Exhibit 4.6


 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and
  Nine Months Period ended September 30, 2008

  December 1,
  2008

  	
   

  	
  

  



 


General


 


This Management’s
Discussion and Analysis (“MD&A”) supplements but does not form part of the
unaudited interim consolidated financial statements of the Company for the
three and nine months ended September 30, 2008.  The following information should be read in
conjunction with the September 30, 2008 unaudited interim consolidated
financial statements as well as the annual audited consolidated financial
statements of the Company and the related annual MD&A for the year ended December 31,
2007.  The preparation of financial data
is in accordance with Canadian generally accepted accounting principles (“GAAP”)
and all figures are reported in United States dollars except as otherwise
stated.  The Company’s public filings are
available on SEDAR at www.sedar.com.


 


Special
Note Regarding Forward Looking Statements


 


Certain statements
included or incorporated by reference in this Management Discussion and
Analysis, including information as to the future financial or operating
performance of the Company, its subsidiaries and its projects, constitute
forward-looking statements.  The words “believe,”
“expect,” “anticipate,” “contemplate,” “target,” “plan,” “intends,” “continue,”
“budget,” “estimate,” “may,” “schedule,” and similar expressions identify
forward-looking statements. 
Forward-looking statements include, among other things, statements
regarding targets, estimates and assumptions in respect of gold production and
prices, operating costs, results and capital expenditures, mineral reserves and
mineral resources and anticipated grades and recovery rates.  Forward-looking statements are necessarily
based upon a number of estimates and assumptions that, while considered
reasonable by the Company, are inherently subject to significant business,
economic, competitive, political and social uncertainties and contingencies.
Many factors could cause the Company’s actual results to differ materially from
those expressed or implied in any forward-looking statements made by, or on
behalf of, the Company.  Such factors
include, among others, risks relating to additional funding requirements,
reserve and resource estimates, gold prices, exploration, development and
operating risks, illegal miners, political and foreign risk, uninsurable risks,
competition, limited mining operations, production risks, environmental
regulation and liability, government regulation, currency fluctuations, recent
losses and write-downs and dependence on key employees.  See “Risk and Uncertainties” section of this
Management Discussion and Analysis. Due to risks and uncertainties, including
the risks and uncertainties identified above, actual events may differ
materially from current expectations. 
Investors are cautioned that forward-looking statements are not
guarantees of future performance and, accordingly, investors are cautioned not
to put undue reliance on forward-looking statements due to the inherent
uncertainty therein.  Forward-looking
statements are made as of the date of this Management Discussion and Analysis
and the Company disclaims any intent or obligation to update publicly such
forward-looking statements, whether as a result of new information, future
events or results or otherwise.


 


Business
of the Company


 


The Company has two
business segments: i) exploration and development of gold mineral properties
and ii) the extraction, processing and sale of gold ore.  The Company’s business operations are in
Venezuela.


 


1055 Dunsmuir Street, Suite
2164, Four Bentall Centre, PO Box 49132


Vancouver, BC   V7X 1B1 - Tel:  604-632-4044 ·
Fax:  604-632-4045


www.rusoro.com


 

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and
  Nine Months Period ended September 30, 2008

  December 1,
  2008

  	
   

  	
  

  



 


Corporate
Development Highlights during 2008


 


·      On
June 10, 2008, the Company closed an $80 million syndicate financing led
by Peter Hambro Mining Plc. (the “Hambro Financing”). The proceeds were raised
for asset acquisitions and for corporate development projects.


 


·      On
July 4, 2008 the Company entered into an agreement with the Venezuelan
Ministry of Mines and Basic Industries (“MIBAM”) to establish a joint venture
(the “Mixed Enterprise”) to carry on with gold exploration, development and
mining of the Hecla-Venezuela assets. 
The Mixed Enterprise will be owned 50% by the Company and 50% by Empresa
Basica Minera Nacional (“EMN”), a company owned by MIBAM.  The Mixed Enterprise is expected to be
created within 6 months of the date of the agreement with MIBAM.  None of the Company’s existing assets, such
as the Choco 10 mine, are to be contributed to the Mixed Enterprise.


 


·      On
July 8, 2008, the Company closed the acquisition of 100% of the
outstanding shares of El Callao Gold Mining Ltd. and Drake-Bering Holdings B.V.
including their wholly-owned subsidiaries Minera Hecla Venezolana, C.A. (“Minera
Hecla”) and El Callao Gold Mining Company de Venezuela, SCS (“El Callao Gold
Mining”) (the “Hecla-Venezuela Acquisition”).


 


·      On
August 11, 2008 the Company re-initiated production from underground at
Isidora mine, with a production of high-grade ore grading in excess of 30 g/t.


 


·      On
September 5, 2008, the Company announced that it had formally completed
agreements with MIBAM to custom mill ore from various CVG Minerven, C.A. (“CVG
Minerven”) operations in Venezuela.


 


·      On
November 3, 2008, the Company announced that it had received an updated
resource estimate for the San Rafael/El Placer Project (SREP) and the Days
Vein, located in the El Dorado District, Venezuela. The updated SREP indicated resource (639,000t
@ 19.41g/t Au) contained ounces decreased by 21% while
the updated inferred resource ounces (703,000t @ 23.16g/t Au) increased by 42%
(+156,000 ounces (“oz”)). A significant increase in grade for both categories
(17% for the Indicated and 47% for the Inferred) was also documented in the
updated resource estimate. For the Days Vein the updated inferred ounces
(209,000t @ 5.50g/t Au) increased by 2% with a 143% increase in grade.


 


2

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and
  Nine Months Period ended September 30, 2008

  December 1,
  2008

  	
   

  	
  

  



 


Summary of Mining Operations


 


Choco 10 Mine


 


The Company purchased
the operating Choco 10 gold mine in November 2007.  The mine is located in the El Callao
district, which is within 10 km of the Company’s Increíble 6 project.  None of the Company’s gold production is
hedged.  Key mine-operating statistics
are as follows:


 


	
   

  	
   

  	
  Q3 2008

  9 months

  	
   

  	
  Q3 2007

  9 months

  	
   

  	
  Q3 2008

  3 months

  	
   

  	
  Q3 2007

  3 months

  	
   

  
	
  Gold production (ounces)

  	
   

  	
  72,184

  	
   

  	
  —

  	
   

  	
  22,082

  	
   

  	
  —

  	
   

  
	
  Monthly average gold
  production (ounces)

  	
   

  	
  8,020

  	
   

  	
  —

  	
   

  	
  7,361

  	
   

  	
  —

  	
   

  
	
  Gold sold (ounces)

  	
   

  	
  74,757

  	
   

  	
  —

  	
   

  	
  21,755

  	
   

  	
  —

  	
   

  
	
  Total cash costs per ounce
  (1)

  	
   

  	
  658

  	
   

  	
  —

  	
   

  	
  713

  	
   

  	
  —

  	
   

  
	
  Total cash cost per ounce in
  Venezuelan Bolivars(2)

  	
   

  	
  2,556

  	
   

  	
  —

  	
   

  	
  2,617

  	
   

  	
  —

  	
   

  
	
  Avg. official foreign
  exchange rate (bolivars to U.S. dollars)

  	
   

  	
  2.15

  	
   

  	
  —

  	
   

  	
  2.15

  	
   

  	
  —

  	
   

  
	
  Avg. parallel foreign
  exchange rate (bolivars to U.S. dollars)

  	
   

  	
  4.09

  	
   

  	
  —

  	
   

  	
  3.75

  	
   

  	
  —

  	
   

  
	
  Avg. realized gold price (3)

  	
   

  	
  663

  	
   

  	
  —

  	
   

  	
  676

  	
   

  	
  —

  	
   

  
	
  Avg. spot gold price

  	
   

  	
  897

  	
   

  	
  —

  	
   

  	
  825

  	
   

  	
  —

  	
   

  
	
  Monthly avg. ore mined
  (tonnes)

  	
   

  	
  184,015

  	
   

  	
  —

  	
   

  	
  189,824

  	
   

  	
  —

  	
   

  
	
  Monthly avg. waste mined
  (tonnes)

  	
   

  	
  539,506

  	
   

  	
  —

  	
   

  	
  504,356

  	
   

  	
  —

  	
   

  
	
  Strip ratio (waste: ore)

  	
   

  	
  2.93

  	
   

  	
  —

  	
   

  	
  2.65

  	
   

  	
  —

  	
   

  
	
  Monthly avg. ore processed
  (tonnes)

  	
   

  	
  201,332

  	
   

  	
  —

  	
   

  	
  189,028

  	
   

  	
  —

  	
   

  
	
  Monthly avg. grade of ore
  processed (g/t)

  	
   

  	
  1.56

  	
   

  	
  —

  	
   

  	
  1.92

  	
   

  	
  —

  	
   

  
	
  Monthly avg. recovery rate (%)

  	
   

  	
  87

  	
   

  	
  —

  	
   

  	
  87

  	
   

  	
  —

  	
   

  
	
  Monthly avg. gold recovered
  (ounces)

  	
   

  	
  8,785

  	
   

  	
  —

  	
   

  	
  10,152

  	
   

  	
  —

  	
   

  



 






(1)   Cash costs
increased from $499/oz in Q1 2008 to $769/oz in Q2 2008 and decreased to
$713/oz in Q3 2008. The main reason for the increase in the cash cost per ounce
in Q2 and Q3 2008 as compared to Q1 2008 is due to the effect of the
appreciation of the Venezuela Bolivar (“Bs”) against the U.S. dollar, from an
average of 4.98 Bs to 1 U.S. dollar in Q1 2008 to an average of 3.51 Bs to
1 U.S. dollar in Q2 2008 and an average of 3.75 Bs to 1 U.S. dollar in Q3 2008.
The parallel market exchange rate is used to convert the Bs cash cost per ounce
to U.S. dollar instead of the official exchange rate.


 


(2)   Cash cost per
ounce in Bs remained at similar level between Q3, Q2 and Q1 2008 at Bs 2,617,
Bs 2,649 and Bs 2,461 per ounce respectively. 
A reasonably steady Bs cash cost per ounce versus an increasing U.S.
dollar cash cost per ounce during the 9 months period ended September 30
2008 is due to the effect of the appreciation of the Bs against the U.S.
dollar.


 


(3)   Average realized
gold price is impacted by the discount as indicated in “Venezuelan Exchange
Controls and Revenue” and the timing of gold sales.


 


Hecla
Venezuela Acquisition


 


On July 8, 2008, the
Company closed the Hecla-Venezuela Acquisition for consideration of $20 million
paid in cash and $5 million by the issuance of 4,273,504 common shares of the
Company.  Acquisition costs amounted to
$1.2 million. In addition the Company paid $0.9 million for the working capital
of the Companies acquired in the Hecla-Venezuela Acquisition.


 


3

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and
  Nine Months Period ended September 30, 2008

  December 1,
  2008

  	
   

  	
  

  



 


On July 4, 2008,
concurrently with the Hecla-Venezuela Acquisition, the Company entered into an
agreement with MIBAM to create the Mixed Enterprise within six months of the
date of this agreement, to carry on with gold exploration, development and
mining of the main assets acquired in the Hecla-Venezuela Acquisition which are
the Block B — Isidora mining leases, which includes the Isidora mine, and the
La Camorra mill facility in Bolivar State, Venezuela. Once formed, the Mixed
Enterprise will be 50% owned by the Company and 50% owned by Empresa Basica
Minera Nacional (“EMN”), which is a company owned indirectly by MIBAM.  As part of the agreement with MIBAM, on August 6,
2008, the Company paid $5 million to CVG Minerven which owns 100% of EMN.


 


Additionally, the
Company is to provide a pledge in favour of EMN on 50% of the Company’s
interest in Minera Hecla and El Callao Gold Mining until the Mixed Enterprise
is created.  For the period ended September 30,
2008, the Company has not consolidated the companies acquired in the
Hecla-Venezuela Acquisition. For accounting purposes, the Company’s management
has concluded that the Company does not currently have a continuing power to
determine the strategic, operating, investing and financing polices of the
companies acquired in the Hecla-Venezuela Acquisition until such time that the
Mixed Enterprise is formed. Management has made this determination as the
approval granted by CVG Minerven and MIBAM to transfer the mining leases, as a
result of the change in control of the companies acquired in the
Hecla-Venezuela Acquisition, together with ownership of the  mining rights, contracts and assets directly
affected by the mining leases are both subject to the creation of the Mixed
Enterprise in the period required in the agreement entered with MIBAM.
Therefore until such time that the Mixed Enterprise has been established the
Company has determined that it is not appropriate to consolidate the companies
acquired in the Hecla-Venezuela Acquisition. The agreement to create the Mixed
Enterprise is in the final stages of being completed and management expects
this agreement will be completed in December of 2008.


 


Minera Hecla resumed its
mining operations on August 11, 2008. Key operating statistics from that
date until September 30, 2008 based on a 100% interest are as follows:


 


	
  Gold production (ounces)

  	
   

  	
  4,722

  	
   

  
	
  Gold sold (ounces)

  	
   

  	
  2,602

  	
   

  
	
  Avg. realized gold price

  	
   

  	
  666

  	
   

  
	
  Total cash costs per ounce

  	
   

  	
  247

  	
   

  
	
  Total ore mined (tonnes)

  	
   

  	
  13,948

  	
   

  
	
  Total waste mined (tonnes)

  	
   

  	
  3,980

  	
   

  
	
  Monthly avg. grade of ore
  processed (g/t)

  	
   

  	
  33.41

  	
   

  
	
  Total ore processed (tonnes)

  	
   

  	
  4,396

  	
   

  
	
  Monthly avg. recovery rate (%)

  	
   

  	
  90

  	
   

  



 


For the period ended September 30, 2008 the
Company has not consolidated the companies acquired in the Hecla-Venezuela
Acquisition, including the operations of the Isidora mine. The combined cash
cost per ounce of the Isidora and Choco 10 mines for the three months period
ended September 30 2008 would have resulted in a weighted average cash
cost per ounce of $631.


 


4

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and
  Nine Months Period ended September 30, 2008

  December 1,
  2008

  	
   

  	
  

  



 


Exploration and Development Properties


 


El Callao District


 


Choco
Project


 


Drilling completed on
the Choco project included grade control, resource definition and oxide
expansion drilling for a total of 68,311 metres in the nine months ended September 30,
2008 and 12,078 metres in the three months ended September 30, 2008.  The focus of drilling this period was on the
existing mine concession area where resource-to-reserve conversion was required
in saprolite ore.


 


A series of updated
internal resource and reserve estimates continue to be completed during 2008
and are being included in technical/economic reports ranging from scoping to
feasibility studies designed to determine the preferred path for expanding
and/or extending the existing production and/or developing additional
stand-alone mining operations.


 


In May 2008, the
Company started a scoping study for the Choco 10 mine and surrounding deposits
in the El Callao district.  Information
derived from this study will be used to establish various working parameters
and assumptions to be used in a definitive feasibility study.  The scoping study advanced during Q3 2008 and
is now expected to be completed during Q4 2008. 
The data and conclusions of the scoping study will form the basis for a
feasibility study, which is expected to be completed during 2009.  The studies will focus on establishing the
viability of a planned significant gold production expansion at the Choco 10
mill and mine, including the adjacent Increible 6 property.


 


The current 43-101
compliant gold ounces at the Choco project are 1.66 Moz Au proven and
probable reserves (15.4 Mt grading 3.4 g/t), 4.45 Moz Au measured and
indicated (56.1 Mt @ 2.46 g/t)) and 2.87 Moz Au (40.8 Mt @ 2.20
g/t) inferred.


 


Two main goals exist for
this resource and reserve process:  a)
resource and reserve conversion at Choco project to support the oxide strategy
(mining and processing of oxide ore) for 2-3 years, b) resource and reserve
conversion to support expanded production capacity (3-4 years out) and a
Bankable Feasibility Study.


 


Increible
6 Project


 


The Increible 6 project
is located in the El Callao district, 10 km northeast of the Choco mill.  Previous work at Increible 6, including
geochemistry, geophysics trenching, and drilling has outlined a series of gold
targets.  The main gold zones (Culebra,
Cristina, Elisa, and Olga) are contained within a 4.5 km long and 1.0 km wide
east-west trending shear zone, which crosses the central portion of the project
and contains 1.59 Moz Au indicated (23.45 Mt grading 2.11 g/t)
and 1.1 Moz Au inferred (17.5 Mt grading 1.95 g/t).


 


Exploration drilling
during the nine months ended September 30, 2008 totalled 27,881 metres and
for the three months ended September 30, 2008 totalled zero metres.  Drilling during the nine months ending September 30,
2008 included 15,600 metres of RC drilling (102 holes) and 12,281 metres of
diamond drilling (73 holes).  The drop in
drilling metres during Q3 2008 reflects a pause in drilling as the updated
resource estimate is completed.


 


The 2008 drilling
targeted four main objectives:


 


1)     detailed drilling of saprolite portions of main zones
for final resource estimations 

(Elisa and Ingrid zones);


 


2)     follow-up drilling on positive results
(Olga/Cristina/El Buzo);


 


3)     first pass drilling on new areas (Payara);


 


5

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and
  Nine Months Period ended September 30, 2008

  December 1,
  2008

  	
   

  	
  

  



 


4)     condemnation drilling of proposed waste dump.


 


Exploration
and Development Properties


 


The infill program on
the near surface material for the main Elisa and Ingrid structures was designed
to provide additional information for the detailed geological model for the
development and production scheduled for Q1 2009.  All zones remain open.  The oxide portion of Increible 6 is included
into the Choco 10 mine oxide strategy for near term exploitation.


 


El Dorado District


 


The Company’s mineral
titles in the El Dorado district are comprised of Emilia, Emilia II, El Placer,
San Rafael, Ceiba, and others.  This
block of claims has a history of past gold production and contains the company’s
Emilia mill, which has been in the process of being upgraded since September 2006.


 


Updated 43-101 compliant
resource estimates for the SREP project consists of an indicated resource of
399,000 oz Au (0.64 Mt grading 19.4 g/t) and an additional 523,000 oz Au
in inferred resources (0.7 Mt grading 23.1 g/t).  Updated 43-101 compliant resource estimates
for Days Vein on the Emilia concession consist of 37,000 oz of inferred
resources (209,000 t at 5.5 g/t Au). The total Emilia project, which includes
Days, contains in total 83,000 oz Au in inferred resources (0.37 Mt
grading 7 g/t).


 


During Q1 2008, a total
of 7,574 metres in 24 drill holes was completed on the main trend of SREP
project and 4,533 metres in 39 drill holes at the Days Zone on the Emilia
concession.  Drilling on the SREP and
Days Zone during Q2 2008 totalled 2,598 metres. 
No drilling was completed during Q3 2008 as all previous exploration and
drilling data was compiled and an updated resource estimate initiated.


 


Development activities
continue at Emilia related to the expansion and upgrading of the Emilia mill
and completion of the Alvarez ramp at SREP in order to start the exploitation
of the mine in 2009.  The overall
objective continues to be the expansion and upgrading the El Dorado resource in
order to complete the studies required to evaluate the various development
possibilities in the district.


 


Cuyuni District


 


Valle
Hondo


 


The 13,000 ha Valle
Hondo project is located 40 km east of the Company’s Emilia mill.  Drilling on the Valle Hondo project in the
nine months ending September 30, 2008, totalled 16,316 metres all
completed on the Arenales anomaly.  The
drilling was highly successful in intersecting numerous high grade gold
mineralized structures.  Drilling during
the three months ended September 30, 2008, consisted of 3,229 metres
(1,822 metres of RC drilling on the Arenales Anomaly and 1,407 metres of
diamond drilling on the Apanao Zone).


 


Previous drilling
(13,000 metres in 114 diamond drill holes) dated from 1996 and 1997 was
completed on the Apanao deposit, located 8 km east of Arenales.  Work during the period at Apanao also
included further road access and camp upgrades.


 


The current 43-101
resource estimation for the Apanao deposit currently stands at 103,000 oz Au
(3.5 Mt @ 0.92 g/t) indicated and 1.34 Moz Au (47 Mt @
0.89 g/t) inferred.


 


The overall objective
continues to be the expansion and upgrading the Apanao gold resource and the
definition of additional resources (primary target at Arenales) from within the
project.  A scoping study designed to
model the development alternatives at the Valle Hondo project is scheduled to
commence in Q1 2009.  The goal is to
outline sufficient resources to allow the modelling of potential gold
production at Valle Hondo for a range of operations of differing sizes.


 


6

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and
  Nine Months Period ended September 30, 2008

  December 1,
  2008

  	
   

  	
  

  



 


Km88 District


 


Yuruan


 


The Yuruan Concession is
contiguous with several other mineral titles, all 100% controlled by the
Company, which total more than 11,000 ha. 
Drilling during the nine months ended September 30, 2008, the
metres totalled 15,711 and for the three months ended September 30, 2008,
1,035 metres.


 


Drilling to date has
outlined a series of gold mineralized zones contained within a large
regional-scale structural trend, which cross the Yuruan concession and extend
on the adjacent mineral titles controlled by the Company.  The drilling in Q3 2008 was primarily follow
up drilling on previously defined high-grade intercepts.  No additional drilling is planned for Q4
2008.  Once all results are received, an
updated interpretation of the mineralized structures outlined to date will be
completed.  The objective of the drilling
program in the area is to evaluate the possibility of outlining additional gold
resources for the Emilia mill and/or the possibility of a “stand alone”
project.


 


Other
Bolivar State Projects


 


The Increible 14 project
is located 15 km northwest of the Company’s Choco 10 mine.  A total of 8,072 meters of diamond
drilling was completed during the nine months ended September 30, 2008 and
zero metres of drilling was completed during the three months ended September 30,
2008. This work tested all of the principal targets within the project.  Some results are pending and once received a
detailed interpretation of the mineralized structure intersected to date will
be completed. No drilling is planned for Q4 2008.  Future drilling will be evaluated in
conjunction with a series of regional exploration targets within the El Callao
district.


 


Minoro


 


In Honduras, the Company
holds the mineral rights to the 10,000 ha Minoro project.  No fieldwork was completed in Q3 2008.


 


Selected
Quarterly Information


 


	
   

  	
   

  	
  Q3 2008

  	
   

  	
  Q2 2008

  	
   

  	
  Q1 2008

  	
   

  	
  Q4 2007

  	
   

  	
  Q3 2007

  	
   

  	
  Q2 2007

  	
   

  	
  Q1 2007

  	
   

  	
  Q4 2006

  	
   

  
	
  Revenue

  	
   

  	
  14,717

  	
   

  	
  23,152

  	
   

  	
  11,688

  	
   

  	
  3,495

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Net Loss

  	
   

  	
  (12,490

  	
  )

  	
  (36,818

  	
  )

  	
  (17,263

  	
  )

  	
  (12,980

  	
  )

  	
  (11,187

  	
  )

  	
  (4,167

  	
  )

  	
  (3,910

  	
  )

  	
  (25,362

  	
  )

  
	
  Loss per Share

  	
   

  	
  (0.03

  	
  )

  	
  (0.10

  	
  )

  	
  (0.04

  	
  )

  	
  (0.06

  	
  )

  	
  (0.08

  	
  )

  	
  (0.03

  	
  )

  	
  (0.03

  	
  )

  	
  (0.85

  	
  )

  



 


Note:  in thousands of $
except per share data


 


The following discussion
highlights some of the significant factors that had impact on the results in
the eight most recently completed quarters ended September 30, 2008.


 


7














 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008

  December 1, 2008 

  	
   

  



 


During the
third quarter of 2008, revenue decreased by $8.4 million. This is due to an
increase in gold inventories between quarters, the fact that Q2 revenue was
impacted positively by a reduction in gold inventories from the end of Q1 to
the end of Q2, and a Q3 production shortfall of 2,980 ounces versus Q2, from
25,062 ounces produced in Q2 to 22,082 in Q3 2008. Net loss decreased by
approximately $24.3 million over the previous quarter. This was partially due
to a decrease in stock-based compensation expense of $16.7 million versus the
previous quarter, as Q2 was impacted by the issuance of fully vested stock options
and re-pricing of certain stock options. 
In addition, the Company had a foreign exchange gain of
$6.8 million in Q3 compare to a foreign exchange loss of $3.5 million in
Q2, which was mainly due to the impact of the depreciation of the Bolivar in Q3
2008 on the future income tax liability of the Company’s integrated foreign
operations in Venezuela. Interest expense on long-term debt increased $2.5
million as the debt was outstanding for the entire Q3 as it was issued in June 2008.  Other reason for the decrease in net loss
during Q3 was a decrease in amortization expense of $3.3 million and a decrease
of $5.3 million in cost of sales.


 


During the
second quarter of 2008, revenue increased by $11.5 million over the previous
quarter due to a reduction of gold inventories between quarters.  Net loss increased by $19.6 million from the
previous quarter principally due to an increase of stock-based compensation
expense of $16.5 million for the issuance and re-pricing of stock options
during the second quarter of 2008, and due to a lower foreign exchange loss
recorded during the second quarter versus previous quarter.  The foreign exchange loss arose on the
appreciation of the future income tax liability of the Company’s integrated
foreign operation in Venezuela as a result of the appreciation of the Bolivar
versus the U.S. dollar.  During the
second quarter the appreciation of the Bolivar was not as strong as in the
first quarter of 2008.


 


During the
first quarter of 2008, revenue increased by $8.2 million over the previous
quarter as in the fourth quarter of 2007 only one month of revenue was recorded
as Choco 10 mine had been recently acquired. 
Net loss increased by $4.3 million from the prior quarter due
principally to foreign exchange losses from the Company’s integrated foreign
operations as a result of the appreciation of the Venezuela Bolivar against the
U.S. dollar during the quarter.


 


During the
fourth quarter of 2007, revenue increased by $3.5 million over the previous
quarter due to the acquisition of Choco 10 mine on December 3, 2007.  Before this time, the Company had no revenue
as it did not have a gold producing mine. 
Net loss increased $1.8 million over the previous quarter.


 


During the
third quarter of 2007, net loss increased by $7 million from the prior quarter
as a result of $4 million increase in foreign exchange loss and the
remaining $3 million mainly due to stock based compensation expense from the
issuance of 6.8 million stock options in September 2007.


 


There are no
major variances between the results of the second and first quarter of
2007.  Net loss increased by $0.3 million
in the second quarter of 2007 when compared to its previous quarter.


 


During the
first quarter of 2007, net loss decreased by $21.5 million when compared to the
fourth quarter of 2006, as in the latter the Company recorded stock-based
compensation expense for the amount of $7.8 million and a loss for
impairment of mineral properties of $13.9 million recorded in the fourth
quarter of 2006.


 


During the
fourth quarter of 2006, the Company completed a reverse take-over transaction
with Grupo Agapov Corp. and net loss increased by $22.4 million from the
previous quarter mainly as a result of recorded stock based compensation
expense of $7.8 million and impairment of mineral properties of $13.9
million.  The loss per share figures
reflect the share recapitalization upon the reverse take-over with Grupo Agapov
Corp.


 


8

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008

  December 1, 2008 

  	
   

  



 


Results of Operations for the Three and
Nine Months Ended September 30, 2008 Compared to the Three and Nine Months
Ended September 30, 2007


 


Revenue


 


Revenue from
gold sales during Q3 2008 totalled $14.7 million (2007 - $Nil) or 21,755 oz Au
(2007 – Nil) at an average gold price of $676/oz. Revenue for the nine months
ending September 30, 2008 was $49.6 million (2007 – $Nil) or 74,757 oz Au
(2007 – Nil) at an average gold price of $663/oz.


 


All of the
Company’s gold sales are recorded in Venezuela in Bs and translated to U.S.
dollars for financial reporting purposes using the average parallel exchange
rate for the reporting period.  In order
to maximize the bolivars received from gold sales, the Company is selling its
gold production to registered local purchasers in Venezuela at prices based on
the U.S. dollar spot price of gold, minus an average 19% discount, with
settlement in bolivars pegged to the parallel rate (as defined in Venezuelan
Exchange Controls and Revenue).  This is
more beneficial than exporting the gold at the spot price of gold and
collecting through the Central Bank of Venezuela (“CBV”) in bolivars at the
official rate of exchange.  As a result,
the Company’s reportable revenue and realized prices per ounce are below the
average U.S. dollar spot price of gold.


 


Cost of sales
during the nine months ended September 30, 2008, totalled $48.3 million
(2007 – $Nil).  The cost of sales in the
period reflects all components capitalized to inventory except for the
component of inventory cost relating to the amortization of property, plant and
equipment (“PP&E”), which is classified in the statement of operations
under “amortization”.  The amount
presented during the nine months ended September 30, 2008 in amortization
includes cost of inventory sold of $25.0 million (2007 – $Nil) related to the
amortization of PP&E used in the production process.


 


Cost of sales
includes an inventory impairment of $3.6 million during the nine months ended September 30,
2008 (2007 – $Nil) to adjust the carrying value of gold and gold in process
inventory to its net realizable value. 
The carrying value of gold and gold in process inventory includes the
amortization of PP&E. PP&E acquired with the Choco 10 mine on Q4 2007,
was measured and incorporated into the Company’s books at fair value.  Since then, the balance of PP&E has
increased significantly over the nine months ending September 30, 2008, as
a result of the appreciation of the Bolivar against the U.S. dollar with a
resulting significant impact on amortization and inventories.  During Q3 2008, cost of sales was
$18.4 million (2007 – $Nil) and amortization included $7.5 million (2007 –
$Nil) related to the amortization of PP&E related to production of
inventory.


 


Administration
expense for Q3 2008 was $4.1 million (2007 – $3.2 million). Stock-based
compensation expense decreased by $2.5 million which was offset by $1.3 million
of administrative expenses at the Choco 10 mine operation (which is not
included in the same period of the previous year as the Company did not receive
ownership of the Choco 10 mine until Q4 2007) and due to increased other
administrative costs as the Company transitioned from an exploration company to
an operating company. Administration expense for the nine months ended September 30,
2008 was $26.7 million (2007 - $8.4 million). Stock-based compensation expense
increased by $9.5 million, administrative expenses at the Choco 10 mine
operation were $4.0 million (which is not included in the same period of the
previous year as the Company did not receive ownership of the Choco 10 mine
until Q4 2007) and due to increased other administrative costs as the Company
transitioned from an exploration company to an operating company.


 


Consulting
expense for Q3 2008 was $1.6 million (2007 - $3.0 million). Stock-based
compensation expense decreased by $1.1 million which was the significant factor
in the decrease. Consulting expense for the nine months ended September 30,
2008 was $8.4 million (2007 - $5.1 million). Stock-based compensation increased
by $2.5 million which was the significant factor in the increase.


 


9

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008

  December 1, 2008 

  	
   

  



 


Foreign
exchange gain (loss) for Q3 2008 was $6.8 million (2007 – ($4.1 million)) The
gain in Q3 2008 is mainly due to the depreciation of the Bolivar in the quarter
which decreased the Bolivar-denominated future income tax liability of the
Company’s integrated foreign operations in Venezuela.  The foreign exchange loss for the nine months
ended September 30, 2008 of $4.1 million (2007 – $4.4 million) is mainly
due to the appreciation of the Bolivar in the nine months ended September 30,
2008 which increased the Bolivar-denominated future income tax liability of the
Company’s integrated foreign operations in Venezuela.


 


Interest
income during the periods reflects the interest earned on cash balances held
during the period.


 


Interest on
long-term debt for Q3 2008 was $3.2 million (2007 - $Nil) and for the nine
months ended September 30, 2008 was $3.9 million (2007 – $Nil). This is
the interest accrued on the Hambro Financing, which has a coupon of 10% per
annum and an effective annual interest rate of 18.5%.


 


Professional
fees during Q3 2008 was $0.3 million (2007 - $0.2 million) and for the nine
months ended September 30, 2008 was $1.3 million (2007 - $0.8 million) and
are mainly related to legal, tax, audit and accounting services provided in
relation to the Company being publicly traded and the Choco 10 and Isidora  mines.


 


Salaries
during Q3 2008 was $0.8 million (2007 – $0.6 million). Stock-based compensation
expense decreased by $0.1 million however this was offset by an increase in the
number of staff in the corporate office as a result of the growth of
operations. Salaries for the nine months ended September 30, 2008 was $3.3
million (2007 - $1.2 million). Stock-based compensation expense increased by
$0.9 million and the remaining increase is due to an increase in the number of
staff in the corporate head office as a result of the growth of operations.


 


Travel and
entertainment during Q3 2008 was $0.6 million (2007 – $0.6 million) and for the
nine months ended September 30, 2008 was $2.6 million (2007 – $0.9
million) due to the increase in travel between offices in Canada, Venezuela and
Russia as a result of the Company’s growth of operations in Venezuela.


 


Financial Position


 


Total assets
totalled $1.28 billion as at September 30, 2008 (December 31, 2007 –
$1.00 billion). Total assets primarily consisted of $956 million in PP&E (December 31,
2007 – $759 million), $230 million in mineral properties (December 31,
2007 – $190 million) and $20 million in cash (2007 – $31 million).   Most of the cash balance as at September 30,
2008, is held in U.S. dollars.  The
increase in total assets, PP&E and mineral properties is primarily the
result of the appreciation of the Venezuela Bolivar versus the U.S. dollar from
5.70 Bs to 1 U.S. dollar at December 31, 2007 to 4.50 Bs to 1 U.S. dollar
at September 30, 2008.  A large
majority of the assets are denominated in bolivars from the Company’s
self-sustaining foreign operations, Choco 10 mine, which according to the
Company’s accounting policy are translated from bolivars to U.S. dollars at the
prevailing market exchange rate at the balance sheet date.  The same applied to liabilities, such as
accounts payable and accrued liabilities of $39 million as at September 30,
2008 (December 31, 2007 – $21 million) and future income tax liability of
$337 million as at September 30, 2008 (December 31, 2007 – $277
million), as a majority of their increase is due to the appreciation of the
Bolivar versus the U.S. dollar.


 


Long-term
debt of $70.5 million (December 31, 2007 – $Nil) represents the balance of
the Hambro Financing reduced by financing costs and after segregating its
equity component attributable to the convertible option of the loan.  The debt is held in U.S. dollars and
repayable as indicated under the “Liquidity and Capital Resources” section of
this MD&A.


 


10

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008

  December 1, 2008 

  	
   

  



 


Liquidity and Capital Resources


 


The Company’s
cash position decreased from $31 million at December 31, 2007 to $20
million at September 30, 2008. This was due to a cash outflow from
operating activities of $14 million, a cash inflow from financing activities of
$74 million and a cash outflow from investing activities of $71 million.   The Company’s current assets excluding cash
less current liabilities decreased by $15.0 million, from $0.6 million as
at December 31, 2007 to negative $14.4 million as at September 30,
2008, due to increases in accounts payable and accrued liabilities and income
tax payable more than offsetting the increase in cash held as collateral,
receivables and inventories – materials. 
Financing activities included $75.3 million received from the
Hambro Financing. The Hambro financing principal of $80 million is repayable in
full in June 2010 and bears interest at 10% per annum with semi-annual
payments. Investing activities included $28 million related to the
Hecla-Venezuela Acquisition and payment under the commitment agreement to
create the Mixed Enterprise, $16.5 million of exploration expenditures and
$21.7 million of PP&E expenditures.


 


Venezuelan Exchange Controls and Revenue


 


In accordance
with the exchange control regulations in Venezuela, the CBV centralizes the
purchase and sale of foreign currency in the Country.  The current rate of exchange is currently
fixed at 2.15 per U.S. dollar.  The
Venezuelan government enacted the Criminal Exchange law that imposes strict
sanctions for the exchange of Venezuelan currency with other foreign currencies
through other than designated methods.


 


The exchange
regulations do not apply to certain securities, which are traded within
Venezuela and on recognized exchanges outside Venezuela.  Therefore, the purchase in one market and
sale in the other market of these dual listed securities provides an effective
parallel market for the Venezuelan currency. 
The Venezuelan government issues the majority of the securities that are
so traded. The parallel or market rate is volatile and the trend has been
consistently higher than the official rate.


 


Exports of
gold are subject to the exchange control regulations and although sales are
based on the U.S. dollar spot gold price at the time of delivery, payment is
received in Bs, with the U.S. dollar revenues converted to Bs by the CBV at the
official rate of 2.15 Bs to 1 U.S. dollar. 
With the parallel rate materially above the official rate, the Company
decided not to export its gold but rather to sell it domestically in Bs based
on the USD spot gold price minus an average 19% discount at the time of
delivery and payment is received in Bs at the parallel rate.  For financial reporting purposes, revenue for
the quarter is translated from Bs to U.S. dollars at the average parallel
exchange rate for the period.  The
Company does not convert the Bs revenue to U.S. dollars, rather the Bs are used
to fund ongoing operations and exploration in Venezuela.


 


Commitments and Contingencies


 


As part of
the Company’s normal course of business, the Company entered into arrangements
that will influence the Company’s future operations and liquidity, some of
which are already reflected as liabilities in the interim consolidated financial
statements at September 30, 2008. 
The principal commitments of the Company are debt repayments, asset
retirement obligations, service contracts with suppliers in relation to the
exploration and operation of its mineral properties and construction contracts,
among others.


 


11

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008

  December 1, 2008 

  	
   

  



 


Operating
Commitments are as follows:


 


At September 30,
2008, the Company is committed to payments under operating leases for premises,
vehicles and machinery and to payments under contracts for community relations,
security, computer maintenance, consulting and other services as follows:


 


	
   

  	
   

  	
  Related Party

  	
   

  	
  Non-Related Party

  	
   

  	
  Total

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  
	
  2008

  	
   

  	
  38,878

  	
   

  	
  296,313

  	
   

  	
  335,191

  	
   

  
	
  2009

  	
   

  	
  155,511

  	
   

  	
  103,704

  	
   

  	
  259,215

  	
   

  
	
  2010

  	
   

  	
  155,511

  	
   

  	
  73,655

  	
   

  	
  229,166

  	
   

  
	
  2011

  	
   

  	
  155,511

  	
   

  	
  73,655

  	
   

  	
  229,166

  	
   

  
	
  2012

  	
   

  	
  77,756

  	
   

  	
  73,655

  	
   

  	
  151,411

  	
   

  
	
  2013 and thereafter

  	
   

  	
  —

  	
   

  	
  153,449

  	
   

  	
  153,449

  	
   

  
	
   

  	
   

  	
  583,167

  	
   

  	
  774,431

  	
   

  	
  1,357,598

  	
   

  



 


The Company had the following commitments related to the creation of
the Mixed Enterprise:


 


1.               To
transfer to EMN certain mining rights owned by the Company, located in El
Dorado District, named: Belkis 1, Urupagua, Virginia 1, Virginia 2 and
Guaicamacuare.  These mining rights have
not been transferred as of September 30, 2008.


 


2.               To
transfer to a governmental entity to be determined by MIBAM a plant for the
treatment of diamonds which is currently owned by an officer, director and
major shareholder of the Company. The plant will need to be purchased by the
Company prior to the transfer. An independent valuation of the plant is
underway.


 


3.               During
a period of 18 months from entering the agreement, the Company has committed to
incur various social costs in the benefit of the communities around the
Hecla-Venezuela assets.  The total cost
to be incurred has not yet been determined by the Company.


 


Legal Contingencies


 


The Company
is involved in various claims and litigation arising in the normal course of
business.  While the outcome of these
matters is uncertain and there can be no assurance that such matters will be
resolved in the Company’s favor, the Company does not currently believe that
the outcome of adverse decisions in any pending or threatened proceedings
related to these and other matters or any amount which it may be required to
pay by reason thereof would have a material impact on its financial position,
results of operations or cash flows.


 


Off-Balance Sheet Arrangements


 


The Company
does not have any off-balance sheet arrangements.


 


Critical Accounting Estimates


 


Critical
accounting estimates are those estimates that have a high degree of uncertainty
and for which changes in those estimates could materially influence the Company’s
results.  Specific areas requiring the
use of estimates include the determination of depletion of reserves,
amortization provisions for plant and equipment, the estimated asset retirement
obligations and the input variables used to calculate stock-based compensation,
future tax asset valuation allowance, termination benefits, the estimation of
the fair value of liability and equity components of the Hambro Financing.  Actual results could differ from these estimates.


 


12

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008

  December 1, 2008 

  	
   

  



 


Related Party Transactions


 


In addition
to related party transactions and balances disclosed elsewhere are the
following related party transactions and balances:


 


·                  Included
in prepaid expenses and deposits is $41,373 (December 31, 2007: $41,373)
related to a security deposit for a lease entered into with a company
controlled by certain directors.


 


·                  Included
in amounts capitalized as mineral properties is $2,188,312 (December 31,
2007: $1,227,967) related to the provision of technical services and personnel
from companies which are controlled by certain directors and/or senior
management of the Company.


 


·                  Included
in long-term debt is financing costs of $96,570 (December 31, 2007: $Nil)
and included in other assets is acquisition costs of $115,263 (December 31,
2007: $Nil) related to the provision of legal services which were paid to a
company controlled by certain directors.


 


·                  Included
in administrative expenses is $441,461 (2007: $184,588) for the three-month
period and $857,551 (2007: $184,588) for the nine-month period ended September 30,
2008 related to the cost of running the Company’s Moscow office, these expenses
were paid to a company controlled by certain directors.


 


·                  Included
in consulting expenses is $448,013 (2007: $125,510) for the three-month period
and $1,062,057 (2007: $265,093) for the nine-month period ended September 30,
2008 related to consulting fees charged by certain directors and/or a company
controlled by certain directors in accordance with the terms of  consulting contracts that they have with the
Company.


 


·                  Included
in professional fees is $42,726 (2007: $26,501) for the three-month period and
$266,765 (2007: $41,878) for the nine-month period ended September 30,
2008 related to the provision of legal services which were paid to a company
controlled by certain directors.


 


·                  Included
in travel and entertainment expenses is $Nil (2007: $134,743) for the
three-month period and $364,781 (2007: $134,743) for the nine-month period
ended September 30, 2008 related to the provision of travel services which
have been supplied by a company which is owned by a director.


 


Related party transactions are recorded at the
exchange amount which is the consideration agreed to between the related
parties.


 


Disclosure of Outstanding Share Data


 


Authorized


 


·                  As
at December 1, 2008, September 30, 2008 and December 31, 2007,
there was an unlimited number of common shares outstanding without par value.


 


Issued and
Fully Paid Common Shares


 


·                  As
at December 1, 2008, 390,777,946 common shares were issued and outstanding,
(391,455,669 – September 30, 2008 and 386,835,106 – December 31,
2007).  The Company does not have shares
subject to escrow restrictions or pooling agreements.


 


13

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008

  December 1, 2008 

  	
   

  



 


Stock Options
and Warrants


 


·                  As
at December 1, 2008, 108,800,129 warrants to acquire an equal number of
common shares were outstanding and exercisable (108,800,129 – September 30,
2008 and 109,147,188 – December 31, 2007) and 35,376,178 stock options
were outstanding (35,376,178 – September 30, 2008 and 18,541,178 – December 31,
2007) of which 31,951,178 were exercisable (29,787,011 – September 30,
2008 and 11,314,511 – December 31, 2007).


 


Change in Accounting Policies


 


Capital
Disclosures and Financial Instruments – Disclosures and Presentation


 


At January 1, 2008, the Company adopted
three new presentation and disclosure standards that were issued by the
Canadian Institute of Chartered Accountants: Handbook Section 1535,
Capital Disclosures (“Section 1535”), Handbook Section 3862, Financial
Instruments – Disclosures (“Section 3862”) and Handbook Section 3863,
Financial Instruments – Presentation (“Section 3863”).


 


Section 1535 requires the disclosure of
both qualitative and quantitative information that enables users of financial
statements to evaluate (i) an entity’s objectives, policies and processes
for managing capital; (ii) quantitative data about what the entity regards
as capital; (iii) whether the entity has complied with any capital
requirements; and (iv) if it has not complied, the consequences of such
non-compliance.


 


Sections 3862 and 3863 replace Handbook Section 3861,
Financial Instruments – Disclosure and Presentation, revising and enhancing its
disclosure requirements and carrying forward unchanged its presentation requirements
for financial instruments.  Sections 3862
and 3863 place increased emphasis on disclosures about the nature and extent of
risks arising from financial instruments and how the entity manages those
risks.


 


Inventories


 


Section 3031,
Inventories (“Section 3031”), which replaces Section 3030,
establishes standards for the measurement and disclosure of inventories. The
new standard provides more extensive guidance on the determination of cost,
including allocation of overhead and requires impairment testing. The adoption
of Section 3031 did not result in a material impact on the Company’s
consolidated financial position and results of operations. The disclosure
requirements in Section 3031 have been expanded to include disclosure of
the amount of inventories recognized as an expense during the period, which is
included in the “cost of sales” and “amortization” lines on the Consolidated
Statement of Operations and Deficit.


 


Goodwill and
intangible assets


 


In January 2008,
the CICA issued Section 3064, Goodwill
and Intangible Assets, which will replace Section 3062, Goodwill and Other Intangible Assets. The
standard provides guidance on the recognition of intangible assets in
accordance with the definition of an asset and the criteria for asset
recognition as well as clarifying the application of the concept of matching
revenues and expenses, whether these assets are separately acquired or
internally developed. Section 1000 – Financial Statement Concepts was also
amended to provide consistency with this new standard.  This standard will apply to the Company’s
interim and annual financial statements beginning on January 1, 2009. The
Company has not yet determined what the impact of adopting this standard will
have on the financial statements.


 


14

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008

  December 1, 2008 

  	
   

  



 


International
Financial Reporting Standards


 


The
Accounting Standards Board of the CICA announced that Canadian Generally
Accepted Accounting Principles (“GAAP”) for publicly accountable enterprises
will be replaced with International Financial Reporting Standards (IFRS) for
fiscal years beginning on or after January 1, 2011. Early conversion to
IFRS for fiscal years beginning on or after January 1, 2009 may also be
permitted.


 


Implementing
IFRS will have an impact on accounting, financial reporting and supporting IT
systems and processes. It may also have an impact on taxes, contractual
commitments involving GAAP based clauses, long-term employee compensation plans
and performance metrics. Accordingly, when the Company develops its IFRS
implementation plan, it will have to include measures to provide extensive
training to key finance personnel, to review contracts and agreements and to
increase the level of awareness and knowledge amongst management, the Board of
Directors and Audit Committee. Additional resources may be engaged to ensure
the timely conversion to IFRS.


 


Risk and Uncertainties


 


Country Risk


 


The Company’s
mineral exploration and exploitation activities may be adversely affected by
political instability and legal and economic uncertainty in the countries where
the Company has operations.  The risks
associated with the Company’s foreign operations may include political unrest,
labour disputes, invalidation of governmental orders and permits, corruption,
war, civil disturbances and terrorist actions, arbitrary changes in laws,
regulation and policies, taxation, price controls, exchange controls, delays in
obtaining or the inability to obtain necessary permits, opposition to mining
from environmental or other nongovernmental organizations, limitations on
foreign ownership, limitations on the repatriation of earnings, limitations on
mineral exports and increased financing costs. 
These risks may limit or disrupt the Company’s projects or operations,
restrict the movement of funds or result in the deprivation of contractual
rights or the taking of property by nationalization, expropriation or other
means without fair compensation.  The
Company’s mineral properties and mining rights are located in Venezuela and as
such, the Company may be affected by political or economic instabilities.


 


Title to Mineral Properties


 


Title to, and
the area of, mineral properties may be disputed or impugned.  Although the Company has investigated its
title to the mineral properties for which it holds concessions or mineral
leases or licenses, there can be no assurance that the Company has valid title to
such mineral properties or that its title thereto will not be challenged or
impugned.  For example, mineral
properties sometimes contain claims or transfer histories that examiners cannot
verify; and transfers under foreign law often are complex.  The Company does not carry title insurance
with respect to its mineral properties. 
A successful claim that the Company does not have title to a mineral
property could cause the Company to lose its rights to mine that property,
perhaps without compensation for its prior expenditures relating to the
property.  Furthermore, the Mining
Operation Contract does not transfer any property ownership rights to the
Company.


 


15

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008

  December 1, 2008 

  	
   

  



 


Environmental Regulation and Liability


 


The Company’s
activities are subject to laws and regulations controlling not only mineral
exploration and exploitation activities themselves but also the possible
effects of such activities upon the environment. Environmental legislation may
change and make the mining and processing of ore uneconomic or result in
significant environmental or reclamation costs. 
Environmental legislation provides for restrictions and prohibitions on
spills, releases or emissions of various substances produced in association
with certain mineral exploitation activities, such as seepage from
tailings disposal areas that could result in environmental pollution.  A breach of environmental legislation may
result in the imposition of fines and penalties or the suspension or closure of
operations.  In addition, certain types
of operations require the submission of environmental impact statements and approval
thereof by government authorities. 
Environmental legislation is evolving, with stricter standards and
enforcement, increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects and a heightened degree of
responsibility for companies and their directors, officers and employees.  Permits from a variety of regulatory
authorities are required for many aspects of mineral exploitation activities,
including closure and reclamation. 
Future environmental legislation could cause additional expense, capital
expenditures, restrictions, liabilities and delays in the development of the
Company’s properties, the extent of which cannot be predicted.


 


In the
context of environmental permits, in particular the approval of closure and
reclamation plans, the Company must comply with standards and laws and
regulations, which may entail costs and delays depending on the nature of the
activity to be permitted and how stringently the regulations are implemented by
the permitting authority. In accordance with applicable laws, the Company has
provided various forms of financial assurances to cover the cost of reclamation
activities.  However, there can be no
assurance that the Company will not incur reclamation costs that are in excess
of such financial assurances.  While the
Company established a reserve for reclamation activities, there can be no
assurance that the combination of the reserve and financial assurances will be
sufficient to meet future reclamation standards, if such standards are
materially more stringent than existing standards.  The Corporation does not maintain
environmental liability insurance.  The
Corporation has adopted high standards of environmental compliance; however,
failure with or unanticipated changes in Venezuela’s laws and regulations
pertaining to the protection of the environment in the future could adversely
affect the Company.


 


Reserve and Resource Estimates


 


The Company’s
reported mineral reserves and resources are estimates only. As a result, there
can be no assurance that they will be recovered at the rates estimated or at
all.  Mineral reserve and resource
estimates are based on limited sampling and are uncertain because the samples
may not be representative.  Mineral
reserve and resource estimates may require revision (either up or down) based
on actual production experience.  Market
fluctuations in the price of metals, increased production costs or reduced
recovery rates may render estimated mineral reserves and resources uneconomic
and may ultimately result in a restatement of mineral reserves and
resources.  In addition, short-term
operating factors, such as the need for sequential development of mineral
deposits and the processing of new or different ore grades, may adversely
affect the Company’s profitability in any particular accounting period. If its
mineral reserve and resource estimates are incorrect, the Company will not
correctly allocate its financial resources, causing it either to spend too much
on what could be a less than economic deposit or to fail to mine what could be
a significant deposit.


 


16

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008

  December 1, 2008 

  	
   

  



 


Mineral Exploration and Exploitation


 


Mineral
exploration and exploitation involves a high degree of risk. Few properties
that are explored are ultimately developed into producing mines.  Unusual or unexpected formations, formation
pressures, fires, power outages, labour disruptions, flooding, explosions,
tailings impoundment failures, cave-ins, landslides and the inability to obtain
adequate machinery, equipment or labour are some of the risks involved in
mineral exploration and exploitation activities.  The Corporation has relied on and may
continue to rely on consultants and others for mineral exploration and
exploitation expertise.  Substantial
expenditures are required to establish mineral reserves and resources through
drilling, to develop metallurgical processes to extract the metal from the
material processed and, in the case of new properties, to develop the mining
and processing facilities and infrastructure at any site chosen for
mining.  There can be no assurance that
the Company will discover mineral reserves and resources in sufficient
quantities to justify exploitation or that the funds required to exploit any
mineral reserves and resources discovered by the Company will be obtained on a
timely basis or at all.  The economics of
exploiting mineral reserves and resources discovered by the Company are
affected by many factors, many outside the control of the Company, including
the cost of operations, variations in the grade of material mined and metals
recovered, price fluctuations in the metal markets, costs of processing
equipment, continuing access to smelter facilities on acceptable terms and
other factors such as government regulations, including regulations relating to
royalties, allowable production, importing and exporting of minerals and environmental protection.  There can be no assurance that the Company’s
mineral exploration and exploitation activities will be successful.


 


Uninsurable Risks


 


Mineral
exploration and exploitation activities involve numerous risks, including unexpected
or unusual geological operating conditions, rock bursts, cave-ins, fires,
floods, earthquakes and other environmental occurrences and political and
social instability.  It is not always
possible to obtain insurance against all such risks and the Company may decide
not to insure against certain risks as a result of high premiums or other
reasons.  Should such liabilities arise,
they could negatively affect the Company’s profitability and financial position
and the value of the common shares of the Company.  The Company does not maintain insurance
against environmental risks.


 


Production Risks


 


The Company
prepares estimates of future production at its operations. Failure to meet
these estimates could adversely affect the corporation’s profitability, cash
flows and financial position.  There can
be no assurance that the Company will achieve its production estimates.


 


The Company’s
actual production may vary from its estimates for a variety of reasons,
including actual ore mined varying from estimates of grade, tonnage, dilution
and metallurgical and other characteristics; short-term operating factors such
as the need for sequential development of ore bodies and the processing of new
or different ore grades from those planned; mine failures, slope failures or
equipment failures; industrial accidents; natural phenomena such as inclement
weather conditions, floods, droughts, rock slides and earthquakes; encountering
unusual or unexpected geological conditions; changes in power costs and
potential power shortages; shortages of principal supplies needed for
operation, including explosives, fuels, chemical reagents, water, equipment
parts and lubricants; labour shortages or strikes; civil disobedience and
protests; and restrictions or regulations imposed by governmental or regulatory
authorities or other changes in the regulatory environments. Such occurrences
could result in damage to mineral properties, interruptions in production,
injury or death to persons, damage to property of the Company or others, monetary
losses and legal liabilities.  These
factors may cause a mineral deposit that has been mined profitably in the past
to become unprofitable forcing the Company to cease production. These factors
also apply to the Company’s future operations.


 


17














 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008
 December 1, 2008

  	
  

  



 


Regulations and Permits


 


The Company’s activities
are subject to wide variety of laws and regulations governing health and worker
safety, employment standards, waste disposal, protection of the environment,
protection of historic and archaeological sites, mine development and
protection of endangered and protected species and other matters.  The Company is required to have a wide
variety of permits from governmental and regulatory authorities to carry out
its activities.  These permits relate to
virtually every aspect of the Company’s exploration and exploitation
activities.  Changes in these laws and
regulations or changes in their enforcement or interpretation could result in
changes in legal requirements or in the terms of the Company’s permits that
could have a significant adverse impact on the Company’s existing or future
operations or projects.  Obtaining
permits can be a complex, time-consuming process.  There can be no assurance that the Company
will be able to obtain the necessary permits including any renewals thereof on
acceptable terms, in a timely manner or at all. 
The costs and delays associated with obtaining permits and complying
with these permits and applicable laws and regulations could stop or materially
delay or restrict the Company from continuing or proceeding with existing or
future operations or projects.  Any
failure to comply with permits and applicable laws and regulations, even if
inadvertent, could result in the interruption or closure of operations or
material fines, penalties or other liabilities.


 


Gold Price Volatility


 


The gold price can
fluctuate widely and is affected by numerous factors beyond the Company’s
control, including industrial and jewellery demand, inflation and expectations
with respect to the rate of inflation, the strength of the U.S. dollar and
other currencies, interest rates, gold sales by central banks, forward sales by
producers, global or regional political or financial events, and production and
cost levels in major gold-producing regions. 
The gold price is also subject to rapid short-term changes due to
speculative activities.  The Company’s
revenues, cash flow, profitability and the market price of the common shares of
the Company are significantly affected by changes in the gold price.  If the realized gold price is below the cost
of production at the Company’s operations for a significant period, the Company
may be required to suspend or terminate production at the affected
operation.  In addition, the Company may
be required to restate its mineral reserves and resources, write down its
investment and increase or accelerate reclamation and closure charges at the
affected operation.  Any of these
developments could negatively affect the Company’s profitability, cash flows
and financial position.  Accordingly,
even if the Company discovers and produces gold, there can be no assurance that
the gold price will be high enough to enable the Company to sell the gold
produced by it profitably.


 


Financial
Instruments


 


The Company thoroughly
examines the various financial instrument risks to which it is exposed and
assesses the impact and likelihood of those risks.  These risks may include credit risk, interest
rate risk, liquidity risk, currency risk, market risk and other price
risks.  Where material, these risks are
reviewed and monitored by the Board of Directors.


 


Financial
Instrument Classification and Measurement


 


The Company classifies
its cash and cash held as collateral as held-for-trading. Receivable are
classified as loans and receivables. Accounts payable and accrued
liabilities,  short-term debt, long-term
debt and loan payable on acquisition are classified as other liabilities, all
of which are measured at amortized costs. Management reviewed all significant
financial instruments held by the Company and determined that no material
differences between fair value and carrying value existed as at the reporting
date.


 


18

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008
 December 1, 2008

  	
  

  



 


Credit
Risk


 


The Company’s credit risks are limited to
trade receivables in the ordinary course of business.  The Company sells to a small number of
customers with exemplary credit histories and the balance of other receivables
owed to the Company in the ordinary course of business is not significant.  Therefore, the Company is not exposed to
significant credit risk. The Company’s credit risk has increased since last
year as it is now a producer and seller of gold.


 


Pursuant to their respective terms, trade
receivables are aged as follows at September 30, 2008:


 


	
  0-30 days

  	
   

  	
  $

  	
  735,904

  	
   

  
	
  31-60 days

  	
   

  	
  343,207

  	
   

  
	
  61-90 days

  	
   

  	
  667,564

  	
   

  
	
  Over 90 days due

  	
   

  	
  566,581

  	
   

  
	
   

  	
   

  	
  $

  	
  2,313,256

  	
   

  



 


Liquidity
Risk


 


Liquidity risk is the risk that the Company
will be unable to meet its financial obligations. The Company manages liquidity
risk by ensuring that it has sufficient cash, credit facilities and other
financial resources available to meet its obligations.


 


The Company forecasts cash flows for a
period of 12 months to identify financial requirements. These requirements are
met through a combination of cash flows from operations, credit facilities,
disposition of assets, and accessing capital markets.


 


	
   

  	
   

  	
  2008

  	
   

  	
  2009-2010

  	
   

  	
  Total

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  
	
  Accounts payable and accrued liabilities

  	
   

  	
  8,107,772

  	
   

  	
  28,050,458

  	
   

  	
  36,158,230

  	
   

  
	
  Income taxes payable

  	
   

  	
  —

  	
   

  	
  6,219,306

  	
   

  	
  6,219,306

  	
   

  
	
  Loan payable on acquisition

  	
   

  	
  1,500,000

  	
   

  	
  —

  	
   

  	
  1,500,000

  	
   

  
	
  Interest on long-term debt

  	
   

  	
  4,000,000

  	
   

  	
  12,000,000

  	
   

  	
  16,000,000

  	
   

  
	
  Long-term debt

  	
   

  	
  —

  	
   

  	
  80,000,000

  	
   

  	
  80,000,000

  	
   

  
	
   

  	
   

  	
  13,607,772

  	
   

  	
  126,269,764

  	
   

  	
  139,877,536

  	
   

  



 


Currency Risk


 


The Company is exposed to currency risk as a
majority of its assets and liabilities are denominated in foreign
currencies.  Unfavourable changes in the
applicable exchange rate may result in a decrease or increase in foreign
exchange gains or losses.  The Company
does not use derivative instruments to reduce its exposure to foreign currency
risk.


 


The Company has adopted the “Current Rate”
methodology for accounting for its self-sustaining operations. Under this
approach the assets and liabilities acquired are restated according to the
prevailing market exchange rate at the balance sheet date with all foreign
exchange gains (and losses, when applicable) being recorded as Other
Comprehensive Income in the consolidated balance sheets.


 


The Company’s Venezuelan operations and cash
holdings are currently subject to currency and exchange controls.  These government imposed controls may
adversely affect the Company as such controls restrict the Company’s ability to
flow U.S. dollars out of the country.


 


19

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008
 December 1, 2008

  	
  

  



 


As at September 30, 2008, the Company
holds cash of $604,632 (December 31, 2007: 
$516,268) in Venezuelan Bolivars.


 


Financial instruments that impact the Company’s net earnings or other
comprehensive income due to currency fluctuations include: Venezuelan Bolivar
and Canadian dollar denominated cash, short term investment, receivables,
accounts payable and accrued liabilities and income tax payable. The
sensitivity of the Company’s net earnings and other comprehensive income from
these financial instruments due to changes in the exchange rate between the
Venezuelan Bolivar, Canadian dollar and the United States dollar are summarized
in the below:


 


	
   

  	
   

  	
  As at September 30, 2008

  	
   

  
	
   

  	
   

  	
  10% Increase in the

  Venezuelan Bolivar

  	
   

  	
  10% Decrease in the

  Venezuelan Bolivar

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  
	
  Net earnings

  	
   

  	
  (13,977

  	
  )

  	
  12,706

  	
   

  
	
  Other comprehensive income

  	
   

  	
  72,384,413

  	
   

  	
  (65,804,011

  	
  )

  
	
  Comprehensive income

  	
   

  	
  72,370,436

  	
   

  	
  (65,791,305

  	
  )

  



 


	
   

  	
   

  	
  As at September 30, 2008

  	
   

  
	
   

  	
   

  	
  10% Increase in the

  Canadian Dollar

  	
   

  	
  10% Decrease in the

  Canadian Dollar

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  
	
  Net earnings

  	
   

  	
  (130,990

  	
  )

  	
  119,081

  	
   

  
	
  Other comprehensive income

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Comprehensive income

  	
   

  	
  (130,990

  	
  )

  	
  119,081

  	
   

  



 


Dependence on Key Employees


 


The Company’s business
and operations are dependent on retaining the services of a small number of key
management personnel.  The success of the
Company is, and will continue to be, to a significant extent, dependent on the
expertise and experience of the directors and senior management.  The loss of one or more key employees could
have a materially adverse effect on the Company.


 


Common Share Price Volatility


 


The market price of the
common shares of the Company could fluctuate significantly based on a number of
factors in addition to those listed in this document, including the Company’s
operating performance and the performance of competitors and other similar
companies; the public’s reaction to the Company’s press releases, other public
announcements and the Company’s filings with the various securities regulatory
authorities; changes in earnings estimates or recommendations by research
analysts who track the common shares or the shares of other companies in the
resource sector; changes in general economic conditions; the arrival or
departure of key personnel; acquisitions, strategic alliances or joint ventures
involving the Company or its competitors; and gold price volatility.


 


In addition, the market
price of the common shares of the Company are affected by many variables not
directly related to the Company’s success and are, therefore, not within the
Company’s control.


 


Non-GAAP Measures


 


Total cash cost per
ounce is calculated in accordance with the Gold Institute Production Cost
Standard. The total cash cost per ounce data, are presented to provide
additional information and are not prepared in accordance with GAAP.  The data should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with GAAP.


 


20

















 


	
  RUSORO MINING LTD.

  Management’s Discussion and Analysis

  For the Three and Nine Months Period ended September 30, 2008
 December 1, 2008

  	
  

  



 


Data used in the
calculation of total cash costs per ounce may not conform to other similarly
titled measures provided by other precious metals companies. Management uses
the cash cost per ounce data to access profitability and cash flow from the
Company’s operations and to compare it with other precious metals
producers.  Total cash costs per ounce
are derived from amounts included in the Statement of Operations and include
mine site operating costs such as mining, processing, administration, royalties
and production taxes but exclude amortization, reclamation, capital
expenditures and exploration costs.


 


Outlook


 


At the time the Mixed Enterprise is created and the Company begins to
consolidate its 50% share of the Isidora Mine the cash cost per ounce of the
Company’s operations is expected to decrease signficantly. Also, the Venezuela
Bolivar has continued to depreciate subsequent to September 30, 2008 which
is expected to have a positive impact on cash cost per ounce of the Company in
U.S. dollars.


 


During August the Company signed a contract to outsource haulage,
loading and dumping activities at the Choco 10 mine. During September the
Choco 10 mine showed a reduction in mining costs per tonne moved due to the
effect of this contract, and the Company expects these positive benefits to
continue in the future.


 


In light of the recent down-turn in the financial markets and related
budgetary constraints encountered, the Company has initiated a number of
measures to cut operating costs, expenses and overheads where applicable. As a
starting measure, senior executive fees, in-country senior management fees and
board fees have been reduced, in some cases by up to 50%. Employee
rationalization and expatriate work-force reduction initiatives have also
commenced at all operating and administrative sites. Active exploration,
including drilling activities, has also been significantly reduced. These
measures should serve to have a positive impact on the Company’s future
financial performance.


 


21