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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2001
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, 2001
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., its predecessor Gold Reserve Corporation and
subsidiaries.
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 property commenced in 1992 and
have included over 165,000 meters of drilling. The Brisas property is presently
estimated to contain a mineral resource of 9.9 million ounces of gold and
approximately 1.13 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. The mineralization continues for an
unknown distance down dip to the west and to the north and has also been
intersected below the current mineralized resource.
The presently proposed Brisas mining facility is estimated to cost between $350
and $400 million and process an estimated 55,000 tonnes per day, yielding an
average annual production of approximately 362,000 ounces of gold and 46 million
pounds of copper, over a mine life of 13 years. The plan for the development of
the property as it presently exists includes on-site copper processing utilizing
an autoclave for pressure oxidation of the concentrates followed by a series of
leaching sequences to recover the copper and gold. Implementation of this
process would eliminate significant transportation costs for the copper gold
concentrates to an off-site smelter resulting in improved Brisas project
economics. Construction of the proposed mining facility, if warranted, is
expected to take approximately 18 to 24 months.
Current cost estimates (U.S. Dollars), in accordance with the Gold Institute
guidelines, result in cash operating costs of $153 per ounce of gold net of
copper revenues (using $300 per ounce gold, $0.90 per pound copper and on-site
copper processing). Total after-tax costs are estimated at $243 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. 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 the
project's cash and total costs of $13 per ounce of gold.
Reserve Estimate Audits
The extensive data compiled by the Company, which serves as the basis of its
pre-feasibility report, has been closely scrutinized by Behre Dolbear & Company,
Inc. ("Behre Dolbear") and a number of other consultants. Behre Dolbear
initially audited the Company's data collection procedures in 1997, completed an
additional audit of the Company's modeling and reserve methodology in 1998 and
subsequently verified the reserve estimates in early 1999.
The results of the audits determined that the technical data collection
procedures used by the Company meet or exceed accepted industry standards; the
assay laboratories utilized provided 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; the estimating techniques used
by the Company were an accurate representation for the reserves; the 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 reserve and resource estimates set forth in this document have been
prepared in accordance with the disclosure requirements of applicable Canadian
Securities Commissions. Such estimates will not qualify as a commercially
mineable ore body under standards promulgated by the U.S. Securities and
Exchange Commission until the economic viability of the project is established
and documented in a final feasibility study.
Mineral Resource Estimates
The Brisas property is estimated to contain a total mineral resource of 9.9
million ounces of gold and approximately 1.13 billion pounds of copper (based on
0.5 gram per tonne gold equivalent cut-off). The mineral resource, effective
November 1999, 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) (%)
- --------------------------------------------------------------------------------------------------------------
0.50 221,042 0.805 0.111 145,028 0.690 0.155 40,103 0.733 0.110 406,173 0.757 0.127
==============================================================================================================
(millions) 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 5.721 541.0 3.217 495.7 0.945 97.3 9.883 1,134.0
==============================================================================================================
Mineral Reserve Estimate
The Brisas property is presently estimated to contain approximately 235 million
tonnes of ore with an average grade of 0.79 grams per tonne gold and 0.14%
copper and a waste to ore ratio of 1.63:1. The mineral reserve estimate,
effective January 2000, has been prepared in accordance with reporting
requirements of applicable Canadian Securities Commissions and is 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
- ----------------------------------------------------------------------------------------------------
Proven 187,443 0.814 0.119 4,906 491,841
Probable 47,411 0.682 0.205 1,040 214,309
- ----------------------------------------------------------------------------------------------------
Total 234,854 0.787 0.136 5,946 706,150 383,912 618,766 1.63
====================================================================================================
Outlook
The ultimate design and future construction of the plant is subject to the
results of the final feasibility study. Management continues to focus on
obtaining permits, securing additional process facility sites, developing
infrastructure and waste deposition. Additional metallurgical, geotechnical and
hydrological investigations, negotiations related to such things as electrical
power supply and development and condemnation drilling will occur as a part of
the completion of the final feasibility study. The completion of the final
feasibility and the timing of future development of the Brisas property will be
dictated by, among other issues, future gold and copper prices.
Brisas-Cristinas Combined Project
As a result of the sustained low-level gold price, we have evaluated
alternatives to the development of the Brisas property on a stand-alone basis.
We have concluded that the best alternative and the most rational way to develop
the Brisas property, is to combine it with the contiguous Cristinas property and
jointly develop the properties as one large project. We have presented our
proposal to combine the two projects to various Venezuelan government decision
makers and it has received considerable support.
The Cristinas project is located to the north and is contiguous (one ore body)
to the Brisas property. This project is controlled by MINCA, a 30%-70% joint
venture between the Corporacion Venezolana de Guayana (CVG), a Venezuelan
government corporation, and Placer Dome Inc. of Vancouver, British Columbia,
respectively. MINCA maintains control of Cristinas 4, 5, 6 & 7 in the case of
gold mineralization in the form of a CVG work contract and in the case of copper
through a MEM concession. In 1999, MINCA placed the project on care and
maintenance and, in 2000, the joint venture partners agreed to a one-year
extension (which expires July 16, 2001) to their relationship. As required by
the extension agreement, MINCA engaged Scotia Capital of Toronto to explore
various alternatives and solicit third-party interest for the development of the
Cristinas project.
We believe these deposits should be exploited in combination due to the
potential enhanced return on investment afforded by a single infrastructure
package, eliminating duplication and offering both cost savings and a reduced
environmental impact; more efficient mining through a single open pit, lowering
operating costs and allowing access to otherwise unavailable ore between the
Brisas and Cristinas deposits and; a single process plant offering a lower
capital cost for each ounce of gold produced. If combined, the project could
potentially contain a world-class mineral reserve.
The Government of Venezuela desires to recommence construction and initiate
mining activities at the Cristinas project and is evaluating various
alternatives including this proposal to combine the projects. However, the
development of the proposed combined project is dependent upon, among other
things, the final decision of the Venezuelan government, participation by one or
more major gold producers, completion of a final feasibility study, the price of
gold and copper, and obtaining adequate financing and the appropriate
environmental and operating permits. For these reasons, there can be no
assurances that the proposal will proceed or, if it does, what the Company's
interest in the combined project might be.
Financial Overview
The consolidated financial statements contained herein have been prepared in
accordance with accounting principles generally accepted in Canada, which differ
in certain respects from accounting principles generally accepted in the United
States of America. You are urged to refer to the December 31, 2000 audited
consolidated financial statements. The notes contained in the annual financial
statements also apply to these interim financial statements at March 31, 2001
and are not repeated herein.
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. (All
amounts are stated in U.S. Dollars).
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), decreased $0.4 million from December 31, 2000 to
approximately $16.5 million as of March 31, 2001.
March 31, December 31,
2001 2000
Cash and equivalents $ 11,288,785 $ 10,108,111
Marketable securities - current 4,447,795 3,045,421
Marketable securities - non-current 796,267 3,790,030
$ 16,532,847 $ 16,943,562
Planned expenditures for 2001 are estimated at $3.1 million. Approximately $1.1
million will be spent directly on the Brisas property, primarily on development
activities. The remaining expenditures relate to corporate management of the
Brisas property, exploration activities other than on the Brisas property and
general corporate activities including the advancement of our proposal to
combine Brisas with the Cristinas property. Interest income for 2001 is
projected to be approximately $0.9 million. Management anticipates that its
combined cash and investment position will be sufficient to cover estimated
operational and capital expenditures (excluding estimated mine construction
costs) beyond 2001.
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 does not plan to raise funds
through the sale of equity or debt in the near future. 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,
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.
Consolidated net loss for the three months ended March 31, 2001 amounted to
$140,279 or $0.01 per share compared to consolidated net loss of $543,681 or
$0.02 per share for the same period in 2000. The net loss for the three month
period ended March 31, 2001 decreased from the prior period primarily as a
result of gains on sales of marketable securities in 2001 as compared to losses
on sales of marketable securities during the same three-month period in 2000.
Certain reclassifications of the 2000 financial statements have been made to
conform with the 2001 presentation. These reclassifications had no effect on the
net loss or accumulated deficit as previously reported.
As of May 30, 2001, the Company had the following shares, equity units and share
options outstanding:
Class A common 22,132,333
Equity units* 1,038,867
Options to purchase Class A common shares 3,338,954
*An equity unit consists of one class B common share of Gold Reserve Inc. and
one class B common share of Gold Reserve Corporation. Equity units are
convertible into class A common shares of Gold Reserve Inc. on a one to one
basis.
CONSOLIDATED BALANCE SHEET
March 31, 2001 and December 31, 2000 (unaudited)
March 31, December 31,
U.S. Dollars 2001 2000
- -------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 11,288,785 $ 10,108,111
Marketable securities 4,447,795 3,045,421
Deposits, advances and other 394,882 370,044
Accrued interest 2,619 53,046
Total current assets 16,134,081 13,576,622
Property, plant and equipment, net 45,206,434 44,902,369
Marketable securities 796,267 3,790,030
Other 1,229,807 1,233,301
Total assets $ 63,366,589 $ 63,502,322
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 331,008 $ 335,103
Total current liabilities 331,008 335,103
Minority interest in consolidated
subsidiaries 1,045,654 1,037,013
Total liabilities 1,376,662 1,372,116
SHAREHOLDERS' EQUITY
Serial preferred stock,
without par value
Common shares and equity units,
without par value 102,105,986 102,105,986
Less, common shares held
by affiliates (403,331) (403,331)
Accumulated deficit (39,627,619) (39,487,340)
KSOP debt (85,109) (85,109)
Total shareholders' equity 61,989,927 62,130,206
Total liabilities and
shareholders' equity $ 63,366,589 $ 63,502,322
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2001 and 2000 (unaudited)
U.S. Dollars 2001 2000
OTHER INCOME
Interest $ 233,108 $ 263,813
Gain on sale of marketable securities 103,763
336,871 263,813
EXPENSES
General and administrative 249,762 263,693
Technical services 104,926 115,161
Corporate communications 64,593 56,806
Legal and accounting 23,318 33,531
Foreign currency loss 25,910 38,151
Loss on sale of marketable securities 283,507
Interest 3,659
Minority interest in net income
of consolidated subsidiaries 8,641 12,986
477,150 807,494
Net loss $ (140,279) $ (543,681)
Net loss per share - basic and diluted $ (0.01) $ (0.02)
Weighted average common
shares outstanding 23,171,200 23,101,200
CONSOLIDATED STATEMENT OF ACCUMULATED DEFICIT
For the Three Months Ended March 31, 2001 and 2000 (unaudited)
U.S. Dollars
Accumulated deficit, December 31, 2000 $ (39,487,340)
Net loss (140,279)
Accumulated deficit, March 31, 2001 $ (39,627,619)
Accumulated deficit, December 31, 1999 $ (38,176,276)
Net loss (543,681)
Accumulated deficit, March 31, 2000 $ (38,719,957)
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2001 and 2000 (unaudited)
U.S. Dollars 2001 2000
Cash Flows from Operating Activities:
Net loss $ (140,279) $ (543,681)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 11,247 10,967
Amortization of discount on
marketable securities (1,242) (11,481)
Foreign currency loss 25,910 38,151
Minority interest in net income of
consolidated subsidiaries 8,641 12,986
Net (gain) loss on sale of marketable securities (103,763) 283,507
Changes in current assets and liabilities:
Net decrease in current assets 25,589 68,223
Net decrease in current liabilities (4,095) (3,891)
Net cash used by operating activities (177,992) (145,219)
Cash Flows from Investing Activities:
Proceeds from the sale and maturity of
marketable securities 4,196,394 7,607,312
Purchase of marketable securities (2,500,000) (3,172,847)
Purchase of property, plant and equipment (341,222) (387,102)
Other 3,494 31,245
Net cash provided by investing activities 1,358,666 4,078,608
Change in Cash and Cash Equivalents:
Net increase in cash and cash equivalents 1,180,674 3,933,389
Cash and cash equivalents - beginning of period 10,108,111 4,377,521
Cash and cash equivalents - end of period $ 11,288,785 $ 8,310,910
The accompanying notes are an integral part of the consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in Canada for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in Canada for complete financial statements. In the opinion of management, the
accompanying unaudited consolidated financial statements contain all adjustments
necessary to present fairly the financial position of Gold Reserve Inc. and
subsidiaries (the "Company") as of March 31, 2001, the results of operations for
the three months ended March 31, 2001 and 2000, and the cash flows for the three
months ended March 31, 2001 and 2000. The results of operations for the three
months ended March 31, 2001 and 2000 are not necessarily indicative of the
results to be expected for the full year. These financial statements should be
read in conjunction with the consolidated financial statements including notes
thereto included in the Company's fiscal 2000 Form 20-F.
2. Geographic Segments
United States Venezuela Consolidated
2001
Net loss $ 126,784 $ 13,495 $ 140,279
2000
Net loss $ 506,904 $ 36,777 $ 543,681
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 30, 2001