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, 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.
September 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,
obtaining 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. The mineral resource on the Brisas property, estimated at 9.9
million ounces of gold and approximately 1.13 billion pounds of copper, is
contained within an area approximately 1,900 meters long and 500 to 900
meters wide. The identified mineralization continues for an unknown
distance down dip to the west, to the north and below the current
mineralized resource.
The anticipated mining and processing facility is currently designed to
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 a mining facility at the
Brisas property is estimated to cost between $350 and $400 million.
Based on Gold Institute guidelines and the assumptions included in the
pre-feasibility, 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. Construction of a mining facility, if
warranted, would take 18 to 24 months.
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:
(kt=1,000 tonnes) 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. 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 sustained low prices for gold and copper, management believes
that the most rational approach to the development of the Brisas property
is to combine it with the contiguous Cristinas property and jointly develop
the properties as one large project. In addition, the combined project,
versus two stand-alone projects, offers the best solution economically,
environmentally and socially.
The Company has presented its combined project proposal to Corporacion
Venezolana de Guayana (CVG) and to other Venezuelan government officials.
During September 2001, CVG publicly confirmed the government's intention to
unify or combine the Brisas and Cristinas properties into one large mining
project.
Several years ago, CVG and Placer Dome Inc. formed a joint venture company,
Minera Las Cristinas, C.A. (MINCA) to explore and exploit gold located on
the Cristinas property (known as Las Cristinas 4, 5, 6 and 7). CVG entered
a work contract with MINCA relating to gold and after successful exploration
of the Cristinas property by MINCA the Ministry of Energy and Mines granted
copper concessions to CVG. The copper concessions were subsequently
transferred by CVG to MINCA for financing purposes.
MINCA commenced construction of the gold and copper Cristinas project various
times but discontinued activities due to low gold prices. CVG allowed MINCA
two one-year contract extensions to re-activate the project or agree upon an
acceptable alternative for the development of the project. Immediately prior
to the expiration of the second contract extension Placer Dome announced the
sale of its interest in MINCA to Vannessa Ventures Ltd.
As a result of Placer Dome's sale of its interest in MINCA and other contract
disagreements with MINCA, CVG officially announced the revocation or
cancellation of its work contract with MINCA. In November 2001, CVG obtained
physical control of the Cristinas property from MINCA. CVG has recently
announced that their objective is to re-activate the development of the
Cristinas project in the near future.
It is unclear how the recent cancellation of the work contract or the previous
transfer 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: entering an
acceptable agreement between the Company, CVG and, if appropriate, other third
parties; the resolution of legal implications related to the cancellation of
the work contract by CVG; status of MINCA's copper concessions; resolution of
all legal challenges related to the Cristinas property; determination of
MINCA's on-going activities; various approvals and permits by the government
of Venezuela; completion of a feasibility study; adequate financing; and future
metal prices.
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 continues to believe the development of Brisas and Cristinas
as a combined project is the most rational approach to exploit the orebody.
Financial Overview
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 $1.3 million from December
31, 2000 to approximately $15.7 million as of September 30, 2001.
September 30, December 31,
2001 2000
Cash and equivalents $ 6,787,341 $ 10,108,111
Marketable securities - current 7,854,640 3,045,421
Marketable securities -non-current 1,014,037 3,790,030
$ 15,656,018 $ 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. Other income for
2001 is projected to be approximately $1.2 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 nine months ended September 30,
2001 amounted to $2,030 and $461,799 or $0.00 and $0.02 per share compared
to consolidated net loss of $148,824 and $927,363 or $0.01 and $0.04 per
share for the same periods in 2000. The net loss for the nine months ended
September 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 nine-month period in 2000.
As of October 31, 2001, the Company had the following shares, equity units
and share options outstanding:
Class A common 22,437,833
Equity units* 1,038,867
Options to purchase Class A common shares 3,400,700
*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
September 30, 2001 and December 31, 2000 (unaudited)
September 30, December 31,
U.S. Dollars 2001 2000
- -----------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 6,787,341 $ 10,108,111
Marketable securities 7,854,640 3,045,421
Deposits, advances and other 386,485 370,044
Accrued interest 35,853 53,046
Total current assets 15,064,319 13,576,622
Property, plant and equipment, net 45,838,691 44,902,369
Marketable securities 1,014,037 3,790,030
Other 1,191,528 1,233,301
- -----------------------------------------------------------------------------
Total assets $ 63,108,575 $ 63,502,322
=============================================================================
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 370,678 $ 335,103
- -----------------------------------------------------------------------------
Total current liabilities 370,678 335,103
Minority interest in consolidated subsidiaries 1,055,920 1,037,013
- -----------------------------------------------------------------------------
Total liabilities 1,426,598 1,372,116
- -----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Serial preferred stock, without par value
Common shares and equity units, without par value 102,250,911 102,105,986
Less, common shares held by affiliates (403,331) (403,331)
Accumulated deficit (39,949,139) (39,487,340)
KSOP debt (216,464) (85,109)
- -----------------------------------------------------------------------------
Total shareholders' equity 61,681,977 62,130,206
- -----------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 63,108,575 $ 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 Nine Months Ended September 30, 2001 and 2000 (unaudited)
Three Months Ended Nine Months Ended
U.S. Dollars 2001 2000 2001 2000
OTHER INCOME
Interest $ 185,376 $ 290,047 $ 634,711 $ 844,316
Gain (loss) on sale of
marketable securities 284,101 385,358 (283,507)
- ------------------------------------------------------------------------------
469,477 290,047 1,020,069 560,809
EXPENSES
General and administrative 269,124 242,416 833,983 805,373
Technical services 77,648 95,354 270,706 322,487
Corporate communications 66,434 46,677 209,221 159,312
Legal and accounting 10,438 16,009 73,667 67,894
Foreign currency loss 42,565 24,894 75,384 89,763
Interest 3,511 10,681
Minority interest in net income
of consolidated subsidiaries 5,298 10,010 18,907 32,662
- ------------------------------------------------------------------------------
471,507 438,871 1,481,868 1,488,172
- ------------------------------------------------------------------------------
Net loss $(2,030) $(148,824) $(461,799) $(927,363)
==============================================================================
Net loss per share $(0.00) $(0.01) $(0.02) $(0.04)
==============================================================================
Weighted average common
shares outstanding 23,396,646 23,113,679 23,247,211 23,106,731
==============================================================================
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICIT
For the Nine Months Ended September 30, 2001 and 2000 (unaudited)
U.S. Dollars
Accumulated deficit, December 31, 2000 $ (39,487,340)
Net loss (461,799)
- ----------------------------------------------------------------------
Accumulated deficit, September 30, 2001 $ (39,949,139)
======================================================================
Accumulated deficit, December 31, 1999 $ (38,176,276)
Net loss (927,363)
- ----------------------------------------------------------------------
Accumulated deficit, September 30, 2000 $ (39,103,639)
======================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three and Nine Months Ended September 30, 2001 and 2000 (unaudited)
Three Months Ended Nine Months Ended
U.S. Dollars 2001 2000 2001 2000
Cash Flows from Operating Activities:
Net loss $(2,030) $(148,824) $(461,799) $(927,363)
Adjustments to reconcile net loss
to net cash used by
operating activities:
Depreciation 10,881 13,605 33,188 35,417
Amortization of (discount) premium
on marketable securities 8,744 (108,299) 9,729 (167,767)
Foreign currency loss 42,565 24,894 75,384 89,763
Minority interest in net income
of consolidated subsidiaries 5,298 10,010 18,907 32,662
Net (gain) loss on sale of
marketable securities (284,101) (385,358) 283,507
Other 3,500 3,500
Changes in current assets
and liabilities:
Net decrease (increase)
in current assets (6,545) 54,617 10,037 (30,381)
Net increase in
current liabilities 12,436 45,649 35,575 8,284
- --------------------------------------------------------------------------------------
Net cash used by operating activities (212,752) (104,848) (664,337) (672,378)
- --------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from the sale and maturity
of marketable securities 1,484,401 7,048,000 6,228,289 16,655,312
Purchase of marketable securities (3,366,136) (7,931,829) (7,885,886) (16,073,710)
Purchase of property, plant
and equipment (375,267) (379,396) (1,044,894) (1,295,309)
Other 30,052 7,644 41,773 52,701
- --------------------------------------------------------------------------------------
Net cash used by investing activities (2,226,950) (1,255,581) (2,660,718) (661,006)
- --------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from the issuance of
common shares 2,160 4,285
- --------------------------------------------------------------------------------------
Net cash provided by financing
activities 2,160 4,285
- --------------------------------------------------------------------------------------
Change in Cash and Cash Equivalents:
Net decrease in cash and
cash equivalents (2,437,542) (1,360,429) (3,320,770) (1,333,384)
Cash and cash equivalents
- beginning of period 9,224,883 4,404,566 10,108,111 4,377,521
- --------------------------------------------------------------------------------------
Cash and cash equivalents
- end of period $6,787,341 $3,044,137 $6,787,341 $3,044,137
======================================================================================
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 September 30, 2001, the results of operations for the three and nine
months ended September 30, 2001 and 2000, and the cash flows for the three
and nine months ended September 30, 2001 and 2000. The results of
operations for the three and nine months ended September 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. (All amounts are stated in U.S. Dollars).
2. Geographic Segments
Net Loss (income) for the Three and Nine Months Ended September 30, 2001
and 2000
Three Months Ended Nine Months Ended
2001 2000 2001 2000
- -----------------------------------------------------------------------
United States (30,546) 135,467 399,899 857,310
Venezuela 32,576 13,357 61,900 70,053
- -----------------------------------------------------------------------
Consolidated $2,030 $148,824 $461,799 $927,363
=======================================================================
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 23, 2001
