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, 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.
June 30, 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 include 165,000 meters
of drilling. The mineral resource on the Brisas property is estimated at 9.9
million ounces of gold and approximately 1.13 billion pounds of copper. The
mineralization is contained within an area approximately 1,900 meters long and
500 to 900 meters wide and continues for an unknown distance down dip to the
west, to the north and below the current mineralized resource.
The Brisas mining facility is presently estimated to cost between $350 and $400
million and will 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.
Based on Gold Institute guidelines, cash operating costs are estimated at $153
per ounce of gold (using $300 per ounce gold, $0.90 per pound copper and
on-site copper processing) and total after-tax costs are estimated at $243 per
ounce of gold (including operating costs, working capital, initial capital and
life of mine capital less sunk costs). Estimated cost per ounce of gold is
determined net of copper revenues.
Reserve Estimate Audits
Considerable data compiled by the Company has been closely scrutinized by Behre
Dolbear & Company, Inc. ("Behre Dolbear") and a number of other consultants.
Behre Dolbear has audited the Company's data collection procedures, its
modeling and reserve methodology and reserve estimates.
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 the property 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 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(1) 234,854 0.787 0.136 5,946 706,150 383,912 618,766 1.63
====================================================================================================
(1) Using $300/oz Au, $0.80/lb Cu and $3.30/tonne revenue cutoff
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 study and the timing of future development of the Brisas
property will be influenced by, among other items, prevailing gold and copper
prices.
Brisas-Cristinas Combined Project
As a result of the sustained low price of gold, the Company has evaluated
various alternatives to the development of the Brisas property. Management
has 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. The Company has
presented the combined project to various Venezuelan government decision-makers
and Management believes the proposal has been favorably received.
MINCA, a joint venture company between Placer Dome Inc. and Corporacion
Venezolana de Guayana (CVG), a Venezuelan government corporation, holds the gold
and copper rights related to the Cristinas property through a Ministry of Energy
and Mines concession and CVG work contract.
On July 13, 2001, Placer Dome Inc. announced that it sold its interest in MINCA
to Vannessa Ventures Ltd. of Vancouver, British Columbia.
It is unclear how the recent sale of Placer Dome Inc.'s interest in MINCA will
effect the development of the Cristinas property either on a stand-alone or
combined project basis.
The development of the combined project is dependent upon:
CVG, Vannessa Ventures Ltd. and Placer Dome Inc. resolving various issues
relating to the recent sale including the ultimate determination of MINCA's
on-going activities;
Various approvals by the government of Venezuela;
Completion of a feasibility study; and
Obtaining adequate financing.
There can be no assurances that the development of the combined project will
proceed and, if it does, what the Company's interest in the combined project
will be.
Management believes the development of Brisas and Cristinas as a combined
project is the most rational approach to exploit the orebody. In addition,
the combined project, versus two stand-alone projects, offers the best
solution economically, environmentally and socially.
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 June
30, 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 $1.0 million from December 31,
2000 to approximately $15.9 million as of June 30, 2001.
June 30, December 31,
2001 2000
Cash and equivalents $ 9,224,883 $ 10,108,111
Marketable securities - current 5,397,800 3,045,421
Marketable securities - non-current 1,313,785 3,790,030
$ 15,936,468 $ 16,943,562
Planned expenditures for 2001 are estimated at $3.1 million. Expenditures
include development activities directly on the Brisas property, corporate
management of the Brisas property, activities related to the advancement of
the proposal to combine the Brisas and Cristinas properties and exploration
activities other than on the Brisas 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 2002.
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 and six months ended June 30, 2001 amounted
to $319,490 and $459,769 or $0.01 and $0.02 per share compared to consolidated
net loss of $234,858 and $778,539 or $0.01 and $0.03 per share for the same
periods in 2000. The net loss for the six months ended June 30, 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.
As of July 31, 2001, the Company had the following shares, equity units and
share options outstanding:
Class A common 22,434,833
Equity units* 1,038,867
Options to purchase Class A common shares 3,420,204
*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 SHEETS
June 30, 2001 and December 31, 2000 (unaudited)
June 30, December 31,
U.S. Dollars 2001 2000
- --------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 9,224,883 $ 10,108,111
Marketable securities 5,397,800 3,045,421
Deposits, advances and other 396,098 370,044
Accrued interest 10,410 53,046
- --------------------------------------------------------------------
Total current assets 15,029,191 13,576,622
Property, plant and equipment, net 45,516,870 44,902,369
Marketable securities 1,313,785 3,790,030
Other 1,221,580 1,233,301
- --------------------------------------------------------------------
Total assets $ 63,081,426 $ 63,502,322
====================================================================
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 358,242 $ 335,103
- --------------------------------------------------------------------
Total current liabilities 358,242 335,103
Minority interest in consolidated
subsidiaries 1,050,622 1,037,013
- --------------------------------------------------------------------
Total liabilities 1,408,864 1,372,116
- --------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Serial preferred stock,
without par value
Common shares and equity units,
without par value 102,108,111 102,105,986
Less, common shares held by affiliates (403,331) (403,331)
Accumulated deficit (39,947,109) (39,487,340)
KSOP debt (85,109) (85,109)
- --------------------------------------------------------------------
Total shareholders' equity 61,672,562 62,130,206
- --------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 63,081,426 $ 63,502,322
====================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Approved by the Board of Directors:
s/ Chris D. Mikkelsen s/ Patrick D. McChesney
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2001 and 2000 (unaudited)
Three Months Ended Six Months Ended
U.S. Dollars 2001 2000 2001 2000
OTHER INCOME
Interest $216,227 $290,456 $449,335 $554,269
Gain on sale of marketable
securities 103,763
- -------------------------------------------------------------------------------
216,227 290,456 553,098 554,269
EXPENSES
General and administrative 315,097 299,264 564,859 562,957
Technical services 88,132 111,972 193,058 227,133
Corporate communications 78,194 55,829 142,787 112,635
Legal and accounting 39,911 18,354 63,229 51,885
Foreign currency loss 6,909 26,718 32,819 64,869
Loss on sale of marketable
securities 2,506 2,506 283,507
Interest 3,511 7,170
Minority interest in net income
of consolidated subsidiaries 4,968 9,666 13,609 22,652
- -------------------------------------------------------------------------------
535,717 525,314 1,012,867 1,332,808
- -------------------------------------------------------------------------------
Net loss $(319,490) $(234,858) $(459,769) $(778,539)
===============================================================================
Net loss per share $(0.01) $(0.01) $(0.02) $(0.03)
===============================================================================
Weighted average common
shares outstanding 23,171,310 23,101,200 23,171,255 23,101,200
===============================================================================
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICIT
For the Six Months Ended June 30, 2001 and 2000 (unaudited)
U.S. Dollars
Accumulated deficit, December 31, 2000 $(39,487,340)
Net loss (459,769)
- ---------------------------------------------------------------------
Accumulated deficit, June 30, 2001 $(39,947,109)
=====================================================================
Accumulated deficit, December 31, 1999 $(38,176,276)
Net loss (778,539)
- ---------------------------------------------------------------------
Accumulated deficit, June 30, 2000 $(38,954,815)
=====================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three and Six Months Ended June 30, 2001 and 2000 (unaudited)
Three Months Ended Six Months Ended
U.S. Dollars 2001 2000 2001 2000
Cash Flows from
Operating Activities:
Net loss $(319,490) $(234,858) $(459,769) $(778,539)
Adjustments to reconcile net loss
to net cash used by
operating activities:
Depreciation 11,060 10,845 22,307 21,812
Amortization of (discount)premium
on marketable securities 2,227 (47,987) 985 (59,468)
Foreign currency loss 6,909 26,718 32,819 64,869
Minority interest in net income
of consolidated subsidiaries 4,968 9,666 13,609 22,652
Net (gain) loss on sale of
marketable securities 2,506 (101,257) 283,507
Changes in current assets
and liabilities:
Net decrease (increase)
in current assets (9,007) (153,221) 16,582 (84,998)
Net (decrease) increase
in current liabilities 27,234 (33,474) 23,139 (37,365)
- --------------------------------------------------------------------------------
Net cash used by operating activities (273,593) (422,311) (451,585) (567,530)
- --------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from the sale and maturity
of marketable securities 547,494 2,000,000 4,743,888 9,607,312
Purchase of marketable securities (2,019,750)(4,969,034)(4,519,750)(8,141,881)
Purchase of property, plant
and equipment (328,405) (528,811) (669,627) (915,913)
Other 8,227 13,812 11,721 45,057
- --------------------------------------------------------------------------------
Net cash provided (used) by
investing activities (1,792,434)(3,484,033) (433,768) 594,575
================================================================================
Cash Flows from Financing Activities:
Proceeds from the issuance of
common shares 2,125 2,125
- --------------------------------------------------------------------------------
Net cash provided by
financing activities 2,125 2,125
================================================================================
Change in Cash and Cash Equivalents:
Net increase (decrease) in cash
and cash equivalents (2,063,902)(3,906,344) (883,228) 27,045
Cash and cash equivalents
- beginning of period 11,288,785 8,310,910 10,108,111 4,377,521
- --------------------------------------------------------------------------------
Cash and cash equivalents
- end of period $9,224,883 $4,404,566 $9,224,883 $4,404,566
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Selected 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 June 30, 2001, the results of operations for the three
and six months ended June 30, 2001 and 2000, and the cash flows for the
three and six months ended June 30, 2001 and 2000. The results of
operations for the three and six months ended June 30, 2001 and 2000 are
not necessarily indicative of the results to be expected for the full year.
These financial statements follow the same accounting policies and methods
of their application as the most recent annual financial statements and
should be read in conjunction with the consolidated financial statements
including notes thereto included in the Company's fiscal 2000 financial
statements.
2. Geographic Segments
Net Loss for the Three and Six Months Ended June 30, 2001 and 2000
Three Months Ended Six Months Ended
2001 2000 2001 2000
- ---------------------------------------------------------------
United States 303,661 214,939 430,445 721,843
Venezuela 15,829 19,919 29,324 56,696
- ---------------------------------------------------------------
Consolidated $319,490 $234,858 $459,769 $778,539
===============================================================
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 23, 2001
