Deciding to hang tough and hopefully reap from benefits despite Venezuela's increasingly hostile foreign business climate, Russian-Canadian junior Rusoro Mining agreed to buy U.S. silver miner Hecla's La Camorra unit in a $25 million cash and stock deal.

As Venezuelan Minister of Basic Industries of Mining Rodolfo Sanz yet against raised the possibility of rescinding the La Camorra concession this week, Hecla announced it would sell its Venezuelan subsidiaries to Rusoro for $20 million in cash and 4,273,504 shares of Rusoro common stock.

In a statement, Hecla President and CEO Phil Baker said, The sale of our Venezuelan properties is part of our strategy towards reducing the financing put in place to acquire Green's Creek. Prior to this transaction, Hecla repatriated approximately $39 million in cash that generated a $14 million foreign exchange loss. The transaction generates immediate cash from both the sale of the assets and the repatriation of $25 million of our cash from our Venezuelan subsidiaries.

Since Hecla carries the Venezuelan properties at a book value of $39 million, the transaction is expected to result in a pre-tax loss on the sale in the range of $10 million to $12 million. The $14 million foreign exchange loss will be reported in second quarter results.

In a news release Thursday, Rusoro said that as a result of the Hecla -Venezuela acquisition, the second tranche of Rusoro's syndicated US$80 million financing led by Peter Hambro Mining Plc in the amount of US$52 million has been realized.

Rusoro CEO Andrew Agape said the acquisition allows us to target an annual production rate of 220,000 ounces per year by the end of 2008. We have received strong in-country support for this acquisition and we look forward to employing our Venezuela expertise to re-energize the Hecla-Venezuela assets for the benefit of our shareholders and the local communities.

Rusoro will gain an 83% increase in gold production to a total of 220,000 ounces annually.  The company bought Gold Fields' Venezuelan assets, including the Choco 10 mine, last October.  Hecla's La Camorra mill facility is located two kilometers from Rusoro's San Rafael/El Placer deposits and 40km from Rusoro's Ceiba deposit. The La Camorra mill has availability capacity to treat the ore from both project sites, which may eliminate the need to update and expand Rusoro's Emilia mill.

Meanwhile Hecla's Isidora Mine is located 5 km from Rusoro's Choco 10 Mine.

Both parties said they anticipate that the La Camorra mill and concession may revert to the Venezuelan State on or about January 1, 2009. Venezuelan President Hugo Chavez has been on an expropriation spree for several years.  The Venezuelan Government announced on June 3, 2008, that it would mediate between workers and Hecla management in a dispute over working conditions at the Isadora gold mine.

Lately, when the Chavez Government begins mediation, it's a good bet that a foreign corporation owning that Venezuelan operation will find itself a target for expropriation. Meanwhile, Reuters has reported that a new Mining Law awaiting approval in Venezuela's National Assembly will mandate that private companies operating in the mining sector accept new terms, including the formation of joint companies with majority state ownerships.

However, Rusoro said it is in discussions with the Venezuelan government to explore opportunities with Minerven and MIBAM to form a joint venture regarding the La Camorra and Block B- Isidora assets.

The sale of the La Camorra unit will reduce Hecla's gold production this year to 70,000 ounces as compared to the earlier guidance of 115,000 ounces with the majority of that production from the Green's Creek mine in Alaska. Baker said La Camorra only contributed 3% of Hecla's gross profit.