View:
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 May 2006
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 NI 43-101 Technical Report Gold and Copper Project - Brisas Project
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 Gold Reserve 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, concentration of operations and assets in foreign
countries, corruption, requests for improper payments, uncertain legal
enforcement, regulatory, political and economic risks associated with
Venezuelan operations, our ability to obtain additional funding for the
development of the Brisas project, in the event any key findings or
assumptions previously determined by our experts in the final feasibility
study (including any updates thereto) significantly differ or change as a
result of actual results in our expected construction and production at the
Brisas project, risk that actual mineral reserves may vary considerably from
estimates presently made, impact of currency, metal prices and metal
production volatility, changes in proposed development plans (including
technology used), our dependence upon the abilities and continued
participation of certain key employees, and 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 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: May 2, 2006
By: s/ Robert A. McGuinness
Name: Robert A. McGuinness
Title: Vice President - Finance & CFO
EXHIBIT INDEX
99.1 NI 43-101 Technical Report Gold and Copper Project - Brisas Project
Prepared for Gold Reserve Inc.
February 24, 2005
NI 43-101 Technical Report Gold and Copper Project - Brisas Project
Prepared for
Gold Reserve Inc.
February 24, 2005
Prepared by
Pincock, Allen & Holt
Susan R. Poos, P.E.
Raul H. Borrastero, C.P.G.
Richard Addison, P.E.
Richard J. Lambert, P.E.
1.0 SUMMARY
The Brisas Project is a gold-copper deposit located in the Kilometer 88
mining district of Bolivar State in southeast Venezuela. Before its
acquisition by Gold Reserve Inc. (GRI) in 1992, the property had been
worked on a small scale by local owners and also by illegal miners.
Shallow pitting and hydraulic methods were used to mine the upper
saprolite zone, and coarse gold was recovered by gravity concentration.
Gold Reserve has carried out a major exploration drilling program on the
concession, resulting in the definition of a large, gold-copper deposit.
The operating plan proposes 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
486,000 ounces of gold and 63 million pounds of copper over an
estimated mine life of approximately 16 years.
The Brisas Project Feasibility Study dated January 2005 assumed an
economic base case utilizing $400 per ounce gold price and $1.00 per
pound copper price. At such prices, cash operating costs (net of copper
credits) are estimated at $154 per ounce of gold and total costs per
ounce, including operating costs and initial and sustaining capital
would be $263 per ounce of gold. Initial capital costs are currently
estimated at $552 million. All amounts are in U.S. dollars.
1.1 Location
The Brisas Project is located in the Kilometer 88 mining district of
Bolivar State in southeast Venezuela at Latitude 6 10 North and
Longitude 61 28 West. The property is approximately 3.5 kilometers west
of the KM 88 marker on Highway 10. Las Claritas is the closest town to
the property.
The project site is located in the Guyana region, which covers
approximately one-third of Venezuelas national territory. The main
nearby large city is Puerto Ordaz, with approximately 700,000
inhabitants, situated on the Orinoco River near its confluence with the
Caroni River. Puerto Ordaz has major port facilities, accessible to
ocean-going vessels from the Atlantic Ocean, via the Orinoco, a
distance of about 200 km. There is regularly scheduled airline service
to Puerto Ordaz from various cities within Venezuela.
Highway 10 provides paved access from Puerto Ordaz, which is 373
kilometers northwest of the property, to within 3.5 kilometers of the
project site. Unpaved roads provide the remaining 3.5 kilometers of
access. Upgrading the unpaved roads is part of the infrastructure
improvements plan for the project area.
1.2 Ownership
The main mineralized area at the Brisas Project is contained within the
500-hectare (1,235 acre) Brisas alluvial and hardrock concession. The
concession measures 2,500 meters (1,5 miles) north-south and 2,000
meters (1.25 miles) east-west. GRI also controls several other
concessions either adjacent to or near the Brisas concession.
According to GRI, mineral ownership consists of Brisas alluvial
production concession originally granted in 1988 and acquired by GRI in
1992 with the acquisition of Compania Aurifera Brisas del Cuyuni S.A.
The hardrock production concession immediately below the alluvial
concession was applied for by GRI in 1993 and was ordered to be issued
by the Ministry of Energy and Mines (MEM) in December 1997. The
concession was granted to GRI in early 1998 and the official record of
veta (hard rock) rights were published in the Gaceta Official De La
Republica De Venezuela on March 3, 1998.
Other applications for mineral rights have been submitted for small
tracts of land immediately adjacent to the Brisas concessions. These
include the 15-hectare NLNAV1 to the north, the 21-hectare NLEAV1 to
the east and the 32-hectare NLSAV1 to the south. GRI has received the
contract for mineral rights on NLEAV1 and NLSAV1 and is in the process
of applying for conversion to a concession for each. GRI expects the
rights for NLNAV1 will be granted in the near future.
Additionally, in 1999, GRI acquired the 1433-hectare (3541 acres) El
Pauji concession and contracts with Corporation Venezolana de Guyana
(CVG) for the 4,950-hectare (12,232 acres) Barbara property, the
847-hectare (2,162 acres) Zuleima property and the 1644-hectare (4062
acres) Lucia property. GRI has applied with MEM to convert the Barbara,
Zuliema and Lucia properties to concessions as provided for in the new
Venezuela mining law that was enacted late in 1999. Early in 2004 Gold
Reserve obtained contracts for the 499-hectare (1232 acres) Esperanza
and the 50-hectare (123 acres) Yusmari properties. Barbara is located
approximately 2.6 km (1.6 miles) south of the Brisas concession and
will be the site for tailings and waste rock disposal facilities.
Lucia, EL Pauji and Zuleima are located 1.8 km (1.1 miles) southwest of
the Brisas concession. Their use for mining is yet to be determined. The
Yusmari property is within the ultimate pit boundary while the Esperanza
property will be used for waste rock disposal.
1.3 Geology
The Brisas Project is within the Guayana Shield in northern South
America. The shield covers easternmost Colombia, southeastern
Venezuela, Guyana, Suriname, French Guiana and northeastern Brazil. The
Venezuelan portion of the shield is subdivided into five geological
provinces with different petrological, structural and metallogenic
characteristics. The provinces are, from oldest to youngest, Imataca,
Pastora, Cuchivero, Roraima, and Parguaza. Only Imataca, Pastora and
Roraima provinces are found in the vicinity of the Brisas deposit.
The Brisas concession itself lies within a portion of the lower
Caballape Formation volcanic and volcanic-related sedimentary rocks.
The units present are (1) andesitic to rhyolitic tuffaceous volcanic
beds, (2) related sedimentary beds, and (3) a tonalitic intrusive body.
All rocks have been tilted and subjected to lower greenschist facies
metamorphism. In the main mineralized trend, moderate to strong
foliation is oriented N 10 E and dipping 30 to 55 NW. This foliation
appears to be parallel to the original bedding, and tends to be
strongest in the finer-grained rocks. A much weaker foliation
orientation appears in outcrop exposures, striking NNW and dipping to
the SW.
Dikes and quartz veins cut the lower Caballape Formation. The strata
and intrusive rocks are cut by N30W-striking mafic dikes emplaced at
regular intervals (200-600 meters), some of which have displacement on
the order of tens of meters. Quartz veins populate the concession and
have been noted both in outcrop and in drill intersections. The most
common are sets of thick, boudinaged, and en echelon vein structures
that follow foliation/bedding orientation. They are thought to relate
in part to movement of quartz during metamorphism. Other quartz veins
exist in various orientations within the property.
1.4 Mineralization
There are four distinct types of Au and Cu mineralization present in
the concession, defined by geometry, associated minerals, and the Au/Cu
ratio. These zones are the Blue Whale body, disseminated
gold+pyrite+/-Cu, disseminated high Cu, and shear-hosted Au.
The Blue Whale mineralized body is a discrete, sharply bounded,
flattened, cigar-shaped feature that trends more or less parallel to
the local schistosity and plunges about 35 SW along foliation. It is 20
meters in diameter at its widest point, and tapers off at depth. It is
volumetrically a small fraction of the economically mineralized ground
in the Brisas Project, but it possesses the highest Au and Cu grades.
The bulk of ore mineralization occurs in disseminated, coalescing,
lensoid bodies, high in Au and in most cases low in Cu. These bodies
lie almost exclusively in the lapilli-rich, rapidly alternating
sequence of tuffaceous units and are clearly aligned along foliation.
Together, these lenses form a generally well defined mineralized band
which mimics the dip of the foliation/bedding and remains open at
depth. It remains at a similar thickness from the northern concession
boundary for a distance of 1.4 km south, after which it tapers rapidly.
Alteration minerals characteristic of these lenses are epidote,
chlorite, secondary biotite, and sericite.
The Au in the stratiform lenses is highly disseminated but only roughly
associated with high occurrences of pyrite. Fine-scale sub-sampling of
three meter assay intervals indicates good correlation between Au and
small (<1 cm) calcite/quartz veins. Correlation also exists with zones
of high occurrence of epidote, and in lapilli-sized lithic fragments
that have been partially to completely replaced by epidote and
sulfides. Sub-sampling evidence also suggests that Au is more evenly
distributed through the rock near the center of the large mineralized
lenses than it is near the margins.
Stratiform lenses of high Cu (with or without high Au) parallel and
underlie the Au+pyrite lenses described above. These lenses outcrop in
the northern part of the deposit, and plunge to the south along the
bedding/foliation in a manner similar to the Blue Whale and high Au/low
Cu lenses. Rock in the mineralized zones is characterized by a high
degree of lapilli and crystal replacement by chalcopyrite, and in some
cases, by bornite and covellite. High chalcopyrite in the rock matrix
is often accompanied by high chlorite, secondary biotite, and in some
cases molybdenite.
Shear-hosted gold occurrences exist in the southern part of the
concession, running parallel to the foliation as with mineralization
further north. Stratigraphically, they occur above the large
disseminated lenses previously described. The gold grades are erratic
and localized, up to 100 g/t Au over a three-meter core interval. There
is a high degree of correlation between chalcopyrite and Au grade,
though Cu grades in these shears is sub-economic.
1.5 Exploration
GRI began exploration on the Brisas concession in late 1992 after its
acquisition of the concession. Prior to 1992, no known drill holes
existed on the property. Local miners working in small pits dug in the
alluvial material had identified gold mineralization. Initial work by
GRI included surface mapping, regional geophysical surveys, and
geochemical sampling. Several anomalies were identified on the property
followed by drilling and assaying starting in 1993. The presence of
large quantities of stratabound gold and copper mineralization was
identified in both saprolite and hard rock material early in the
drilling program. Additional work followed with petrology, mineral
studies, density tests, metallurgical sample collection and laboratory
test work. Several drilling campaigns have taken place at the Brisas
Project and continue to present times.
Emphasis of exploration on the concession focuses on following the
mineralized lenses downdip to the west and down plunge to the south.
Drilling originally concentrated at the surficial exposure of the Blue
Whale, and continued to the west and south where the mineralized lenses
were found to extend at depth.
A total of 811 drill holes with a total drilled length of 180,508
meters have been completed by GRI at the Brisas Project as of May 2004.
Drill hole spacing within and around the planned pit area is about 50
meters or less. Drill hole spacing in the Disseminated High Cu/Low Au
and Blue Whale areas is about 25 meters. The majority of the drilling
was performed using standard diamond core-barrel recovery techniques
although some auger drilling was carried out at the beginning of the
exploration campaign. Auger holes are generally very shallow, and are
scattered throughout the project area and in between later-drilled core
holes. The resource/reserve estimate presented in this report includes
drilling results up to hole D763 drilled in May 2004. A summary of
drilling in the Brisas Project from 1993 through 2004 is shown in Table
1-1. Also included in Table 1-1 are some metallurgical, geotechnical,
and independent verification check holes.
TABLE 1-1 Gold Reserves Inc. Brisas Project Feasibility Study Technical
Report Drilling Summary
Auger Drilling Diamond Drilling Total Comments
Year Holes Meters Holes Meters Holes Meters
1993 16 465 34 5,426 50 5,891
1994 123 3,381 9 11,161 132 14,542
1995 1 123 99 20,622 100 20,745
1996 - - 256 51,411 256 51,411
1997 - - 218 66,431 218 66,431
1999 - - 13 5,726 13 5,726 Holes D711-D721
2003-2004 - - 42 15,762 42 15,726 Holes D722-D763
Total 140 3,969 671 176,539 811 180,508
Condemnation drilling has been performed on the Brisas concession. The
company plans to conduct additional condemnation drilling to test the
plant site, waste dumps and tail disposal areas prior to the
commencement of construction activities. Pincock, Allen & Holt (PAH)
strongly recommends that condemnation drilling be carried out well
ahead of construction.
1.6 Resource Modeling and Estimation
It has been observed for some time within the Brisas Project that the
mineralization generally follows a structural trend that is
sub-parallel to the rock units trend present in the area. Therefore,
the resource model is based on constructing separate mineral envelopes
for Au and Cu that follow the general geologic trend and structural
control of the Brisas zone and, in the case of copper, the weathering
profile as well. The Blue Whale is modeled separately.
Variograms were run on the drill hole data to evaluate the spatial
variability and lateral grade continuity through the deposit and
provide limits for the search radius used in the grade interpolation
process. PAH ran variograms for both Au and Cu downhole composites.
Three-dimensional variograms were run for different orientations
including on strike, dip, and across the ore zones.
Gold and copper composite values were capped according to the
statistical review of the data in order to prevent outlying values from
unnecessarily influencing the model toward higher gold and copper
values. PAH does not believe that the composite grade capping will have
a great influence on the overall model but it could locally prevent
grade overestimation.
The gold and copper grade interpolations for the mineral envelopes only
used the 6m down-hole composites that fell within the grade envelopes.
Only blocks within the grade envelopes received an Au or a Cu grade.
The ordinary rigging (OK) interpolation method was used for all runs.
Table 1-2 tabulates the measured, indicated and inferred resources at
the Brisas Project and shows the tonnage/grade variability at various
gold equivalent (AuEq) cutoff grades. Gold equivalent calculations are
based on metal prices of $350/ounce Au, and $0.90/lb Cu, anticipated
metal recoveries, and smelter costs.
The measured and indicated resource is estimated as 503 million tonnes
at a gold grade of 0.68 gpt and a copper grade of 0.13 percent. In
addition, the inferred resource at the Brisas Project is estimated as
127 million tonnes at 0.65 gpt gold grade and 0.13 percent copper grade
at a 0.4 AuEq cutoff grade. The inferred resources include the inferred
mineralization both within and outside the mineral envelopes.
PAH believes that the resource estimate included in this report
conforms to international standards such as the Canadian Institute of
Mining (CIM) definitions as adopted by Canadian National Instrument NI
43-101, and that the current drill hole database is sufficient for
generating a feasibility level resource model.
Table 1-2 Gold Reserve Inc. Brisas Project Feasibility Study Technical
Report Mineral Resource Estimate
Category AuEq k Gold Copper
Cutoff tonnes gpt k ozs % m lbs
Measured 0.3 252,974 0.641 5,213 0.114 634
0.4 217,883 0.700 4,905 0.118 566
0.5 177,433 0.774 4,418 0.126 492
0.6 139,905 0.858 3,860 0.134 412
0.7 107,966 0.950 3,298 0.141 335
Indicated 0.3 348,070 0.586 6,558 0.130 995
0.4 284,941 0.662 6,066 0.132 827
0.5 226,512 0.742 5,406 0.138 688
0.6 175,731 0.829 4,681 0.144 557
0.7 134,161 0.921 3,975 0.147 434
0.3 601,044 0.609 11,771 0.123 1,630
Measured 0.4 502,824 0.678 10,971 0.126 1,393
+ 0.5 403,945 0.756 9,824 0.133 1,180
Indicated 0.6 315,636 0.842 8,541 0.140 969
0.7 242,127 0.934 7,273 0.144 769
Note: AuEq based on the "Smelter Case". AuEq= Au (gpt) + Cu (%) * 0.9
Category AuEq k Gold Copper
Cutoff tonnes gpt k ozs % m lbs
Inferred(*) 0.3 172,414 0.539 2,986 0.131 497
0.4 126,561 0.649 2,641 0.133 370
0.5 94,973 0.753 2,299 0.135 282
0.6 68,723 0.875 1,933 0.139 210
0.7 53,069 0.975 1,664 0.141 165
Note: AuEq based on the "Smelter Case". AuEq= Au (gpt) + Cu (%) * 0.90
(*) Inferred resources include both within and outside the mineral
envelopes.
1.7 Mine Design and Reserve Estimate
The Brisas Project is envisioned as an open-pit gold-copper mining
project, which will utilize hydraulic shovels and 236-tonne trucks as
the primary mining equipment. Production is scheduled for 25.2 million
tonnes of hard rock ore and on average 46.8 million tonnes of waste per
year over the 16 years of the project. During the first four years 9.4
million tonnes of oxide saprolite ore and 12.6 million tonnes of
sulfide saprolite ore are mined. Each saprolite ore type is stockpiled
separately and fed to different crushers at a rate of 1.94 million
tonnes per year.
There are two hard rock ore types, which are referred to as north and
south. Although the names imply a geographic relationship the two ores
are actually defined based on the copper content. North ore is a
gold-chalcopyrite-pyrite with a copper content greater than or equal to
0.05 percent. South ore is a gold-pyrite with a copper content less than
0.05 percent. In general the ore types split at 681,800 north
coordinate; however, both occur on either side of this line.
Design of the ultimate pit was based on the results of a Whittle
Lerchs-Grosmann (LG) pit shell analysis. Whittle is a software package
that uses the LG algorithm to determine the approximate shape of a
near-optimal pit shell based on applied cutoff-grade criteria and pit
slopes. These shells are generated from the geologic grade models, and
economic and physical criteria.
In the Whittle analysis, for the ultimate pit design, the pit shells
were allowed to cross the northern Brisas concession boundary. All of
the material in this area was treated as waste rock. Allowing the
crossover into the Cristinas concession area maximizes the metal
recovery on the Brisas concession.
Since the Brisas Project has two primary metals, gold and copper, a
cutoff grade based on a single metal does not account for the value
provided by the other metal. As a result the incremental cutoff grade
based on revenue of $2.76 per tonne was used to estimate reserves.
Revenue of this amount, covers the costs for processing, general and
administration, and selling. Mining costs are not included since an
incremental cutoff assumes mining is a sunk cost.
Using the revenue per tonne cutoff grade of $2.76 and metal prices of
$350 per ounce for gold and $0.90 per pound for copper, PAH calculated
the reserves for the ultimate pit. Total proven and probable reserves
for the Brisas Project are estimated at 414.6 million tonnes of ore at
a gold grade of 0.69 grams per tonne and a copper grade of 0.13
percent. There are a total of 748.3 million tonnes of waste in the pit
resulting in a strip ratio (waste/ore) of 1.81. Table 1-3 summarizes
these reserves by category.
Table 1-3 Gold Reserve Inc. Brisas Project Feasibility Study Technical
Report Reserve Estimate by Category
Reserve Tonnage Au Grade Au Au Cu Grade Cu Cu
Category (000's) g/t grams 000's ounces 000's % tonnes M pounds
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
Waste 748,333 Strip Ratio 1.81
Total In-Pit 1,162,895
PAH believes that the reserve estimate shown in Table 1-3 is reasonable
and meets the CIM standards for a reserve estimate based on CIM
Standards of Mineral Resources and Reserves Definitions and Guidelines
adopted by the CIM council August 20, 2000.
The reserve estimate in Table 1-3 is based on the assumption that a
backslope extends onto the Las Cristinas concession, which will require
a backslope agreement. GRI received approval of their operating plan
from MEM in February 2003, which included the extension of the
backslope onto the Las Cristinas concession. PAH has not reviewed the
GRI MEM approved 2003 operating plan. According to GRI, Corporacion
Venezolana de Guyana (CVG) and Crystallex have indicated to GRI that a
backslope agreements is probable. PAH believes that the backslope
assumption is valid because backslope agreement are a common practice
in the mining industry and both the government agencies and Crystallex
have been favorable toward an agreement. Also, the backslope agreement
would allow the Crystallex/CVG to mine onto the Brisas concession in
the event their mine plan reaches the border area first. In the event
an agreement is not reached the reserve estimate will have to be
reduced significantly.
1.8 Development and Operations
Mine Plan and Operation
PAH developed the mine production schedule based on open-pit mining
methods utilizing hydraulic shovels and 236-tonnes trucks.
Additionally, the schedule targeted a 50/50 blend of the two hard rock
ores. Overall the split between these two ore types is 54 percent
northern hard rock and 46 percent southern hard rock. Because of this
split the target was to have at least 50 percent northern hard rock.
Both of the saprolite ores are stockpiled since they have to be mined
at a rate that exceeds their milling rate in order to meet the hard
rock ore production requirements. Oxide saprolite mining is completed
in Year 3 but milling is not completed until Year 5. Mining of sulfide
saprolite ore ends in Year 4 but milling is not completed until Year 7.
Plans are for the hard rock to be dumped directly into the primary
crusher, near the pit exit on the east side, to minimize stockpiling
and re-handling.
All of the waste rock, except that used for tailings dam construction,
will be disposed of in the waste rock dump located to the west of the
pit. There is the potential for the waste rock dump to be located over
the down-dip extension of the existing ore body. Exploration drilling
is ongoing on the west side of the pit, which could result in the pit
expanding.
Plans are for the Brisas mine to operate two 12-hour shifts per day, 7
days per week for a total of 14 shifts per week. It is envisioned that
mining of ore would occur on both shifts in order to minimize
stockpiling and re-handling. Scheduled work time is 10.5 hours per
shift, that allows 30 minutes for meals, 30 minutes of delays, and 30
minutes lost during shift change.
Plant Operation
The plant will operate an estimated 360 days per year with 90%
availability. Hard rock ore will be processed at a design rate of 3,240
dry tonnes per hour, or 70,000 dry tonnes per day. The hard rock blend
will average 55% North and 45% South ore, equivalent to 25.2 million
tonne per annum. Additionally, 250 tonnes per hour of both the oxide
and sulfide saprolite will be processed until these resources are
exhausted.
Average concentrate production over the life of the mine will be
124,000 tonnes per year at a grade of 24% copper and 89 g/t of gold and
78 g/t silver. The gold content of the concentrate averages 362,000
oz/yr and includes both the flotation gold recovery as well as the gold
recovered in the gravity concentrate. Gold recovered as dore' metal will
average 128,000 oz/yr, Silver in the dore' will average 86,200 oz/yr.
Plant production is planned for 3,720 dry tones per hour of tailings
that will be stored in a 7.5 million square meter tailings pond. About
530 t/hr of these tailings from the cyanidation plant and will be
subjected to Air-SO2 cyanide destruction before being combined with the
concentrator tailings for discharge to the tailings pond.
Project Economics
A base case economic analysis was prepared for the Brisas Project using
a gold price of $400 per ounce, copper price of $1.00 per pound, and
silver price of $5.50 per ounce. Results for the base case are
summarized in Table 1-4. Table 1-5 provides a summary of some of the
key assumptions and additional detail on the results of the analysis.
Cash operating costs are presented for gold on a net of by-product
credit basis. Capital costs are also in Table 1-5. Project payback is
eight years.
Development of the project yields a pre-tax discounted cash flow rate
of return of 12.0% and a net present value of $388 million (5% discount
rate) at a gold price of $400/oz, a silver price of $5.50/oz, and a
copper price of $1.00 per pound. Total pre-tax cash flow is $1.04
billion.
Likewise, the Brisas Project yields an after-tax discounted cash flow
rate of return of 9.1% and a net present value of $207 million (5%
discount rate) at a gold price of $400/oz, a silver price of $5.50/oz,
and a copper price of $1.00 per pound. Total after-tax cash flow is
$711 million.
The total initial capital is approximately $552 million, with an
additional $175 million of sustaining capital-required over the 15.6
year mine life that includes the VAT and Reclamation costs. The cash
operating cost per gold ounce produced is $154 after by-product
credits. When additional production taxes and preproduction stripping
are added to the capital costs, total cash and noncash costs
(fully-loaded) are $263 per ounce.
Reserve estimates were based on a gold price of $350 per ounce, copper
price of $0.90 per pound, and no silver credits. Results from the
economic analysis at these prices are shown in Table 1-4. Since an
after tax total cash flow of $384 million is achieved the economic
criteria for the reserve statement are met.
TABLE 1-4 Gold Reserves, Inc. Brisas Project Feasibility Study
Technical Report Reserve Case and Base Case Economic Evaluation
Reserve Feasibility
Gold Price Case Study Base
($/troy oz) $350 Case $400
Copper Price ($/pound) $0.90 $1.00
Silver Price ($/troy oz) $0.00 $5.50
Project Economics - Pre-Tax ($ millions)
Cash Flow 543 1,037
NPV @ 5% 95 388
NPV @ 10% (111) 76
IRR 6.8% 12.0%
Project Economics - After Tax ($ millions)
Cash Flow 384 711
NPV @ 5% 12 207
NPV @ 10% (157) (33)
IRR 5.2% 9.1%
Cash Operating Cost
($ per oz Gold)(1) $171 $154
Payback (years) 10.8 8.0
1) Net of copper by-product credit.
TABLE 1-5 Gold Reserve Inc. Brisas Project Feasibility Study Technical
Report Base Case Key Economic Assumptions and Results
Base Case Assumptions
Daily Mill Through-Put 70,000 TONNES/DAY
Mine Life 15.6 Years
Gold Price $400/troy ounce
Copper Price $1.00/pound
Silver Price $5.50/troy ounce
Metallurgical Recovery
Plant Recovery - Gold 83.1%
Plant Recovery - Copper 86.6%
Net Payable Metal - Gold 82.4%
Net Payable Metal - Copper 83.0%
Life of Mine Production
Payable Gold 7.59 million troy ounces
Payable Copper 979 million pounds
Average Annual Production
Payable Gold/year 486,000 troy ounces
Payable Copper/year 63 million pounds
Initial Capital Cost 1 (in millions US 2004 $)
MINE $106.7 MILLION
Mill $276.6 million
Tailings $31.6 million
OWNER'S COSTS $10.1 million
Pre-Stripping $15.2 million
Indirect Costs (includes EPCM and Camp) $57.3 million
Contingency $54.8 million
Total Initial Capital $552.3 million
Capital Costs (in millions US 2004 $)
Initial $552 million
SUSTAINING CAPITAL $157 million
VAT Expense $4 million
Reclamation Expenditure $14 million
Total Capital $727 million
Working Capital $39 million
Cash Operating Costs Per Ore Tonne (in US 2004 $)
Mining and Dewatering $1.70/ore tonne
Processing $2.21/ore tonne
G & A $0.39/ ore tonne
Transportation & Freight $0.37/ ore tonne
Smelting & Refining $0.61/ ore tonne
Total Cash Operating Cost/Ore Tonne $5.28/ ore tonne
COST PER OUNCE OF GOLD
Cash Operating Costs2 $154
EXPLOITATION TAX $13
Capital Cost (initial and sustaining) $96
Total Costs3 $263
(1) A value added tax (VAT) of 15% or $69 million, is not included in
the initial capital as it should be recovered within the first few
years of construction and mining.
(2) Net of copper by-product credit.
(3) Net of copper credit and excluding costs incurred to date of
approximately US $80 million
1.9 Conclusions
Adequacy of Procedures
PAH and various other firms and independent consultants have reviewed
the methods and procedures utilized by GRI at the Brisas Project to
gather geological, geotechnical, and assaying information and found
them reasonable and meeting generally accepted industry standards for a
bankable feasibility level of study.
Adequacy of Data
PAH believes that the Brisas Project has conducted exploration and
development sampling and analysis programs using standard practices,
providing generally reasonable results. PAH believes that the resulting
data can effectively be used in the subsequent estimation of resources
and reserves.
Adequacy of Feasibility Study
This Technical Report is based on the Brisas Project Feasibility Study
prepared by Aker Kvaerner Metals Inc., dated January 2005. PAH believes
that this Feasibility Study was prepared using standard industry
practices and provides reasonable results and conclusions.
Compliance with Canadian NI 43-101 Standards
PAH believes that the current drill hole database is sufficient for
generating a feasibility level resource model for use in resource and
reserve estimation. Recovery and cost estimates are based upon
sufficient data and engineering to support a reserve statement.
Economic analysis using these estimates generates a positive cash flow,
which supports a reserve statement.
At a 0.4 gpt AuEq cutoff grade the measured and indicated resource is
502.8 million tonnes at a gold grade of 0.678 gpt and a copper grade of
0.126 percent. Included in this resource is a proven and probable
reserve of 414.6 million tonnes of ore at a gold grade of 0.69 gpt and
a copper grade of 0.13 percent based on a value cutoff of US$2.76 per
tonne.
PAH believes that the resource and reserve estimates have been
calculated utilizing acceptable estimation methodologies. PAH is also
of the opinion that the classification of measured and indicated
resources, stated in Table 17-10, and proven and probable reserves,
stated in Table 1-3, meet the definitions as stated by NI 43-101 and
defined by CIM Standards on Mineral Resources and Reserves Definitions
and Guidelines adopted by the CIM Council on August 20, 2000.
1.10 Recommendations
The Brisas Project Feasibility Study dated January 2005 provides
reasonable results and conclusions and, in PAHs opinion, meets the
requirements of a feasibility study. As the project moves from the
feasibility stage into the design and construction phases there are
areas of the project that should be given additional consideration
beyond what is required for a feasibility level study. Below is a list
of recommendations to consider as the project advances;
Additional exploration drilling should be investigated as the
Brisas deposit is still open along the down-dip direction and the
resource is mostly limited by drilling. Exploration potential on the
Brisas Project also exists to the south and southeast of the proposed
pit where several narrow intercepts of medium to high-grade gold
mineralization have been encountered by drilling. Some of these
intercepts are near the surface topography.
Although three geo-technical studies have been completed in the
past, PAH recommends that a geotechnical consulting firm conduct a
review of the current Feasibility Study pit design parameters
established by the 1999 study to confirm that they are acceptable.
Although PAH has incorporated the recommended pit slopes, the increased
size and depth of the pit may warrant some modifications of the original
pit slope recommendations. Additionally, geotechnical requirements such
as pit slope monitoring and controlled blasting procedures may need to
be incorporated into the operating plan for the mine.
PAH understands that additional metallurgical testwork is
ongoingfor the final process engineering design. Once this work is
completed, the results should be reviewed to determine if modifications
should be made to any of the assumptions used in the Feasibility.
At the present time Vector Colorado LLC. is completing a detailed
study of the characteristics of the waste rock at the Brisas Project.
The results of this study should be reviewed and the appropriate
adjustments, if any, made to the mine plan.
An Environmental Impact Statement (ESIA), to World Bank Standards,
is currently being prepared for the Brisas Project. Once the ESIA is
completed it should be reviewed and the appropriate measures
incorporated in the Brisas Project plan of operation.