Break Out the Vodka, the Permit Is Here Komrades!

Rusoro (RML.v) has just been handed its exploitation permit for the Increible 6 project that's due online next year (via the CVG title holder)....and will now be online next year thanks to this news. Interestingly, to this author's knowledge the Venezuelan government has just handed out its one and only mining permit for the year 2009 (so far, at least).

Thus while the Capitalists of Toronto and Spokane moan and whine and stamp their little feetsies, the nastyman Commies get their way and can mine their gold. Socialism is the best form of kapitalism, komrade.

Blinis and Cristal served, the end.

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 11, 2009) -RML - News; "Rusoro" or "RML") is pleased to report that the Company has received the exploitation permit from the Ministry of Basic Industry and Mines (MIBAM) to begin mining at the Increible 6 gold deposit in the Bolivar State mining region in south eastern Venezuela. The Increible 6 is located approximately eight kilometres from the Company's Choco 10 Mine and Mill where ore from the Increible 6 will be processed.

The permit was duly issued to the Corporacion Venezolana de Guayana (CVG) the governmental entity which is the legal holder of the Increible 6 mineral title. General Mining de Guayana, a 100% RML owned Venezuelan subsidiary, has a leasing contract with the CVG for 20 years from the date of the exploitation permit and is legally entitled, as formal leaseholder, to perform all the activities authorized by the permit. It is the only exploitation permit approved this year in the Venezuelan mining sector. Rusoro Mining Ltd., (TSX VENTURE:

The Certificate of Exploitation was published in Venezuela's Official Gazette on September 9th, 2009. With this Exploitation Certificate the Company can now complete the final step required for the start of mining which is the receipt of the Permit to Affect Natural Resources from the Ministry of the Environment. The permitting process remains on track for production from Increible 6 in 2009.

Rusoro's 100% owned Increible 6 deposit is host to 1,587,000 ounces indicated (23.5 Mt @ 2.11g/t Au) and 1,100,000 ounces inferred (17.5 Mt @ 1.95g/t Au) (see News Release - Nov. 15, 2007), which Rusoro has advanced through discovery, delineation and now development. The resource estimates for Increible 6 are detailed in a technical report dated November 14, 2007, revised and updated February 14, 2008, titled "Technical Report on the Increible 6 Property, Bolivar State, Venezuela".

Increible 6, along with Choco 10, was the subject of a scoping study (PA), which highlighted the production expansion alternatives for the future (see News Release - May 19, 2009). The positive PA was completed by Micon International Limited, and evaluated the viability of a major expansion at the Choco Mine and Mill and which incorporated the nearby Increible 6 gold deposit. The PA is detailed in a report dated June 2, 2009 and titled "Technical Report on the Preliminary Assessment of the Expansion of Production at Choco 10, Bolivar State, Venezuela". The PA outlined favourable economics for a significant expansion from 135,000 oz Au/yr (2009 guidance) to over 500,000 oz Au/yr at a cash cost of US$331/oz Au over the life of mine (LOM). The PA is preliminary in nature, and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary assessment will be realized. See news release (May 19, 2009) for a summary of the basis for the PA and a listing of the qualifications and assumptions made by the qualified persons.

"Psst! Wanna buy a Venezuelan gold backed dollar bond, guv?"

In Venezuela, there is mucho talk from mucho places about how the goverment is setting itself up to raise cash by selling (or attempting to sell) a new swathe of bonds to a willing world. This article in Bloomberg outlines the bureaucratic nuts'n'bolts filings that have taken place recently. Most intriguing are the manifold rumours swirling around about gold-backed bonds being emitted by CVG. There is a lot of confusion and the story is by far from definitive yet, but this (as far as I can work out) is the general scenario:

1) CVG is a quasi-state run company that operates heavy industry in the South of the country

2) The idea is for CVG to raise up to U$6Bn on dollar denominated bonds that will be backed up by gold production in the years to come.

3) Much the same way as the previous years' PDVSA bonds emissions, the bonds will be offered to Venezuelans via the private banking system. Citizens can pay for the dollar bonds using Bolivares Fuertes (VEF), probably paying a significant premium to the official 2.15/U$1 rate.

If it happens this way, the bonds will be wildly and incredibly popular with the local citizens. Even if the government makes people pay 3.0 for every bond-dollar, it's a big difference to the 6.50/6.90 spread currently offered by the parallel market. Or put theoretically:

• You buy a $1,000 dollar bond using VEF3,000
• The next day you sell that bond back to the banks for, let's say a 10% hairut. The bank gives you U$900.
• You run down the street and buy VEF5,850 with your dollars.

Now for sure the scenario isn't as smooth as that, but the theory will hold true even if the bank takes a more probable 30% haircut on the bonds (i.e. gives you U$700) and even if the parallel rate drops to VEF6.0 = U$1 (you finish with VEF4,200, which is still a nice day's work).

The question will then be "What do the local banks do with all their CVG dollar bonds?". These will be rather....hmm, how can we say this diplomatially...rather dubious financial devices in the end. Backing a dollar bond with revenue from gold that is still underground and mixed up in its mineral rock is a bit of a stretch, especially when you consider the dog's dinner that CVG has made of its non-production around the KM88 region so far this....well, this century, basically. Then there's the inflation in Venezuela and the way the local currency is fading against the dollar. A large lump of dollar debt may become rather difficult for CVG to service in the medium term and the local banks know it. They won't want to hold a stack of CVG dolalr bond paper in their safes, whatever nominal asset value may be printed on them

So Venezuelan banks will be keen to punt plenty of this paper on to other people. AND THAT'S WHERE YOU COME IN, GRINGOS! If all the above does come to pass as has been suggested by the Veenezuelan financial jungledrums, the world financial community will certainly get the "wonderful opportunity" to invest in "gold-backed dollar bonds" from Venezuela "at a considerable and attractive discount to face value".

My advice is that you should avoid such paper like the plague, as the buck has to stop somewhere. If...

• Venezuela is happy with its shiny new U$6bn in funds, and...
• Locals are happy to have made some coin from a quick flip, and....
• Venezuelan banks are happy to have made coin by punting the bnods off to foreign concerns...

...there has to be someone who pays for the party. Look in the mirror, blue-eyed-whitey. If all this happens, Venezuelan banks will be keen to offer any sort of arbitrage over the haircut offered to locals, so if you get the "$1,000 worth of dollar bonds back up by GOLD! for just $710" pitch, please don't go there.

However there is another side to all this. The Venezuelan government needs the cash, so it'll be keen to make this happen. So it must appease the local banks and make the deal profitable one for them, because otherwise it's not going to happen and Hugo&Co won't get their hands on the funds they seem to need (and with more than a little urgency, I gather). Therefore if the bonds deal doen't go ahead, the flipside is that Venezuela ill have to do something quick to shore up its finances. This mean...yep you guessed it...the deval. Thus watching the parallel market in the days and weeks to come will give you a very good idea of whether the government bonds deals will happen and, more importantly, whether they will be successful. Here's what the exchange rate looks like right now.


DYODD.