Rusoro Mining:

Insiders Buying, Growing Production & Positive Cash Flow

I want to give subscribers and followers of our services a short update on Rusoro Mining (RML-TSX - $0.66), just one of many companies included in our Warrant Database.

The warrants now trade at 12 cents (RML.WT) and dipped as low as 2 cents in year end tax loss selling in December 2008. The warrants have a $4/share strike price and expire on Nov. 29, 2012 – almost a full four years from now. While they are well out of the money, we are still very bullish on gold, and four years is a long time.

A very positive development is that Rusoro has recently made our list of companies with Insiders Buying. We find that 3 officers/directors have been buying in the open market since October 2008 and there has been no selling. The fact that company insiders are buying a company's shares is always a factor that investors should consider in their decision making process of buying.

Rusoro operates in Venezuela , and is focused on two fronts: a hostile take-over of Gold Reserve (GRZ-TSX; GRZ-AMEX) that would set the stage for a remarkable growth curve; and improving production at their current mine, Choco 10.

I don’t know if this bid will be successful, but the prize is big - Gold Reserve has the 11 million ounce Brisas deposit. Gold Reserve has not been able to obtain all the permits for production from the Venezuelan government.

Rusoro has been successful and is the only private sector gold producer in the country, operating the Choco 10 mill. Rusoro would use its operational and political expertise in the country to get Brisas into production. We expect this tug of war will end in February. If the bid is successful I expect Rusoro to have a jump in share price. If it fails, both companies’ share prices will fall, though Gold Reserve by much more.

Operationally, Rusoro had record quarterly gold production (38,868 ounces) in the fourth quarter of 2008 and record low cash costs ($358 ( U.S. ) per ounce) for the same period at Choco 10, which it acquired Nov. 30, 2007. It was the first quarter of positive cash flow from operations.

The Choco 10 mill processes ore from two deposits – Choco 10 and Isidora. Rusoro just received a series of permits that will allow it to send ore from a third deposit – Incredible 6 – to Choco 10. Rusoro’s plan would be to grow Choco 10 to handle more than 300,000 oz a year by 2012 using ore from a combination of the three deposits.

The company has growing production, and now has positive cash flow. However, it also has $80 million in debt to a friendly group headed by Endeavour Financial and Peter Hambro Mining, a London UK-listed gold company that happens to be Russia ’s second largest gold producer.

We will update the company two or three times a year as their quarterlies are released or if there is big news on the company.

Investors are encouraged to perform their own due diligence and consult with their investment advisors before making any investments. We currently own a small position in the warrants trading on Rusoro.

Dudley Baker
PreciousMetalsWarrants.com