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 June 30, 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.
June 30, 1999
Interim Financial Report
FORWARD LOOKING STATEMENTS
The information presented in or incorporated by reference in this
interim financial 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 following risks:
-- actual reserves varying considerably from estimates presently made,
-- metals prices and metal production volatility,
-- concentration of operations and assets in Venezuela,
-- regulatory, political and economic risks associated with Venezuelan
operations,
-- inability to obtain adequate funding for future development of the
Brisas property,
-- dependence upon the abilities and continued participation of key
employees,
-- other uncertainties 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 interim financial 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.
OPERATIONS OVERVIEW
The Company's Brisas property, a gold and copper deposit, is located
in the Kilometer 88 mining district in the State of Bolivar,
southeastern Venezuela. Exploration and development activities on the
Brisas property, which commenced in 1992, have included surface
mapping and geochemical sampling, assaying, petrology, mineral studies
and metallurgical sampling as well as approximately 160,000 meters of
drilling comprised of 750 holes.
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), which is contained within an area approximately 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 extensive data compiled by the Company, which serves as the basis
of its 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. 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 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
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 $300 per ounce of gold and $0.80 per pound of copper
(and $3.30/tonne revenue cutoff). The most current estimate is as
follows:
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
========= ====== ====== ======= ======= ======= ======= ====
The Company continues its work to complete a feasibility study on the
Brisas property. The most recent supplement to the pre-feasibility
study, which was originally completed in 1998, contemplates the
implementation of on-site copper processing using the Cominco
Engineering Services Limited (CESL) technology. 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.
Current 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
net production costs.
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.
Management's operational focus continues to be obtaining the required
permits, securing additional sites required for process facilities,
infrastructure, waste deposition and the completion of the final
feasibility study. In addition, continuation or completion of
metallurgical testing, geotechnical and hydrological investigations,
electrical power supply 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.
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.
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 Company'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.
After the reorganization, a shareholder of Gold Reserve Inc. continued
to own an interest in the business, through subsidiary companies, that
in aggregate is essentially the same as before the reorganization.
FINANCIAL OVERVIEW
Because the reorganization discussed above did not take place until
February 1999, the financial statements that are presented in this
interim financial report are those of Gold Reserve Corporation as of
December 31, 1998 and for the three and six months ended June 30, 1998
and those of Gold Reserve Inc. as of and for the three and six months
ended June 30, 1999. The financial position of the consolidated group
subsequent to the reorganization was substantially the same as prior
to the reorganization.
The December 31, 1998 balance sheet is derived 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 June 30, 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.
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 $21.0 million as of
June 30, 1999. (All amounts are stated in U.S. Dollars).
June 30, December 31,
1999 1998
----------- -----------
Cash and equivalents $ 2,927,845 $ 2,848,189
Marketable securities current 15,047,972 15,531,922
Marketable securities- non-current 2,996,267 5,194,359
----------- -----------
$20,972,084 $23,574,470
=========== ===========
Overall the total financial resources of the Company decreased by
approximately $2.6 million during the first six months of 1999,
primarily the result of cash utilized by operations of approximately
$1.0 million and investment in property, plant and equipment of
approximately $1.6 million.
The overall budgeted corporate expenditures for 1999, net of estimated
interest income of approximately $1 million, is estimated at $4.3
million. Of that amount, approximately $2.1 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 on-going exploration activities
other than on the Brisas property. Management anticipates that its
combined cash and investment position will be sufficient to cover
estimated operational and capital expenditures (excluding estimated
mine construction costs) associated with the remainder of 1999 and all
of 2000.
Whether and to what extent additional or alternative financing options
are pursued by the Company depends on a number of important factors,
including the price of gold, if and when mine development activities
are commenced on the Brisas property, management's assessment of the
financial markets, the potential acquisition of additional properties
or projects and the overall capital requirements of the consolidated
corporate group. 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.
Consolidated net loss for the three and six months ended June 30, 1999
amounted to $299,243 and $1,195,233 or $0.01 and $0.05 per share,
respectively, compared to consolidated net loss of $456,786 and
$1,222,325 or $0.02 and $0.05 per share, respectively, for the same
periods in 1998. The change in net loss is primarily attributable to
decreased interest income from lower levels of invested funds,
partially offset by reduced expenditures.
CONSOLIDATED BALANCE SHEETS
June 30, 1999 and December 31, 1998 (unaudited)
June 30, December 31,
U.S. Dollars 1999 1998
----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 2,927,845 $ 2,848,189
Marketable securities 15,047,972 15,531,922
Deposits, advances and other 404,047 461,684
Accrued interest 343,221 456,418
----------- -----------
Total current assets 18,723,085 19,298,213
Property, plant and equipment, net 42,537,832 41,038,160
Marketable securities 2,996,267 5,194,359
Other 1,335,955 1,388,302
----------- -----------
Total assets $65,593,139 $66,919,034
=========== ===========
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 627,970 $ 785,754
Note payable - KSOP 150,000 414,771
----------- -----------
Total current liabilities 777,970 1,200,525
Minority interest in consolidated
subsidiaries 1,022,375 1,005,237
----------- -----------
Total liabilities 1,800,345 2,205,762
----------- -----------
SHAREHOLDERS' EQUITY
Serial preferred stock, without par
value -- --
Common shares, without par value 91,372,817 101,661,054
Equity units 10,298,221 --
Less, common shares held by affiliates (403,331) (403,331)
Accumulated deficit (37,324,913) (36,129,680)
KSOP debt guarantee (150,000) (414,771)
----------- -----------
Total shareholders' equity 63,792,794 64,713,272
----------- -----------
Total liabilities and shareholders'
equity $65,593,139 $66,919,034
=========== ===========
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three and Six Months Ended June 30, 1999 and 1998 (unaudited)
Three Months Ended Six Months Ended
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
OTHER INCOME
Interest $ 305,951 $ 321,001 $ 592,069 $ 680,258
----------- ----------- ----------- -----------
EXPENSES
General and administrative 280,230 314,715 1,010,888 980,607
Technical services 130,110 189,560 322,194 386,395
Corporate communications 68,669 108,836 146,409 236,799
Legal and accounting 69,385 63,348 194,348 151,212
Foreign currency loss 40,501 85,146 85,242 111,020
Interest 5,218 6,302 11,083 17,531
Minority interest in net
income of consolidated
subsidiaries 11,081 9,880 17,138 19,019
----------- ----------- ----------- -----------
605,194 777,787 1,787,302 1,902,583
----------- ----------- ----------- -----------
Net loss $ (299,243) $ (456,786) $(1,195,233) $(1,222,325)
=========== =========== =========== ===========
Net loss per share - basic
and diluted $ (0.01) $ (0.02) $ (0.05) $ (0.05)
=========== =========== =========== ===========
Weighted average common
shares outstanding 22,731,200 22,518,961 22,731,022 22,480,680
=========== =========== =========== ===========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998 (unaudited)
U.S. Dollars 1999 1998
----------- -----------
Cash Flows from Operating Activities:
Net loss $(1,195,233) $(1,222,325)
Adjustments to reconcile net loss to
net cash used by operating
activities:
Depreciation 20,607 20,867
Amortization of premium on held-
to-maturity securities 30,042 50,837
Foreign currency loss 85,242 111,020
Minority interest in net income of
consolidated subsidiaries 17,138 19,019
Changes in current assets and
liabilities:
Decrease in litigation settlement
held in escrow -- 4,500,000
Net decrease (increase) in
current assets 170,834 (17,882)
Decrease in settlement payable -- (4,500,000)
Net increase in current
liabilities (157,784) (188,479)
----------- -----------
Net cash used by operating
activities (1,029,154) (1,191,179)
----------- -----------
Cash Flows from Investing Activities:
Proceeds from maturities of marketable
securities 6,000,000 13,056,187
Purchase of marketable securities (3,348,000) (8,160,385)
Purchase of property, plant and
equipment (1,605,521) (1,429,925)
Other 52,347 92,156
----------- -----------
Net cash provided by
investing activities 1,098,826 3,558,033
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of common shares 9,984 54,705
----------- -----------
Net cash provided by
financing activities 9,984 54,705
----------- -----------
CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
For the Six Months Ended June 30, 1999 and 1998 (unaudited)
U.S. Dollars 1999 1998
----------- -----------
Change in Cash and Cash Equivalents:
Net increase in cash and cash
equivalents $ 79,656 $ 2,421,559
Cash and cash equivalents - beginning
of period 2,848,189 12,524,125
----------- -----------
Cash and cash equivalents - end of period $ 2,927,845 $14,984,684
=========== ===========
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
August 5, 1999