Rhetoric rises in Rusoro bid

For a company that has a market cap of about $75-million, Gold Reserve Inc., a cash-rich operation with rights to a gold-and-copper project in Venezuela, continues to tell the world it doesn't want anything to do with Rusoro Mining Ltd., a much large junior gold producer that also operates in Venezuela.

More than four months after the Spokane, Wash.-based GRI "unanimously" rejected an unsolicited, nonbinding expression of interest from non-cash-rich Rusoro to merge the two companies, its directors have rejected another unsolicited offer by Rusoro. (One consolation: GRI has been able to elicit a better offer: Now its shareholders stand to receive three Rusoro shares for each GRI share; previously it was 2:1.) For good measure, GRI also filed a motion in the Ontario Superior Court of Justice seeking to restrain Rusoro from proceeding with the takeover offer made in the middle of last month, with a Jan. 21 expiry.

"... the Rusoro Offer is opportunistic, financially inadequate and significantly undervalues the company, its assets and their relative contribution to the proposed combination," said Doug Belanger, president of Gold Reserve. "We believe that Rusoro is attempting to acquire Gold Reserve's valuable assets --including the Brisas Project and our large cash reserves -- without offering adequate consideration to Gold Reserve shareholders. Furthermore, we believe that Rusoro's own weak financial position and lacklustre operating performance present significant risks to Gold Reserve shareholders if Rusoro's unsolicited offer is successful."

That response didn't sit too well with Rusoro, which said yesterday it "will work very hard to make sure Gold Reserve shareholders are not prevented by their own management team from having the opportunity to consider our premium bid." GRI closed yesterday at $1.31; Rusoro at 72¢.

There is lots of bad blood:

-GRI retained two firms to review Rusoro's public disclosures. Rosen & Associates reviewed its public financial disclosures, and said, "Rusoro's financial reporting of its historical results and of the pro forma combined entity does not provide sufficient information for GRI's shareholders to make an informed assessment about the Offer." The firm had "serious concerns" about
the discrepancies in Rusoro's gold sale prices, its accounting for production costs and its extensive related-party dealings. Behre Dolbear reviewed Rusoro's public technical disclosure concerning its operations.