Why Gold Reserve (GRZ) may be about to sell out to Rusoro (RMLv)

Let's count up the coincidences, shall we?

1) The GRZ "Brisas" project stands right next door to (quite literally..they back onto each other) the KRY 'Las Cristinas' that's about to be taken away by the Venezuelan government.

2) On August 27th, GRZ confirmed it had been approached by Rusoro Mining (RML.v), the Russian gold miner in Venezuela that has been making unrefusable offers all round the place (the latest to sell out to them at a deep discount was Hecla (HL)). Details of the previously discussed deal and my views can be found on this earlier post.

3) On October 10th, GRZ announced it was selling mining equipment it had planned to use at Las Brisas.

Taking into account that Rusoro and the Venezuelan gov't have already set a couple of precendents on how they work (they JV and split everything down the middle 50/50), it would make a lot of common sense for Venezuela to get its hands on Las Cristinas, Rusoro to get its hands on the slightly smaller but fairly comparative Brisas and then put together one massive mine operation between them.

Strangely, MIBAM might have unwittingly let the cat of the bag, as in its e-mail reported by Bloomberg today it said Las Cristinas has 31m oz of gold. That's way too high a number, in fact, but if you add the two properties together (LC approx 20m oz Au, Brisas approx 11m oz Au) 31m ounces of gold is right in the ballpark.

But finally, there's this. Doug Belanger, President and main man at GRZ, for some reason converted 205,000 class B shares of GRZ to class A shares on October 28th 2008.

Nov 03/08	Oct 28/08	Belanger, A. Douglas	Direct Ownership	Common Shares Class A Common Shares	36 - Conversion or exchange	205,000
Nov 03/08	Oct 28/08	Belanger, A. Douglas	Direct Ownership	Common Shares Class B Shares	36 - Conversion or exchange	-205,000

This seems to be related to a 1999 reorganization of the GRZ company structure. Here's (what I think) is the relevant GRZ SEC filings passage:

In February 1999, Gold Reserve Corporation (predecessor to the  Issuer)    
became a subsidiary of the Issuer.  Generally, each shareholder of Gold    
Reserve Corporation received one Common Share of the Issuer for one share of
Gold Reserve Corporation.  Certain U.S. holders elected, for tax reasons, to
receive Equity Units in lieu of Common Shares.  An "Equity Unit" is comprised
of one Class B common share of the Issuer and one Gold Reserve Corporation 
Class B common share.  An Equity Unit is substantially equivalent, including
voting rights, to a Common Share and is convertible into a Common Share at 
any time at the election of the holder.  Equity Units are not listed for   
trading on any stock  exchange, but subject to compliance with applicable  
federal, provincial and state securities laws, may be transferred.

What this seems to mean (in a nutshell) is that if Belanger didn't convert those "equity units" to true common shares they wouldn't have been recognized or included in any buyout deal. It certainly rings a lot of bells that the President of the company waits nine full years to convert this remnant of stock into common stock (I say remnant because Belanger already owns plenty million GRZ shares) right at the time when all sorts of other wheels seem to be in motion.

I think the big deal between GRZ and Rusoro is about to go down, folks. It's not a trade for the faint of heart, but I think there's value to be had in GRZ stock right now. Don't bet the farm though, and you MUST do your own DD on this one.