Rusoro makes bid for Gold Reserve

This just gets worse and worse to watch. Rusoro is now launching and all share bid for Gold Reserve, read the details of the proposed deal here. The offer values GRZ and its Las Brisas property at a buck 8. Yes, that's a possible 10 million ounces of gold worth...61 million dollars? Am I doing my math right? Rusoro obviously talks like they are doing something great here offering them a 108% premium to Friday's closing price and over 200% premium to the last 30 days trading but my goodness. They are obviously avoiding the fact that the reason the stock is worth garbage is because they entered into an agreement with the Venezuelan government in November announcing they were going to rob Gold Reserve and Crystallex of the land they have been working so hard on developing all these years.

This is an insult to the mining and investment community. Venezuela and Rusoro created the stock collapse of GRZ, it was purely fabricated so they could sweep in and "legally" take over the asset. Worse part is that I have no doubt that those snakes bought at those low, low prices, they knew exactly what they were going to do, not only will they be stealing a huge gold deposit but they will make millions in the process. It's lunacy! How can we sit and watch this unfold without acting, this will set a dangerous precedent if it is allowed to develop the way it is going and we as investors and miners will be setting ourselves up for more of it unless we take a hard stand.

It's one thing to accept your losses and move on but it is another to submit yourself to the will of others. Gold Reserve deserves better, I doubt they will receive it, but this just isn't right.

Gold prices and the Canadian dollar, now and then

The price of Gold has gone up exponentially in the last 6 or 7 years, from $300 to $1000 the change has been dramatic and a big welcome to Gold miners around the world. But for Canadian, Australian and other world miners, the change of price hasn't been as great as it may seem and its fall from $1000 is not really a fall at all. I'll focus on Canada for this post but the calculations can be applied for any other currency.

When the dollars are at par, the price of Gold is the price of Gold, simple enough.
So using ($1USD)/($CDN) x (price of gold).

In 2001 when Gold was $300 and the dollar at .65, Gold was actually at $461
in 2003 when Gold was $430 and the dollar at .75, Gold was actually at $573
in 2006 when Gold was $650 and the dollar .87, Gold was actually at $747
in 2007 when Gold was $800 and the dollar .98, Gold was actually at $816
in 2008 when Gold was $1000 and the dollar 1.05, Gold was actually at $952
Today, when Gold is at $815 and the dollar at 0.81, Gold is actually at $1006

$1000 Gold was nice for Canadian producers, but cheaper gas, a lower dollar and $815 Gold is even better. If Gold returns to $1000 dollars and the Canadian dollar continues to falter against its American counterpart, miners will continue to make healthy profits.

Ecuador mining law to be presented

The piece of legislation thousands of investors, Ecuadorians and mining industry personnel have been waiting for to be released is about to come out. Since Kinross picked up 17 million ounces (or more) for 1.2 billion dollars, outrage ensued and Patrick Anderson is now on the board of directors of Noront (what were they thinking?). Now since the mining investment sector collapsed I've heard a few people say this wasn't a bad deal...thinking short term I can agree but long term, which is what people who had invested in ARU were thinking...this was far, far from a good deal. The only solace the ARU shareholders have is that at least they didn't get robbed like Crystallex and Gold Reserve.

Everyone expects the mining mandate to be pro-mining, even though the president has some extreme factions inside his government he was quoted as saying:

"If there are deep changes to the law, I will veto it and put it up for a popular referendum," Correa said during his weekly media address on Saturday. "The government's political decision is to develop the mining sector."

At least there's some positive news coming out of the mining sector. We'll see what the details of the bill say when it's released but after reading a few drafts, I think it's safe to say this won't have anything major in it that will make people's head spin.

Premier move

Premier Gold Mines (PG) is a junior gold miner from Northwestern Ontario with assets in Red Lake and Geraldton, they made an interesting move last week by grabbing a slew of properties in the Geraldton area from Lac Properties Inc. (Barrick owned company). They did the deal for about half a million shares and a couple million dollars. Why is this so interesting? Well, besides the fact that it's done right in the middle of a mining crash there are a couple of things to consider.

PG is in a 49-51 joint venture with Goldcorp in Red Lake and are stuck spending million of dollars, whether they like it or not, on the Rahill-Bonanza property. Goldcorp is operator and PG has to pay half the cost of whatever they decide to do, which at this time happens to be quite a bit. That's not necessarily a bad thing, you have a major like Goldcorp doing quality advanced work on your ground, but when financing is tight it can be harder to come up with the capital to fund the work. Now when you forecast financing to be tight in the coming years, the last thing you want to do is throw your money around at new properties, what you're seeing nearly every other junior out there do is hunker down and conserve cash, not spend it by aquiring new stuff. Goldcorp doesn't need to do financing to raise cash, the world's richest gold mine is literally 3 kms from Rahill-Bonanza, it can keep on trucking and charge half the bill to Premier for a long long time if it wants to.

So, what does this all mean? Goldcorp has become very defensive of the Red Lake area, with the recent aquisition of Gold Eagle Mines, Premier is probably looking pretty tasty for them. Goldcorp is probably looking at taking PG's Red Lake assets, this means PG could survive with fresh cash and continue work on it's Geraldton properties, before they only had a bit of land, not enough to prop up a company with, now with the new ones they got last week...they have enough.

Time will tell.

cheap tricks

I'm considering looking to buy some majors during the next week, depending on what the markets start to look like on Monday. Common sense is telling me "Don't do it, stupid!" but it's getting hard to ignore some of them. Who would of thought Yamana and FNX would be around 5 bucks ever again? Nickel is in for a rough ride so I won't touch FNX but Yamana and other gold producers are starting to look pretty sexy. The biggest thing to remember (and that I have to remind myself of) is that bottom might still be far away and getting caught in a stock that goes sideways for months is an easy possibility. Do your own dilligence and don't rush into anything.