SEATTLE () -- Earlier this week, Peter Hambro [LSE:POG] announced plans to invest $20 million in Rusoro Mining [TSX-V:RML] - not a substantial amount for Russia's No. 2 gold producer, but anther $60 million from leading investment banks is enough to turn some heads.
On Tuesday, Peter Hambro led a group of investors composed of itself, BlackRock Investment Management, GLG Partners LP, Lansdowne Partners Ltd. and Endeavour Mining Capital Corp. in lending $80 million to Rusoro at a time when many banks are not fast to grant loans to juniors, especially juniors in Venezuela.
The loan is exchangeable into shares of Rusoro at C$1.25, a 25% premium to Rusoro's last traded price of C$1.00. Shares of the company have not been immune to the junior selloff, trading at C$3.00 a year ago and C$4.00 at the start of 2007.
Peter Hambro, GLG and Lansdowne will each lend $20 million and BlackRock and Endeavour will lend $10 million each. Peter Hambro will acquire a 4% stake in Rusoro upon completion of the loan. It has the option within 2 years to acquire the holdings held by other lenders in the consortium at C$2.20 per share to give it 14.2%.
"We have always said that any investment outside Russia would need to have a Russo-centric rationale and the Rusoro investment is just such an opportunity," said Peter Hambro, chairman of Peter Hambro, in a statement. "With it we have a strategic investment in a growing gold producer that is backed by proven reserves and resources and a successful management team."
Rusoro is led by a mostly Russian management team including Andre Agapov as CEO and Vladimir Agapov as chairman. Both hold a combined 16% interest in the company.
South African gold producer Gold Fields Ltd. [NYSE:GFI], the world's No. 4 producer, remains Rusoro's largest shareholder with a 36% stake. In , Rusoro acquired Venezuelan assets from Gold Fields, which included the Choco 10 gold mine.
Choco 10 in Bolivar State has measured and indicated resources of 4,451,000 ounces of gold and inferred resources of 2,870,000 ounces. It is currently producing approximately 10,000 ounces of gold per month and is expected to produce 120,000 ounces in 2008. The project will undergo an expansion plan to ultimately double production over the next 36 months.
Rusoro has five advanced gold projects in Venezuela with a total of 12.8 million ounces of gold resources. Despite Venezuela's legislative uncertainty, the company has consistently confirmed its good standing with government agencies.
On , Venezuelan Environment Minister Yuviri Ortega said the country would not give environmental permits for any open-pit mines and will not allow companies to look for gold in its Imataca Forest Reserve.
Crystallex [AMEX:KRY; TSX:KRY] and Gold Reserve [AMEX:GRZ; TSX:GRZ] were denied environmental permits needed to begin development and production at Las Cristinas and Las Brisas, both located in the Imataca Forest Reserve.
Rusoro Mining, however, confirmed in a statement that it was in possession of all necessary permits to produce gold at Choco 10, which is not within the Imataca Forest.
