Board also recommends shareholders not tender their shares in the offer.
Washington-based Gold Reserve (TSX: T.GRZ, Stock Forum) announced after Tuesday’s market close that its board of directors unanimously voted to reject Rusoro Mining’s (TSX: V. RML, Stock Forum) December 15 unsolicited offer to acquire all of the outstanding shares and equity units of the company.
As reported earlier this month, Rusoro announced that it had launched a takeover bid for Gold Reserve, valuing Gold Reserve at $1.08 per share.
Later the same week, Gold Reserve announced that it filed an action in the Ontario Superior Court of Justice against Rusoro Mining and Endeavour Financial International Corporation seeking an injunction restraining Rusoro and Endeavour from proceeding with an unsolicited offer for the company.
In response to the Rusoro Offer, the Gold Reserve board of directors formed an independent committee of the board to consider the terms of the offer and its value to Gold Reserve shareholders.
Late Tuesday afternoon, the company said that its board also recommended that Gold Reserve shareholders not tender their shares into the Rusoro offer.
"Gold Reserve's Board of Directors believes that 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 lackluster operating performance present significant risks to Gold Reserve shareholders if Rusoro's unsolicited offer is successful," he added.
The company says its plan is to continue to work with the Venezuelan government to finalize the necessary pre-production permits for the Brisas Project, and it expects to meet with the Venezuelan government in January 2009 “to address anticipated mining sector reforms and the potential impact on our Brisas Project.”
Shares of Gold Reserve remained unchanged at $1.00 Wednesday.
Earlier this week, Rusoro said that “the board of directors of Gold Reserve has amended its shareholder rights plan (the "GRZ Plan") without obtaining GRZ shareholder approval” including “extending the definition of a “Permitted Bid" under the GRZ Plan to exclude a bid from an entity which has confidential information about Gold Reserve. Rusoro noted that the amendments do not have any impact on the company’s bid as “Rusoro does not, and at the time of the Bid did not, have confidential information about Gold Reserve.”
Gold Reserve holds the rights to the Brisas gold/copper project and the Choco 5 gold exploration property in Bolivar State, Venezuela, while Rusoro has five gold projects in Venezuela, including the Choco 10 mine near El Callao.
On the Gold Reserve Bullboard Tuesday evening and Wednesday, posters gave their thoughts on the news, including JimBobby who said:
"The BOD in their news release state "Gold Reserve's Board of Directors believes that 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. The BOD state the Rusoro offer significantly undervalues the Company and this is true however, the stock market undervalues the Company even more that Rusoro. The share price has doubled since the Rusoro offer and there are no other offers in the table. If the Rusoro offfer is accepted, then GRZ share price will double again, if the offer is rejected then back down goes the share price. The Rusoro offer does not offer adequate consideration to GRZ shareholders, however, the stock market was offering even
less consideration and the GRZ CEO and BOD have been spinning their wheels
without success. I'll vote for the Rusoro offer[sic]."
roberto146 replied:
""I'll vote for the Rusoro offer."I would too. The market valued the shares only for the cash on hand. The properties attracted zero valuation. The company is selling off equipment that was to be used for production. There's nothing there. It's sad when something like this happens, but it happens, and there don't seem to be any other buyers.At least the GRZ shareholders would have maybe 25% of a company with about 80 million cash and 20 million ounces of gold.If the offer expires, or is pulled GRZ is back to 30 cents[sic]."
