Filed by Rusoro Mining Ltd.
Pursuant to Rule 425 under the
Securities Act of 1933, as amended
Subject Company: Gold Reserve Inc.
Commission File Number: 333-156117
Date: January 20, 2009
Suite 2164 1055
Dunsmuir Street, Four Bentall Centre
Vancouver, BC V7X 1B1
Tel: 604-632-4044 Fax:
604-632-4045 Toll Free 1 800-668-0091
Website: www.rusoro.com email:
info@rusoro.com
Rusoro Extends Expiry Date
of Gold Reserve Takeover Bid
Comments on Gold Reserves Proposal
to Sue Venezuelan Government
January 19, 2009
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Trading Symbol
(TSX-V): RML
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Vancouver, Canada
Rusoro Mining Ltd. (TSX-V: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
1
under Gold Reserves
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 Reserves
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 Reserves
directors have stated in their circular that they do not intend to grant Gold
Reserves 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 Reserves 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.
·
Venezuelas
Ministry of Basic Industries and Mining (MIBAM) has approved the Companys
study on the technical, financial and environmental aspects of Rusoros
Increible 6 Gold Project. This approval
is a further step in implementing the Rusoros 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 Rusoros Choco
10 mill positive quarterly cashflow, record production levels and record low
cash costs can be reviewed in Rusoros press release dated January 14,
2009.
Gold Reserve Managements
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
2
Venezuelas
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 Reserves 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
Companys Offer and
3
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
Companys 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
* * *
* * * * *
For further
information, please contact:
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George Salamis, President
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Ross Gatensbury, Investor
Relations
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Tel: +1
604 632 4044
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Tel: +1
604 632 4044
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Email: gsalamis@rusoro.com
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Email: gates@rusoro.com
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4
ANY
QUESTIONS OR REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE
COMPANYS INFORMATION AGENT:
North American Toll Free Number: 1-
888-605-7615
Banks and Brokers call collect:
1-212-806-6859
The TSX Venture Exchange has not
reviewed and does not take responsibility for the adequacy or accuracy of this
release
.
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
Rusoros current expectations; (5) permitting and development proceeding
on a basis consistent with Rusoros 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 Rusoros current mineral reserve and
mineral resource estimates; and (11) labour and materials costs increasing on a
basis consistent with Rusoros 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, Rusoros
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 Rusoros
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
5
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 SECs 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.
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