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 Quarter Ended March 31, 1999
GOLD RESERVE INC.
Address Of Principal Executive Offices: 926 West Sprague Avenue
Suite 200
Spokane, Washington 99201
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):
GOLD RESERVE INC.
March 31, 1999
Interim Financial Report
OPERATIONS OVERVIEW
The Brisas property is located in the Kilometer 88 mining district in
the State of Bolivar, southeastern Venezuela. Historical surface and
alluvial mining by local miners helped identify the property as a
target for gold exploration. Exploration and development activities,
commenced in 1992, have included surface mapping and geochemical
sampling, drilling, assaying, petrology, mineral studies and
metallurgical sampling as well as approximately 160,000 meters of
drilling comprised of 750 holes. These activities confirmed the
presence of a large deposit of stratabound gold-copper mineralization,
which is presently contained within an area over 1,900 meters long and
500 to 900 meters wide. Scattered drill holes to the west of the main
body of the deposit demonstrate that mineralization continues for an
unknown distance down dip to the west and to the north. Mineralized
areas have also been intersected below the current deposit.
The Brisas property is presently estimated to contain a total mineral
resource of 8.71 million ounces of gold and approximately 1.06 billion
pounds of copper (based on 0.5 gram per tonne gold equivalent cut-
off). The mineral resource based on 0.5 gold equivalent cut-off grade
is summarized in the following tables:
Measured Indicated Inferred Total
Au Eq ------------------------- ------------------------- ------------------------- -------------------------
Cutoff Au Cu Au Cu Au Cu Au Cu
Grade kt (g/t) (%) kt (g/t) (%) kt (g/t) (%) kt (g/t) (%)
------ ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
0.50 33,386 0.833 0.136 258,286 0.738 0.128 72,623 0.723 0.145 364,296 0.744 0.132
Measured** Indicated** Inferred** Total**
Au Eq ------------------------- ------------------------- ------------------------- -------------------------
Cutoff Au Cu Au Cu Au Cu Au Cu
Grade oz. lb. oz. lb. oz. lb. oz. lb.
------ ------- ------- ------- ------- ------- ------- ------- -------
0.50 0.894 100 6.128 729 1.688 232 8.710 1,061
** in millions
The Company continues its work to complete a feasibility study on the
Brisas property. Since the completion of the initial pre-feasibility
report in 1998, a number of supplements have been prepared. Most
recently, the Company announced that bench scale testing of the
Cominco Engineering Services Limited (CESL) on-site copper process was
successful. The CESL bench scale test achieved 99 percent recovery of
both gold and copper compared with typical off-site smelter recovery
and payable metal of 95 to 96 percent after deductions. The CESL
process utilizes an autoclave for pressure oxidation of the
concentrates followed by a series of leaching sequences to recover the
copper and gold. Implementation of the CESL process would eliminate
significant transportation costs for the copper gold concentrates to
an off-site smelter and improve the Brisas project economics.
Revised cost estimates (U.S. Dollars), in accordance with the Gold
Institute guidelines, result in cash operating costs of $177 per ounce
of gold net of copper revenues (using $0.80 per pound copper and the
CESL process). Total after-tax costs are estimated at $262 per ounce
of gold (including operating costs, working capital, initial capital
and life of mine capital net of copper revenues less sunk costs).
Costs for the Brisas project are determined net of copper revenues.
As a result, the price of copper is a significant factor in
determining production costs.
The data compiled by the Company, which serves as the basis of the
pre-feasibility study, has been closely scrutinized by its
consultants. Behre Dolbear & Company, Inc. ("Behre Dolbear")
originally audited the Company's data collection procedures in 1997.
In 1998, Behre Dolbear completed an additional audit of the Company's
modeling and reserve methodology and in early 1999 verified the
published reserve estimates and confirmed a significant decrease in
the waste to ore ratio.
In total, Behre Dolbear's audits have concluded that technical data
collection procedures meet or exceed accepted industry standards;
assay laboratories provide reliable and acceptable results; the
database compiled by the Company is of a quality appropriate for
utilization in a reserve study suitable for obtaining financing;
estimating techniques used were an accurate representation for the
reserves; drill hole spacing was sufficient to generate future
estimates of proven and probable reserves; the database was correct
and reliable; the reserve risk for the project is low and there is
upside potential for additional reserves at the Brisas property
because the mineralization can be extrapolated with quite high
confidence beyond the current drilling in the down dip direction and
to the north.
The audited reserve estimates contained in the most recent pre-
feasibility supplement have been prepared in accordance with reporting
requirements of applicable Canadian Securities Commissions and
calculated using both $300 per ounce of gold and $0.80 per pound of
copper as well as $335 per ounce of gold and $0.90 per pound of copper
(and $3.30/tonne revenue cutoff). Both calculations are presented in
tabular form below.
Reserve Au Cu Waste Total
tonnes Au Grade Cu Grade ounces pounds tonnes tonnes Strip
Class (thousands) (g/t) (%) (thousands) (thousands) (thousands) (thousands) Ratio
-------- ----------- -------- -------- ----------- ----------- ----------- ----------- -----
Pit design using $300/oz Au and $0.80/lb Cu
Proven 30,504 0.857 0.140 841 94,166
Probable 192,566 0.764 0.132 4,728 560,484
Total 223,070 0.776 0.133 5,569 654,650 321,763 544,833 1.44
Reserve Au Cu Waste Total
tonnes Au Grade Cu Grade ounces pounds tonnes tonnes Strip
Class (thousands) (g/t) (%) (thousands) (thousands) (thousands) (thousands) Ratio
-------- ----------- -------- -------- ----------- ----------- ----------- ----------- -----
Pit design using $335/oz Au and $0.90/lb Cu
Proven 33,106 0.821 0.139 874 101,467
Probable 215,527 0.725 0.136 5,021 646,323
Total 248,633 0.737 0.136 5,895 747,790 321,850 570,483 1.29
The proposed plant is presently expected to cost between $350 and $400
million and process an estimated 55,000 tonnes per day, yielding an
average annual production of as much as 355,000 ounces of gold and 43
million pounds of copper, over a mine life of 13 years. Construction
of the planned facility is expected to take approximately 18 to 24
months, with commissioning and achievement of commercial production
expected shortly thereafter. The Brisas property economics and plant
design are subject to the results of the final feasibility study which
management expects to complete in 2000.
The Company recently re-commenced drilling on the Brisas property.
This drill program could add 750 thousand ounces of gold and 100
million pounds of copper to the proven and probable reserves. The
potential to increase reserves is high because the mineralization can
be extrapolated with high confidence to extend beyond the current
drilling in the down dip direction and to the north. This drilling
program is expected to include approximately 5,000 meters of core at a
cost of approximately $400,000.
Management's operational focus continues to be obtaining the required
permits, securing additional sites required for process facilities,
infrastructure, waste disposition and the completion of the final
feasibility study. In addition, continuation or completion of
metallurgical testing, geotechnical and hydrological investigations,
electrical power supply and concentrate sales agreements, and
development and condemnation drilling will occur prior to completion
of the final feasibility study. It is estimated that an additional $3
to $4 million will be spent for completion of the final feasibility
study.
FINANCIAL OVERVIEW
The total financial resources of the Company, cash plus current and
long-term investments (primarily consisting of highly liquid US
treasury and agency obligations), approximated $22.5 million as of
March 31, 1999. (All amounts are stated in U.S. Dollars)
March 31, December 31,
1999 1998
----------- ------------
Cash and equivalents $ 3,101,805 $ 2,848,189
Marketable securities current 13,512,939 15,531,922
Marketable securities- non-current 5,839,186 5,194,359
----------- -----------
$22,453,930 $23,574,470
=========== ===========
Overall the total financial resources of the Company decreased by
approximately $1.1 million during the first three months of 1999,
primarily the result of cash utilized by operations of approximately
$0.5 million and investment in property, plant and equipment of
approximately $0.6 million.
The overall budgeted corporate expenditures for 1999, net of estimated
interest income of approximately $1 million, is estimated at $4.6
million. Of that amount, approximately $2.4 million will be spent on
the Brisas property, primarily towards the further completion of the
feasibility study. The remaining budgeted expenditures relate to
general corporate activities including future exploration activities
other than on the Brisas property. Management anticipates that its
current cash and investment positions are adequate to cover estimated
operational and capital expenditures (excluding estimated mine
construction costs) associated with the remainder of 1999 and all of
2000.
Future construction costs and development expenses, and the cost of
placing the Brisas property or additional future properties into
production, if warranted, are expected to be financed by a combination
of the sale of additional common stock, bank borrowings or other
means. Management however, does not plan to raise funds through the
sale of equity or debt for the next 18 to 24 months.
Whether and to what extent additional or alternative financing options
are pursued by the Company depends on a number of important factors,
including if and when mine development activities are commenced on the
Brisas property, management's assessment of the financial markets, the
price of gold, the potential acquisition of additional properties or
projects and the overall capital requirements of the consolidated
corporate group.
Consolidated net loss for the three months ended March 31, 1999
amounted to $895,990 or $0.04 per share compared to consolidated net
loss of $765,539 or $0.03 per share for the same period in 1998.
Other income for the current three month period decreased from the
comparable period in 1998 due to decreased interest income from lower
average levels of invested cash as well as a decrease in the rate of
return.
General and administrative expense as well as legal and accounting
expense for the current three month period increased from the
comparable period in 1998 primarily due to expenses associated with
the completion of the reorganization (see below). This increase was
partially offset by a reduction in corporate communication expense as
a result of lower expenditures associated with compensation and
printing and collateral material.
REORGANIZATION
In February 1999, the shareholders of Gold Reserve Corporation (a U.S.
corporation) approved a plan of reorganization whereby Gold Reserve
Corporation became a subsidiary of Gold Reserve Inc.(a Canadian
corporation), the successor issuer. The primary purpose of the
formation of a Canadian parent was to expand the group's profile among
Canadian investors who generally are significant investors in resource
companies. Gold Reserve Corporation previously made filings with the
U.S. Securities and Exchange Commission and The Toronto Stock Exchange
along with the applicable Canadian Securities Commissions.
Except for certain electing U.S. shareholders, each shareholder of
Gold Reserve Corporation received one Gold Reserve Inc. Class A common
share for each common share owned of Gold Reserve Corporation. After
the reorganization, a shareholder of Gold Reserve Inc. continues to
own an interest in the business, through subsidiary companies, that in
aggregate is essentially the same as before the reorganization.
As part of the reorganization, U.S. holders of Gold Reserve
Corporation could elect to receive equity units in lieu of Gold
Reserve Inc. Class A common shares. An equity unit is comprised of
one Gold Reserve Inc. Class B common share and one Gold Reserve
Corporation Class B common share. Equity units were provided to U.S.
holders who would have had a substantial taxable gain upon receipt of
Gold Reserve Inc. Class A common shares so they might defer a
significant portion of such gain. The equity units have voting and
dividend rights similar to the Gold Reserve Inc. Class A common
shares, are substantially equivalent to a Class A common share and are
immediately convertible into Gold Reserve Inc. Class A common shares
upon compliance with certain procedures. Equity units are not listed
for trading on any stock exchange, but, subject to compliance with
applicable federal, provincial and state securities laws, may be
transferred. Unless otherwise noted, general references to common
shares of the company include Class A common shares and Class B common
shares as a combined group.
Because the reorganization did not take place until February 1999, the
financial statements that are presented in this quarterly report are
those of Gold Reserve Corporation as of December 31, 1998 and for the
three months ended March 31, 1998 and those of Gold Reserve Inc. as of
and for the three months ended March 31, 1999. The financial position
of the consolidated group subsequent to the reorganization was
substantially the same as prior to the reorganization except for the
exchange of approximately 2.3 million Gold Reserve Corporation common
shares for an equal number of equity units in lieu of Gold Reserve
Inc. Class A common shares.
FINANCIAL INFORMATION
The December 31, 1998 balance sheet is duplicated from the audited
consolidated financial statements as set forth in the Company's 1998
Form 20-F. You are urged to refer to the notes to those audited
consolidated financial statements which apply to these interim
financial statements at March 31, 1999 and are not repeated here. The
financial information given in the accompanying unaudited financial
statements reflects all normal, recurring adjustments which, in the
opinion of management, are necessary for a fair presentation for the
periods reported.
FORWARD LOOKING STATEMENTS
The information presented in or incorporated by reference in this
Quarterly Report includes both historical information and "forward-
looking statements" (within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) relating to the future results of Gold Reserve Inc. (the
"Company"), which involve risks and uncertainties. Except where the
context indicates otherwise, "Company" means Gold Reserve Inc. and its
predecessor Gold Reserve Corporation.
Numerous factors could cause actual results to differ materially from
those in the forward-looking statements, including without limitation
the risk that actual reserves may vary considerably from estimates
presently made, the impact of metals prices and metal production
volatility, the Company's concentration of operations and assets in
Venezuela, regulatory, political and economic risks associated with
Venezuelan operations, the Company's ability to obtain adequate
funding for future development of the Brisas property, dependence upon
the abilities and continued participation of certain key employees of
the Company, and the risks normally incident to the operation and
development of mining properties.
Investors are cautioned not to put undue reliance on forward-looking
statements, and should not infer that there has been no change in the
affairs of the Company since the date of this Quarterly Report that
would warrant any modification of any forward-looking statement made
in this document or other documents filed periodically with securities
regulators. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf
are expressly qualified in their entirety by this notice. The Company
disclaims any intent or obligation to update publicly these forward-
looking statements, whether as a result of new information, future
events or otherwise.
YEAR 2000 READINESS
Management has made an assessment of its requirements regarding
Year 2000 issues. This assessment focused on three major areas;
(1) internal systems under the control of the Company; (2) systems of
third party suppliers or contractors; and (3) systems maintained by
governmental agencies and major public and private service providers
located in Venezuela. The Company's present business operations are
not dependent upon sophisticated information systems. The Company
does not have any material relationships with third party suppliers at
this time. Future material third party relationships are expected to
be evaluated as to the level of Year 2000 readiness. The Company is
not aware of any published reports documenting the Year 2000
compliance efforts and progress of such governmental agencies and
major public and private service providers located in Venezuela.
Compliance-related failures of future material third-party suppliers
and contractors providing services directly to the Company or failures
related to governmental agencies and public and private service
providers within Venezuela could be significant and could cause an
interruption of business that could be material to the Company. Based
on the current information available, the significance of Year 2000
difficulties which might be experienced by others outside the
Company's control, the magnitude of future business disruption, if
any, and the costs of such disruption cannot be determined at this
time. Management's ongoing evaluation of Year 2000 readiness is
expected to cost less than $10,000.
CONSOLIDATED BALANCE SHEETS
March 31, 1999 and December 31, 1998 (unaudited)
March 31, December 31,
U.S. Dollars 1999 1998
----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 3,101,805 $ 2,848,189
Marketable securities 13,512,939 15,531,922
Deposits, advances and other 422,845 461,684
Accrued interest 234,472 456,418
----------- -----------
Total current assets 17,272,061 19,298,213
Property, plant and equipment, net 41,636,824 41,038,160
Marketable securities 5,839,186 5,194,359
Other 1,353,771 1,388,302
----------- -----------
Total assets $66,101,842 $66,919,034
=========== ===========
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 845,952 $ 785,754
Note payable - KSOP 414,771 414,771
----------- -----------
Total current liabilities 1,260,723 1,200,525
Minority interest in consolidated
subsidiaries 1,011,294 1,005,237
----------- -----------
Total liabilities 2,272,017 2,205,762
SHAREHOLDERS' EQUITY
Serial preferred stock, without par value -- --
Common shares, without par value 91,375,376 101,661,054
Equity units 10,298,221 --
Less, common shares held by affiliates (403,331) (403,331)
Accumulated deficit (37,025,670) (36,129,680)
KSOP debt guarantee (414,771) (414,771)
----------- -----------
Total shareholders' equity 63,829,825 64,713,272
----------- -----------
Total liabilities and shareholders'
equity $ 66,101,842 $66,919,034
=========== ===========
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1999 and 1998 (unaudited)
U.S. Dollars 1999 1998
----------- -----------
OTHER INCOME
Interest $ 286,118 $ 359,257
----------- -----------
EXPENSES
General and administrative 730,658 665,892
Technical services 192,084 196,835
Corporate communications 77,740 127,963
Legal and accounting 124,963 87,864
Foreign currency loss 44,741 25,874
Interest 5,865 11,229
Minority interest in net income of
consolidated subsidiaries 6,057 9,139
----------- -----------
1,182,108 1,124,796
----------- -----------
Net loss $ (895,990) $ (765,539)
=========== ===========
Net loss per share - basic and diluted $ (0.04) $ (0.03)
=========== ===========
Weighted average common shares
outstanding 22,730,840 22,441,829
=========== ===========
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1999 and 1998 (unaudited)
U.S. Dollars 1999 1998
----------- -----------
Cash Flows from Operating Activities:
Net loss $ (895,990) $ (765,539)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 9,683 11,244
Amortization of premium on held-to-
maturity securities 22,156 10,694
Foreign currency loss 44,741 25,874
Minority interest in net income of
consolidated subsidiaries 6,057 9,139
Changes in current assets and liabilities:
Decrease in litigation settlement held
in escrow -- 4,500,000
Net decrease (increase) in current assets 260,785 (135,446)
Decrease in settlement payable -- (4,500,000)
Net increase in current liabilities 60,198 154,684
----------- -----------
Net cash used by operating activities (492,370) (689,350)
----------- -----------
Cash Flows from Investing Activities:
Proceeds from maturities of marketable
securities 4,000,000 10,056,187
Purchase of marketable securities (2,648,000) (6,086,598)
Purchase of property, plant and
equipment (653,088) (729,790)
Other 34,531 31,484
----------- -----------
Net cash provided by investing activities 733,443 3,271,283
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of common shares 12,543 31,000
----------- -----------
Net cash provided by financing activities 12,543 31,000
----------- -----------
Change in Cash and Cash Equivalents:
Net increase in cash and cash equivalents 253,616 2,612,933
Cash and cash equivalents - beginning
of period 2,848,189 12,524,125
----------- -----------
Cash and cash equivalents - end of period $ 3,101,805 $15,137,058
=========== ===========
SIGNATURE
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.
By: s/ Robert A. McGuinness
Vice President Finance & CFO
May 27, 1999