Court halts Rusoro takeover bid for Gold Reserve
ANDY HOFFMAN
RTGAM






An Ontario judge has halted a hostile takeover bid by Rusoro Mining Ltd. for rival Gold Reserve Inc., ruling that the offer is tainted because Rusoro had access to confidential information from a financial adviser who acted for both companies.



Justice Peter Cumming granted an interlocutory injunction restraining Vancouver-based Rusoro from proceeding with an all-stock offer for Gold Reserve, pending the outcome of a trial.



Rusoro's financial adviser on the offer, Endeavour Financial, is prohibited from acting on behalf of Rusoro regarding a potential takeover until the trial concludes.



Lawyers for Gold Reserve had argued that Rusoro had an unfair advantage over other potential bidders because Endeavour possessed confidential information it acquired when it was an adviser to Spokane, Wash.-based Gold Reserve.



"Rusoro, in effect, bought the assurance and advantage of using Gold Reserve's trusted financial adviser, Endeavour, and its possession of relevant confidential information, in substitution for its own due diligence," Justice Cumming's decision stated.



Gold Reserve has tried for more than a decade to develop the Brisas gold deposit in Venezuela, but has been stymied by the country's government, which has denied it the necessary permits to build and operate the mine.



The Brisas deposit contains more than 10-million ounces of gold.



Rusoro, meanwhile, has found some success in Venezuela, producing gold and claiming it is a "partner of choice" for the Venezuelan government.



Although the company is headquartered in Vancouver, trades on the TSX Venture Exchange, and its largest shareholder is South Africa's Gold Fields Ltd., Rusoro has portrayed itself as a Russian-backed company. The company's chairman, Vladimir Agapov, is a Russian national. Rusoros' chief executive officer is Andre Agapov, Mr. Agapov's son.



In his decision, Justice Cumming noted that Rusoro has close ties to Endeavour, including shared investors and executives.



Rusoro was offering three of its shares for each Gold Reserve share, valuing the company at about $127-million.

© 2009 The Globe and Mail