Company News

UPDATE 1-Gold Reserve moves to block Rusoro takeover bid

TORONTO, Dec 16 (Reuters) - Gold Reserve GRZ.TO moved to block a hostile takeover bid on Tuesday, saying it was taking legal action against Russian-controlled Rusoro Mining RML.V and its adviser, Endeavor Financial International.

In a statement, Gold Reserve said that Endeavor’s background as an adviser to both companies had given Rusoro “improper access to, and use of, Gold Reserve’s proprietary and confidential information”.

Rusoro said on Monday it is launching a 3-for-1 all-stock bid for Gold Reserve in order to acquire its Brisas gold and copper deposit in Venezuela.

At Tuesday’s prices, the offer values Gold Reserve at 84 Canadian cents a share, or about C$48 million ($39 million). Gold Reserve was down 3 Canadian cents at 70 Canadian cents on the Toronto Stock Exchange.

Spokane, Washington-based Gold Reserve said it had filed an action with the Ontario Superior Court of Justice, seeking an injunction to block the deal, as well as significant monetary damages and various other items.

Gold Reserve said it received a proposal from Rusoro on Friday, and then sent a letter on Sunday to Rusoro and Endeavor regarding Endeavor’s relationship with Gold Reserve. On Monday, Endeavor terminated the advisory agreement with Gold Reserve, it said.

Shares of Rusoro were up 2 Canadian cents at 27.5 Canadian cents.

Rusoro, which is based in Canada but controlled by Russian Vladimir Agapov, looks set to benefit from Venezuela’s desire to increase control of its mining sector and boost ties with Russia.

Venezuela’s mining ministry told a Russian government delegation in November it would allow Rusoro to operate both the Brisas and Las Cristinas projects.

Las Cristinas, one of the richest deposits in Latin America, is currently operated by Canada's Crystallex KRY.TO, although the company has yet to receive an environmental permit needed to mine the site.

Brisas is expected to yield nearly 500,000 ounces of gold and 60 million pounds of copper a year once it reaches production.

$1=$1.22 Canadian Reporting by Cameron French; editing by Rob Wilson