserve allows Gold Reserve shareholders to benefit from the production of 100,000 attributable gold ounces this year, as well as the opportunity to develop Gold Reserve's Chocó 5 project contiguous to Rusoro's Chocó 10 operations.

Gold Reserve shareholders would own 40% of the combined company, according to Rusoro.

The combined company would have 12.2 million ounces of proven and probable gold reserves and measured and indicated resources (including reserves) totaling 18.9 million ounces.

Previously Gold Reserve had rejected Rusoro's friendly all-stock offers for the Spokane-based junior company. Gold Reserve's board of directors Friday received a non-binding proposal from Rusoro and calls from both Rusoro's legal counsel and its financial advisor Endeavour Financial.  On Sunday Gold Reserve sent letters to both Rusoro and Endeavor expressing concerns about the role of Endeavour in Rusoro's bid.

"Endeavour also provides advisory services to Gold Reserve and has in depth knowledge of confidential and proprietary information about Gold Reserve," according to a Gold Reserve press release issued Monday. "In the circumstances, Gold Reserve believes that the offer cannot proceed and, together with its financial and legal advisors, is considering its options to protect shareholder interests."

Frank Guistra--a good friend of former President Bill Clinton and North American mining's most prominent fundraiser for the William J. Clinton Foundation--serves as an advisor to Endeavour.

In a recent interview with Vheadline--an internet news site specializing in news and analysis about Venezuela-- Rusoro Mining's CEO Andre Agapov called his company the first Russian investors of any kind in Venezuela although Rusoro's headquarters are in Vancouver.

Russian Agapov views a buy-out of Gold Reserve's Las Brisas gold project as part of a general consolidation of assets in  the Kilometer 88 Mining District in Venezuela's Bolivar Region. The takeover of Gold Reserve would also provide Rusoro with access to kaolinite deposits between Las Brisas and the Las Cristinas gold project belong to Canadian junior Crystallex.

Rusoro Mining is the first company to have entered into a 50/50 split with a subsidiary of the Venezuelan government in the ownership of Hecla Mining's former La Camorra unit.  U.S. silver miner Hecla sold its La Camorra unit and left Venezuela after experiencing months of frustration, work stoppages and other impediments to its operations.

In his interview, Agapov suggested that a company could acquire both Gold Reserve and Crystallex for under $100 million in a combined market cap that would give a new owner 40 million ounces of gold.

The Hugo Chavez Administration revoked Gold Reserve's construction permit this year for Las Brisas. Last month Venezuela's mines minister told the press the government planned to seize Las Cristinas, which has had its final permit delayed for months by Venezuela's environmental ministry.

President Chavez has developed a well known penchant for nationalizing some of Venezuela's most important corporations, generally owned and operated by foreign companies.