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 September 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.
September 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
United States Securities Act of 1933, as amended (the "Securities
Act"), and Section 21E of the United States 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 subsidiaries including 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 could vary considerably from estimates presently
made,
-- volatility of metals prices and estimated metal production,
-- 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 165,000 meters of
drilling comprised of 763 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.
Additional mineralized areas have also been intersected below the
current mineralized resource.
Reserve Estimate Audits
-----------------------
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.
Total Mineral Resource Estimates
--------------------------------
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
Reserve Estimate
----------------
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 estimates are 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
-------- ----------- -------- -------- ----------- ----------- ----------- ----------- -----
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
========= ====== ====== ======= ======= ======= ======= ====
Estimate Update
---------------
In October 1999, the Company announced that additional drilling had
increased the size of the Brisas gold copper deposit to 6.05 million
ounces of gold and 732 million pounds of copper (using $300 per ounce
gold and $0.80 per pound copper), a nine percent increase from the
previously announced proven and probable reserves estimates shown
above. The recent increase in the reserve estimate is based on a
floating cone analysis and, as a result, is not yet categorized as
proven and probable reserves at this time. Additional pit design and
economic analysis, necessary to properly categorize the deposit
increase, are expected to be completed within three months.
Outlook
-------
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 resulting in improved 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 (net of copper revenues), working
capital, initial capital and life of mine capital less sunk costs).
Estimated cost per ounce of gold is determined net of copper revenues.
As a result, the price of copper is a significant factor in
determining net production costs. For example, every $0.10 per pound
change in the price of copper results in a corresponding change in our
cash and total costs by $12 per ounce of gold.
The proposed plant is presently estimated 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
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.
This reorganization resulted in a "deemed disposition" or sale of Gold
Reserve shares held by Canadian shareholders possibly resulting in a
taxable transaction. If you owned Gold Reserve shares on February 4,
1999 you may realize a loss or gain (as the case may be) even though
you did not actually sell the shares on that date. The loss or gain on
the deemed disposition or sale is calculated by the difference between
the amount you paid for such shares owned on February 4, 1999 and the
closing market price (Cdn $2.22 or US $1.438) of the shares on
February 4, 1999. Shareholders should consult their tax advisors as to
the particular tax benefits or consequences (e.g. long-term or short-
term capital gain or loss and new tax basis) as a result of the
reorganization.
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 nine months ended September
30, 1998 and those of Gold Reserve Inc. as of and for the three and
nine months ended September 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 Gold Reserve
Corporation's 1998 Form 20-F. You are urged to refer to the notes to
those audited consolidated financial statements which also apply to
these interim financial statements at September 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
non-current marketable securities (primarily consisting of highly
liquid US treasury and agency obligations, approximated $20 million as
of September 30, 1999. (All amounts are stated in U.S. Dollars).
September 30, December 31,
1999 1998
------------- ------------
Cash and equivalents $ 3,256,394 $ 2,848,189
Marketable securities current 12,111,332 15,531,922
Marketable securities- non-current 5,060,559 5,194,359
----------- -----------
$20,428,285 $23,574,470
=========== ===========
Overall the total financial resources of the Company decreased by
approximately $3.1 million during the first nine months of 1999,
primarily the result of cash utilized by operations of approximately
$1.1 million and investment in property, plant and equipment of
approximately $2.2 million.
The overall corporate expenditures budgeted for 1999, net of estimated
interest income of approximately $1 million, is estimated at $4.3
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 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 nine months ended
September 30, 1999 amounted to $300,150 and $1,495,383 or $0.01 and
$0.07 per share, respectively, compared to consolidated net loss of
$203,659 and $1,425,984 or $0.01 and $0.06 per share, respectively,
for the same periods in 1998. Other income decreased primarily as a
result of lower levels of cash and investments. Expenses for the three
months ended September 31, 1999 increased over the prior period
primarily as a result of one-time separation costs associated with the
elimination of several staff positions. Expenses for the nine months
ended September 31, 1999 decreased from the prior period primarily as
a result of various cost reduction measure undertaken by the Company.
CONSOLIDATED BALANCE SHEET
September 30, 1999 and December 31, 1998 (unaudited)
September 30, December 31,
U.S. Dollars 1999 1998
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 3,256,394 $ 2,848,189
Marketable securities 12,111,332 15,531,922
Deposits, advances and other 379,572 461,684
Accrued interest 96,326 456,418
----------- -----------
Total current assets 15,843,624 19,298,213
Property, plant and equipment, net 43,046,878 41,038,160
Marketable securities 5,060,559 5,194,359
Other 1,326,397 1,388,302
----------- -----------
Total assets $65,277,458 $66,919,034
=========== ===========
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 587,604 $ 785,754
Note payable - KSOP 150,000 414,771
----------- -----------
Total current liabilities 737,604 1,200,525
Minority interest in consolidated
subsidiaries 1,028,450 1,005,237
----------- -----------
Total liabilities 1,766,054 2,205,762
----------- -----------
SHAREHOLDERS' EQUITY
Serial preferred stock, without par
value -- --
Common shares, without par value 91,391,577 101,661,054
Equity units 10,298,221 --
Less, common shares held by affiliates (403,331) (403,331)
Accumulated deficit (37,625,063) (36,129,680)
KSOP debt guarantee (150,000) (414,771)
----------- -----------
Total shareholders' equity 63,511,404 64,713,272
----------- -----------
Total liabilities and shareholders'
equity $65,277,458 $66,919,034
=========== ===========
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999 and 1998
(unaudited)
Three Months Ended Nine Months Ended
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
OTHER INCOME
Interest $ 283,853 $ 328,517 $ 875,922 $ 1,008,775
----------- ----------- ----------- -----------
EXPENSES
General and administrative 264,263 238,161 1,275,151 1,218,768
Technical services 179,868 123,779 502,062 510,174
Corporate communications 68,350 66,897 214,759 303,696
Legal and accounting 24,474 47,630 218,822 198,842
Foreign currency loss 38,251 45,752 123,493 156,772
Interest 2,722 8,377 13,805 25,908
Minority interest in net
income of consolidated
subsidiaries 6,075 1,580 23,213 20,599
----------- ----------- ----------- -----------
584,003 532,176 2,371,305 2,434,759
----------- ----------- ----------- -----------
Net loss $ (300,150) $ (203,659) $(1,495,383) $(1,425,984)
=========== =========== =========== ===========
Net loss per share - basic
and diluted $ (0.01) $ (0.01) $ (0.07) $ (0.06)
=========== =========== =========== ===========
Weighted average common
shares outstanding 22,748,123 22,679,304 22,736,744 22,547,581
=========== =========== =========== ===========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
(unaudited)
U.S. Dollars 1999 1998
----------- -----------
Cash Flows from Operating Activities:
Net loss $(1,495,383) $(1,425,984)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 31,666 29,602
Amortization of premium (discount) on
marketable securities (8,082) 70,519
Foreign currency loss 123,493 156,772
Minority interest in net income of
consolidated subsidiaries 23,213 20,599
Changes in current assets and
liabilities:
Decrease in litigation settlement
held in escrow -- 4,500,000
Net decrease (increase) in current
assets 442,204 (31,984)
Decrease in settlement payable - (4,500,000)
Net decrease in current liabilities (198,150) (235,090)
----------- -----------
Net cash used by operating
activities (1,081,039) (1,415,566)
----------- -----------
Cash Flows from Investing Activities:
Proceeds from maturities of marketable
securities 15,500,000 13,056,187
Purchase of marketable securities (11,937,528) (17,286,570)
Purchase of property, plant and
equipment (2,163,877) (2,027,200)
Other 61,905 122,557
----------- -----------
Net cash provided by (used in)
investing activities 1,460,500 (6,135,026)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of common shares 28,744 409,938
----------- -----------
Net cash provided by financing
activities 28,744 409,938
----------- -----------
CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
For the Nine Months Ended September 30, 1999 and 1998
(unaudited)
U.S. Dollars 1999 1998
----------- -----------
Change in Cash and Cash Equivalents:
Net increase (decrease) in cash and
cash equivalents 408,205 (7,140,654)
Cash and cash equivalents - beginning
of period 2,848,189 12,524,125
----------- -----------
Cash and cash equivalents - end of period $ 3,256,394 $ 5,383,471
=========== ===========
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
November 12, 1999