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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the month of January, 2005
Commission File Number: 001-31819
Gold Reserve Inc.
(Exact name of registrant as specified in its charter)
926 W. Sprague Avenue, Suite 200
Spokane, Washington 99201
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F _____
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-____________
Filed with this Form 6-K is the following, which is incorporated herein by
reference:
99.1 Press Release
January 26, 2005
Gold Reserve Completes Bankable Feasibility Study and Makes Production
Decision on the Brisas Gold/Copper Mine
Certain statements included herein, including those that express management's
expectations or estimates of our future performance, constitute "forward
looking statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995. Forward looking statements are necessarily based
upon a number of estimates and assumptions that, while considered reasonable by
management are inherently subject to significant business, economic and
competitive uncertainties and contingencies.
We caution that such forward-looking statements involve known and unknown risks,
uncertainties and other risk factors that may cause the actual financial
results, performance, or achievements of the Company to be materially different
from our estimated future results, performance, or achievements expressed or
implied by those forward looking statements. Numerous factors could cause actual
results to differ materially from those in the forward-looking statements,
including without limitation the risk that actual mineral reserves may vary
considerably from estimates presently made, our ability to obtain funding for
development and production of the Brisas project, the impact of currency, metal
prices and metal production volatility, the concentration of our operations and
assets in Venezuela, the regulatory, political and economic risks associated
with Venezuelan operations, changes in proposed development plans (including
technology used), delays or inability in obtaining required permits or
concession interpretations or extensions, our dependence upon the abilities and
continued participation of certain key employees, and the risks normally
incident to the operation and development of mining properties. These are
discussed in greater detail in Gold Reserve's filings with the U.S. Securities
and Exchange Commission at www.sec.gov (including under the heading
"Risk Factors") and the Annual Information Form and other reports filed with
Canadian provincial securities commissions at www.sedar.com . Gold Reserve
expressly disclaims any intention or obligation to update or revise any forward
looking statement whether as a result of new information, events or otherwise.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Gold Reserve Inc.
(Registrant)
Date: January 28, 2005 By: s/ Robert A. McGuinness
Name: Robert A. McGuinness
Title: Vice President - Finance & CFO
EXHIBIT INDEX
99.1 Press Release
NR-05-02
GOLD RESERVE COMPLETES BANKABLE FEASIBILITY STUDY AND MAKES PRODUCTION DECISION
ON THE BRISAS GOLD/COPPER MINE
SPOKANE, WASHINGTON January 26, 2005
Gold Reserve Inc. (TSX: GRZ - AMEX:GRZ) is pleased to announce that it has
received the completed Bankable Feasibility Study from Aker Kvaerner Metals
Inc. on its Brisas gold and copper property, located in southeastern Venezuela
and, based on the positive conclusions contained therein, the Board of
Directors has approved proceeding with the financing and construction of the
mine.
The feasibility study operating plan assumes a large open pit mine containing
proven and probable reserves of approximately 9.2 million ounces of gold and
1.2 billion pounds of copper in 414 million tonnes of ore grading 0.69 grams
of gold per tonne and 0.13% copper, at a revenue cutoff grade of $2.76 per
tonne using a gold price of $350 per ounce and a copper price of $0.90 per
pound. The project anticipates utilizing conventional truck and shovel mining
methods with the processing of ore at full production of 70,000 tonnes per day,
yielding an average annual production of 487,000 ounces of gold and 64 million
pounds of copper over an estimated mine life of approximately 16 years.
The feasibility study assumed an economic base case utilizing $400 per ounce
gold and $1.00 per pound copper. At such prices, cash operating costs (net of
copper credits) are estimated at $153 per ounce of gold and total costs per
ounce, including operating costs and initial and sustaining capital, would be
$262 per ounce of gold. Initial capital costs are currently estimated to be
$552 million. All amounts are in U.S. dollars.
Key conclusions from the feasibility study are as follows:
-Brisas is a world-class gold and copper deposit with favorable leverage to
gold and copper prices, each $0.10 increase/decrease in copper prices changes
net cash operating costs by $13 per ounce,
-Pre-tax cash flow (NPV at 0% discount) approximates $103 million annually and
over the life of mine approximates a total of $1.6 billion at current metal
prices of $425 per ounce gold and $1.40 per pound copper,
-The Brisas project cash operating and total costs per ounce are anticipated to
be positioned in the lower half of the worldwide gold industry cost curve,
-The ore-body is very large, predictable and open for further expansion,
-The ore-body is relatively simple to mine, although special attention is
required to pit dewatering in order to ensure mining efficiencies and pit
slope stability,
-The mining and processing methods are all based on conventional technology and
no new or unproven technology is expected to be employed,
-SGS Lakefield Research confirmed the Brisas project's gold and copper
metallurgical recovery profiles,
-Copper is an extremely valuable component to the project economics with a life
of mine copper revenue of US$1.4 billion at current copper prices of $1.40 per
pound,
-Existing infrastructure (including transportation and power transmission) near
the Brisas project minimizes capital and operating costs.
The following estimates are the key parameters contained in the feasibility
study:
Proven & Probable Reserve
Based on Internal Cutoff Using Revenue of $2.76/tonne ($350/oz Au, $0.90/lb Cu)
- -------------------------------------------------------------------------------
Au Au Cu
Reserve Tonnage Au Grade Grams Ounces Cu Grade Cu pounds
Category (000's) g/t (000's) (000's) % Tonnes (000,000's)
- -------------------------------------------------------------------------------
Proven 193,248 0.71 136,826 4,399 0.12 237,985 525
Probable 221,315 0.68 149,548 4,808 0.13 296,823 654
Total Ore 414,563 0.69 286,375 9,207 0.13 534,808 1,179
Strip ratio (waste to ore) - 1.81:1
Mill Through-Put 70,000 tonnes per day
Metallurgical Recovery
Gold Copper
----- ------
Plant Recovery 83.1% 87%
Net Payable Metal 82.4% 84%
Life of Mine Production Gold 7.59 million ounces
(payable metals) Copper 997 million pounds
Average Annual Production 487,000 gold ounces
64 million pounds copper
Mine Life 16 Years
Initial Capital Cost ($million)1
Mine $ 106.7
Mill 276.7
Tailings 31.6
Owner's Costs 10.0
Pre-Stripping 15.0
Indirect Costs (includes EPCM and Camp) 57.3
Contingency 54.8
- ----------------------------------------------------------------------------
Total Initial Capital 1 $ 552.1
- ----------------------------------------------------------------------------
1 A value added tax (VAT) of 15%, or US$69 million, is not part of the initial
capital cost as it should be recovered within the first few years of
construction and operations, pursuant to Venezuelan tax regulations. All
IRR, NPV and total cost calculations include VAT and sustaining capital.
Base Case Economics - $400 per ounce gold and $1.00 per pound copper
Cash Operating Cost Per Ore Tonne
Mining and Dewatering $ 1.70
Processing 2.21
General and Administrative 0.39
Transport and Freight 0.37
Smelting and Refining 0.61
- ------------------------------------------------------------------------------
Total cash operating cost per tonne $ 5.28
- ------------------------------------------------------------------------------
Cost Per Ounce of Gold
Cash Operating Costs 1 $ 153
Exploitation Tax 13
Capital Cost (initial and sustaining) 96
- ------------------------------------------------------------------------------
Total Costs 2 $ 262
- ------------------------------------------------------------------------------
Pre-Tax
Internal Rate of Return 3 12.1 %
Net Present Value (NPV) @ 0 % discount $1.05 billion
@ 5 % discount $392 million
NPV-The difference between the sum of the discounted cash flows that are
expected from the project minus initial and sustaining capital, valued
added tax, exploitation tax and operating costs.
Sensitivity To Gold and Copper Prices
Cash
Operating Total NPV NPV Payback
Metal Prices Cost per Cost per Pre-Tax @ 0% @5% Years(5)
Gold and Copper Ounce(1) Ounce(2) IRR%(3) millions(4) millions(4)
- --------------------------------------------------------------------------------
$450 Au/$1.50 Cu $ 87 $201 19.4% $1,890 $887 5.5
$425 Au/$1.25 Cu $120 $231 15.9% $1,469 $640 6.5
$400 Au/$1.00 Cu $153 $262 12.1% $1,046 $392 8.0
$375 Au/$0.95 Cu $159 $268 9.7% $ 814 $255 9.2
$350 Au/$0.90 Cu $166 $273 7.2% $ 581 $116 10.6
- --------------------------------------------------------------------------------
Current Prices:
- --------------------------------------------------------------------------------
$425 Au/$1.40 Cu $100 $213 17.1% $1,612 $724 6.1
- --------------------------------------------------------------------------------
1 Net of copper by-product credit.
2 Net of copper credit and excluding costs incurred to date of
approximately US $80 million.
3 The after-tax IRR is 9.1% using $400 gold and $1.00 copper.
4 Pre-tax and including VAT.
5 Payback Years relates to recovery of equity invested as the financial
model has been prepared on an un-leveraged equity only basis.
Financial Assumptions
The Bankable Feasibility Study financial model was prepared on an un-leveraged
(equity only) basis, excluded an inflation allowance, provided for depreciation
and amortization on a straight line and units of production basis and assumed a
34% Venezuelan corporate income tax rate.
Bankable Feasibility Study Preparation
The Bankable Feasibility Study was prepared by Aker Kvaerner Metals Inc. The
Qualified Person in charge of the overall execution of the feasibility study is
Tom Turk, Industrial Engineer, Mining Engineer and M.B.A. The Study includes
work performed by other independent consultants under the coordination of Aker
Kvaerner Metals. The geology, mineral resources, proven and probable reserves,
mining sections and the financial analysis for the Study were performed by
Pincock Allen & Holt, Inc. of Denver, Colorado. Metallurgical pilot plant test
work was conducted by SGS Lakefield Research with guidance from Aker Kvaerner
Metals. The metallurgical process flowsheet was designed by Aker Kvaerner
Metals and the tailings facility design, hydrology study, geotechnical analysis
and geochemical analysis were performed by Vector Colorado LLC of Denver,
Colorado. Ingenieria Caura, SA of Venezuela and AATA International, Inc. of
Fort Collins, Colorado conducted the environmental field work in Venezuela and
are in the final stages of preparing the Venezuelan Environmental and Social
Impact Study (V-ESIA) and the International Environmental and Social Impact
Assessment (I-ESIA) for the financial institutions.
Proven and Probable Reserve
The proven and probable reserve (within a pit design) has been estimated in
accordance with the SME Reporting Guide, SEC Industry Guide 7 and CIMM Standards
as adopted by CSA National Instrument 43 - 101. The qualified persons involved
in the property evaluation and resource and reserve estimates were Raul
Borrastero C.P.G. and Susan Poos P.E. of Pincock Allen & Holt, and Brad Yonaka
of Gold Reserve.
The Feasibility Study reserves do not include the results of the recently
completed 15,000 meters of drilling concluded in December 2004. Assays are in
process and we expect to update reserves in March. Any increase in mineable
reserves would be expected to reduce our capital costs per recoverable ounce.
The orebody remains open at depth for further expansions.
Near Term Project Activities
The Company has commenced several activities in order to initiate the
development and construction of the Brisas mine and mill complex. These
activities include initiating detailed engineering, hiring additional
qualified managers, obtaining permits for construction, initiating site
preparation, camp relocation and construction, evaluation of contract mining
and lease purchase programs for mining equipment, and working to obtain the
financing for the project.
First, proposals will be solicited from major Engineering, Procurement and
Construction Management firms (EPCM) with international experience for the
detail design and construction management. The Company anticipates completion
of this activity during the first quarter this year. Detailed engineering for
earthwork activities, the construction camp and other early construction
activities will commence as soon as is practicable after the selection of the
EPCM firm. In addition, orders will be placed for equipment that requires
long lead times for manufacturing and delivery.
Information from the Bankable Feasibility Study is being used to complete an
International Environmental and Social Impact Assessment (I-ESIA) meeting the
IFC and World Bank standards for financing international projects and is
scheduled for completion in the first quarter of 2005. In addition, an
Environmental and Social Impact Study (V-ESIA) is being completed to meet
Venezuelan requirements and an application is being prepared to obtain the
"Authorization to Affect Natural Resources" (AANR), which must be granted by
the Ministry of Environment and Natural Resources (MARN) before full
construction can proceed. Approval of the V-ESIA and granting of the required
permits is anticipated for the third quarter of 2005. However, the actual
timing may vary.
Financing
Concurrent with the completion of the Bankable Feasibility Study, Endeavour
Financial Corporation, the Company's financial advisor, has been evaluating
conventional financial structures (a mix of debt and equity) with the
objective to mininize shareholder dilution while maximizing the financial
leverage of the project. The Company has 43 million shares outstanding on a
fully diluted basis, which, considering the asset base, allows for ample
flexibility in the structuring of the capital financial package.
David Rhodes, Managing Director of Project Finance for Endeavour, stated,
"With the completion of the positive feasibility study we are moving forward
with the assessment of various potential sources of project debt financing
including commercial lending, multi-lateral agencies, and off-take and
equipment financing. Indications of interest have already been received from
a number of these sources and optimization and finalization of the financing
structure will now proceed."
President's Comment
Doug Belanger, President of Gold Reserve, stated, "We are very pleased with
our technical consultant's attention to detail and the professional manner in
which they conducted their studies. With the completion of this Bankable
Feasibility Study and upon expected approval of the Venezuelan Environmental
and Social Impact Study we are closer to our goal of putting the Brisas
project into production. We expect to initiate site preparation construction
as soon as possible with permits currently issued. We believe the project is
very robust and has substantial benefits for both the people of Venezuela and
the shareholders of the Company. The benefits to the Venezuelan economy are
widespread, through the employment of the local workforce and suppliers,
exercising a multiplier effect on the economy as a whole. In addition, the
project has many positive aspects including a low environmental impact for a
project of this magnitude, no current social controversy attached to the
development along with support for the project by the government. Gold Reserve
also enjoys a good relationship with the local community and we will continue
and expand our support in addition to implementing many initiatives to mitigate
the impact of the project. Construction is expected to take two years from the
granting of the permit to affect the resource (AANR) and startup is currently
expected in 2007. During construction we expect to employ 2000 people directly
and after startup Brisas will provide 900 full-time jobs. This is truly a major
milestone for Gold Reserve as we move towards production at the Brisas project.
It has required the hard work and dedication of all of our employees through
some very tough periods. The rebound in the gold and copper prices, the low
interest rate environment and the resurgence of the Venezuelan economy have
come together at a critical time for the anticipated financing and development
of the Brisas Project."
The summary portions of the Feasibility Study described in this press release
are qualified in their entirety by the Executive Summary itself. This release
should be read in conjunction with that summary. A copy of the Feasibility
Study Executive Summary will be available on the Company's website at
www.goldreserveinc.com, www.sedar.com and www.sec.gov shortly.
Gold Reserve Inc. is a Canadian company, currently developing its Brisas
gold/copper project in Southeastern Venezuela. The Company currently has
$33 million in cash and investments. Before full construction can proceed,
the Company must obtain adequate financing.
Certain statements included herein, including those that express management's
expectations or estimates of our future performance, constitute "forward
looking statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995. Forward looking statements are necessarily based
upon a number of estimates and assumptions that, while considered reasonable by
management are inherently subject to significant business, economic and
competitive uncertainties and contingencies.
We caution that such forward-looking statements involve known and unknown risks,
uncertainties and other risk factors that may cause the actual financial
results, performance, or achievements of the Company to be materially different
from our estimated future results, performance, or achievements expressed or
implied by those forward looking statements. Numerous factors could cause actual
results to differ materially from those in the forward-looking statements,
including without limitation the risk that actual mineral reserves may vary
considerably from estimates presently made, our ability to obtain funding for
development and production of the Brisas project, the impact of currency, metal
prices and metal production volatility, the concentration of our operations and
assets in Venezuela, the regulatory, political and economic risks associated
with Venezuelan operations, changes in proposed development plans (including
technology used), delays or inability in obtaining required permits or
concession interpretations or extensions, our dependence upon the abilities and
continued participation of certain key employees, and the risks normally
incident to the operation and development of mining properties. These are
discussed in greater detail in Gold Reserve's filings with the U.S. Securities
and Exchange Commission at www.sec.gov (including under the heading
"Risk Factors") and the Annual Information Form and other reports filed with
Canadian provincial securities commissions at www.sedar.com . Gold Reserve
expressly disclaims any intention or obligation to update or revise any forward
looking statement whether as a result of new information, events or otherwise.
TO THE EXTENT IT IS DETERMINED THE COMPANY'S FINANCING PLANS WILL INCLUDE THE
ISSUANCE OF ANY SECURITIES, ANY SECURITIES THAT MAY BE ISSUED PURSUANT TO ANY
FINANCING OR OTHER OFFERING BY THE COMPANY MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES EXCEPT PURSUANT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, SUCH REGISTRATION
REQUIREMENTS. THIS NEWS RELEASE SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SUCH SECURITIES, NOR SHALL THERE BE ANY SALE
OF ANY SUCH SECURITIES IN ANY STATE IN WHICH SUCH AN OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO APPLICABLE REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
FOR FURTHER INFORMATION:
Internet - www.goldreserveinc.com
A. Douglas Belanger, President
926 W. Sprague Ave., Suite 200
Spokane, WA 99201 USA
Tel. (509) 623-1500
Fax (509) 623-1634