Malcolm Bucholtz B.Sc, MBA Analyst

Trading Note

Rusoro Mining – Time to Take a Closer Look

In a Trading Note issued over a year ago, way back in May 2007, we introduced an up and coming company called Rusoro Mining (TSXv:RML). At the time we noted that we had taken a liking to Rusoro because it had positioned itself very nicely in Venezuela, had a resource in the ground of 4 million ounces of gold and had serious growth potential.

Since this introduction, Rusoro has gone on to transform itself from being a well positioned explorer to being a producer to be reckoned with. Rusoro now has over 13 million ounces of gold resource in the ground. Stop and think about that for a second – 13 million ounces. How many gold producers trading at below $2 a share have 13 million ounces in the ground?

We further pointed out in our initial report that in our opinion, Venezuelan President Hugo Chavez would favour Rusoro Mining because Rusoro understood how to treat people well and how to do good business in Venezuela. To this day, Rusoro continues to co-operate with Government authorities and continues to make every effort to be a good corporate citizen.

At the outset, we also touched on the notion that Rusoro was largely Russian owned and speculated that this would lead to bigger and better things given the solid relationship between Russia and Venezuela.

And indeed, our initial observations have all proven correct.

But despite Rusoro's success, other companies- notably Crystallex and Gold Reserve - continue to have issues in Venezuela. Yet they continue to fight on because the prize is huge. The gold rich state of Bolivar in Venezuela has been compared with Nevada, South Africa and even the Kirkland Lake mining district in Canada. Tens of millions of ounces of gold have been discovered in Bolivar State in the past decade or more and there is more to be discovered – a lot more.

Unfortunately, the market has ignored Rusoro's good fortune and has chosen to focus on the misfortunes of others. The investment crowd has now dropped anything that even remotely resembles a Venezuelan mining play and shares in Rusoro Mining have been sucked down in the vacuum.

Rusoro Mining – The Russian Connection Comes Through in a Big Way

But, keep your eye on Rusoro. Amidst all the negative hype swirling around Venezuela, Rusoro continues to go about its business of increasing production and reserves. The past couple weeks have brought some big news for Rusoro. Rusoro has received an $80 million loan cash infusion from a group of institutions that includes Peter Hambro Mining Plc (ADR's trade in USA as POGNY, AIM listing is POG). Never heard of Peter Hambro you say? Well try this on for size. Peter Hambro Plc is the second largest mining company in Russia with 2007 production of just over 297,000 ounces of gold. The other institutions that participated in this deal include Blackrock Investment Management, GLG Partners, Lansdowne Partners and Endeavour Mining Capital – all heavyweights in their own right.

This $80 million loan is exchangeable into shares of Rusoro Mining at C$1.25 per share at any time between July 10, 2008 and June 4, 2010. Peter Hambro Plc further has the right to acquire these shares from the other members of the loan syndicate at C$2.20 per share. So, does Peter Hambro Plc expect shares in Rusoro to move higher? You bet it does and that is why it has set itself up with this call option feature. Chairman Peter Hambro (he named the company after himself) commenting on this deal noted Rusoro is the first non-Russian investment ever made and that he regards Venezuela as a strategic partner to Russia. Commenting on the call option arrangement that would see Peter Hambro Plc acquire the exchangeable shares associated with this loan at C$2.20, Chairman Hambro noted this price is justified because Rusoro's share price is too low.

Rusoro Mining – Big and Getting Bigger - 220,000 ounces in 2008

Right now, Rusoro Mining has 5 advanced gold projects in Venezuela. Its flagship Choco 10 mine is currently on track to produce 120,000 ounces in 2008 and this figure will double over the next 3 years. Rusoro has developed and accumulated more than 12.8 million ounces of gold assets in the ground in all of the major mining districts in Bolivar State, Venezuela. As a further step towards getting yet bigger, Rusoro recently announced the acquisition of Hecla Mining's Venezuelan assets which include mining leases and a mill facility. With the acquisition of this milling facility, Rusoro should see gold production of 220,000 ounces in total for 2008. These assets will also add significantly to Rusoro's accumulated gold resources in the ground.

Get Rusoro Mining Back on Your Radar Screens

Watching a stock get sucked down into a vacuum when it was seemingly an innocent bystander can be painful. Our advice – sit tight and if possible add to your position at these current low prices. Here at www.themarkettraders.com we are so intrigued we can barely sit still. We are watching, what was one year ago a small up and comer, transform itself into a mining powerhouse. Russia and Venezuela are effectively saying that they will work together on the gold mining front and Rusoro Mining will be the operating entity for this effort. As other players continue to struggle at the margins, Rusoro is on its way to becoming synonymous with gold mining in Venezuela. Get Rusoro Mining back on your radar screens and watch what happens in the months to come.