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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, 2002
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, 2002
Interim Financial Report
U.S. Dollars
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 minimum 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. 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 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. Using an average gold and
copper price of $300 and $0.80, respectively, 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
Using an average gold and copper price of $325 and $0.90, respectively, the
Brisas property is estimated to contain approximately 280 million tonnes of
ore with an average grade of 0.74 grams per tonne gold and 0.14% copper and a
waste to ore ratio of 1.47:1.
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
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 209,954 0.778 0.121 5,252 560,167
Probable 70,053 0.630 0.201 1,419 310,387
- ----------------------------------------------------------------------------------------------------
Total(1) 280,007 0.741 0.141 6,671 870,554 411,282 691,289 1.47
====================================================================================================
(1) Using $325/oz Au, $0.90/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
In late 1999 we recognized that the price of gold, which was near a 20 year
low, was not going to improve in the near term. While our Brisas project on a
stand-alone basis would return positive cash flow, financing the project, if
possible, would severely dilute existing shareholders' interest and burden
the company with debt. As a result, we evaluated ways to improve the
economics of the Brisas project by examining a number of alternatives. Our
conclusion was that the best alternative was to combine the Brisas project
with the adjacent Cristinas project, thereby realizing substantial economies
of scale. The combined project, versus two stand-alone projects, provides
the best solution economically, environmentally and socially for the
Venezuelan Republic.
The two projects are contiguous to each other with Gold Reserve controlling
the Brisas property to the south and Venezuelan government controlling the
Cristinas property to the north. In November 2001, the Venezuelan government
assumed physical control of the Cristinas property from MINCA and recently
assigned the rights to the mineralization on the property to Corporacion
Venezolana de Guayana ("CVG"). CVG is evaluating development alternatives to
the Cristinas project and is seeking third party interest in Cristinas.
We envisage a combined project that would be the second largest gold mine in
Latin America and the sixth largest in the world. Based on information
developed by the Company as well as publicly available data published by
MINCA, management believes that the Brisas-Cristinas gold and copper project
contains a world-class reserve estimated to be at least 21 million ounces of
gold and 2.2 billion pounds of copper.
We have made a number of presentations regarding the combined project to the
various government entities that administer mining and mining related
activities in Venezuela and all have received our proposal very favorably.
CVG has publicly stated its objective to proceed with the development and
construction of Cristinas on a stand alone basis or the combined project,
recognizing that successfully combining the two properties requires
involvement of a major mining company.
The development of the combined project will be influenced by: legal
implications related to the cancellation of the work contract by CVG and
cancellation of the copper concession by MEM; legal challenges related to the
ownership of Cristinas property; the involvement of a major mining company;
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 exact 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, decreased $0.5 million from December 31,
2001 to approximately $14.3 million as of March 31, 2002.
March 31, December 31,
2002 2001
Cash and equivalents $ 5,952,317 $ 5,764,665
Marketable securities - current 7,340,423 9,006,362
Marketable securities - non-current 1,007,250 2,500
$ 14,299,990 $ 14,773,527
Planned expenditures for 2002 are estimated at $3.1 million, which will be
spent on activities directly related to the Brisas property, corporate
management of the Brisas project, corporate activities other than those
related to the Brisas property and the advancement of our proposal to combine
Brisas with the Cristinas property. Other income (primarily investment income)
for 2002 is projected to be approximately $0.75 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) into 2004.
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, 2002 amounted to
$626,317 or $0.03 per share compared to consolidated net loss of $140,279 or
$0.01 per share for the same period in 2001. The increase in net loss from
the comparable three-month period results primarily from a reduction in gain
on sale of marketable securities and an increase in operating expenditures
related to the maintenance of the Brisas property and increased foreign
currency loss.
Certain costs associated with the Brisas property which prior to 2002 were
capitalized are now expensed in the period incurred. The Bolivar/Dollar
exchange rate ended 2001 at Bs. 758 to the Dollar, up Bs. 58 (8.3%) from
December 2000. An exchange peg policy was maintained throughout 2001, but
abandoned in February 2002. Thereafter, a free floating exchange rate system
was established, with the Venezuelan Central Bank acting as the main foreign
currency seller. The exchange rate was approximately Bs. 921 to the Dollar at
March 31, 2002.
As of May 30, 2002, the Company had the following shares, equity units and
share options issued:
Class A common 22,709,447
Equity units* 1,301,691
Options to purchase Class A common shares 3,393,898
*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
March 31, 2002 and December 31, 2001 (unaudited)
March 31, December 31,
U.S. Dollars 2002 2001
- ------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 5,952,317 $ 5,764,665
Marketable securities 7,340,423 9,006,362
Deposits, advances and other 376,037 350,995
Accrued interest 43,213 52,524
- ------------------------------------------------------------------------
Total current assets 13,711,990 15,174,546
Property, plant and equipment, net 46,176,265 46,197,434
Marketable securities 1,007,250 2,500
Other 1,006,944 1,178,134
- ------------------------------------------------------------------------
Total assets $ 61,902,449 $ 62,552,614
========================================================================
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 287,831 $ 320,782
- ------------------------------------------------------------------------
Total current liabilities 287,831 320,782
Minority interest in
consolidated subsidiaries 1,069,795 1,062,852
- ------------------------------------------------------------------------
Total liabilities 1,357,626 1,383,634
- ------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Serial preferred stock, without par value - -
Common shares and equity
units, without par value 102,268,071 102,265,911
Less, common shares held by affiliates (674,598) (674,598)
Deficit (40,964,863) (40,338,546)
KSOP debt (83,787) (83,787)
- ------------------------------------------------------------------------
Total shareholders' equity 60,544,823 61,168,980
- ------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 61,902,449 $ 62,552,614
========================================================================
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 Months Ended March 31, 2002 and 2001 (unaudited)
U.S. Dollars 2002 2001
- ------------------------------------------------------------------------
OTHER INCOME
Interest $ 172,204 $ 233,108
Gain on sale of marketable securities 3,475 103,763
- ------------------------------------------------------------------------
175,679 336,871
EXPENSES
General and administrative 215,442 249,762
Technical services 354,870 104,926
Corporate communications 65,422 64,593
Legal and accounting 21,011 23,318
Foreign currency loss 138,308 25,910
Minority interest in net income
of consolidated subsidiaries 6,943 8,641
- ------------------------------------------------------------------------
801,996 477,150
- ------------------------------------------------------------------------
Net loss $ (626,317) $ (140,279)
========================================================================
Net loss per share $ (0.03) $ (0.01)
========================================================================
Weighted average common
shares outstanding 23,176,843 22,849,276
========================================================================
CONSOLIDATED STATEMENTS OF DEFICIT
For the Three Months Ended March 31, 2002 and 2001 (unaudited)
U.S. Dollars
Deficit, December 31, 2001 $ (40,338,546)
Net loss (626,317)
- ---------------------------------------------------------------
Deficit, March 31, 2002 $ (40,964,863)
===============================================================
Deficit, December 31, 2000 $ (39,487,340)
Net loss (140,279)
- ---------------------------------------------------------------
Deficit, March 31, 2001 $ (39,627,619)
===============================================================
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001 (unaudited)
U.S. Dollars 2002 2001
- --------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net loss $ (626,317) $ (140,279)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 21,169 11,247
Amortization of (discount) premium on
marketable securities 16,189 (1,242)
Foreign currency loss 138,308 25,910
Minority interest in net income of
consolidated subsidiaries 6,943 8,641
Net gain on sale of marketable securities (3,475) (103,763)
Changes in current assets and liabilities:
Net decrease (increase) in current assets (15,731) 25,589
Net decrease in current liabilities (32,951) (4,095)
- --------------------------------------------------------------------------
Net cash used by operating activities (495,865) (177,992)
- --------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from the sale and maturity of
marketable securities 2,603,475 4,196,394
Purchase of marketable securities (1,955,000) (2,500,000)
Purchase of property, plant and equipment (341,222)
Other 32,882 3,494
- --------------------------------------------------------------------------
Net cash provided by investing activities 681,357 1,358,666
- --------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from the issuance of common shares 2,160
- --------------------------------------------------------------------------
Net cash provided by financing activities 2,160
- --------------------------------------------------------------------------
Change in Cash and Cash Equivalents:
Net increase in cash and cash equivalents 187,652 1,180,674
Cash and cash equivalents - beginning of period 5,764,665 10,108,111
- --------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 5,952,317 $11,288,785
==========================================================================
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 March 31, 2002, and the results of operations and the cash flows for the
three months ended March 31, 2002 and 2001. The results of operations for
the three months ended March 31, 2002 and 2001 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 2001 annual report. (All
amounts are stated in U.S. Dollars).
2. Geographic Segments
Net Loss for the Three Months Ended March 31, 2002 and 2001
2002 2001
- -------------------------------------------------------------------------
United States 217,357 126,784
Venezuela 408,960 13,495
- -------------------------------------------------------------------------
Consolidated $ 626,317 $ 140,279
=========================================================================
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, 2002