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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 June 30, 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.
June 30, 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 two projects are contiguous to each other with our Brisas
property to the south and the Venezuelan government's Cristinas property to
the north.
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
approximately 21 million ounces of gold and 2.2 billion pounds of copper. The
combined project would be the second largest gold mine in Latin America and
the sixth largest in the world and provides the best solution economically,
environmentally and socially for the Venezuelan Republic.
In November 2001, the Corporacion Venezolana de Guayana ("CVG")
rescinded MINCA's alluvial and vein gold contract and the Venezuelan
government assumed physical control of the Cristinas property from MINCA. In
March 2002, the Ministry of Energy and Mines ("MEM") assumed all rights over
the cancelled and extinguished Cristinas gold concessions and the related
assets and officially cancelled the Cristinas copper concessions held by
MINCA. In May 2002, President Chavez through MEM issued Decree 1757
reserving for the Republic the exploration and exploitation of gold within
the area of the cancelled and extinguished gold concessions named Cristinas
4, 5, 6 and 7. In addition, the Decree authorized MEM to contract to CVG the
Cristinas gold exploration and exploitation rights. Also during May 2002, MEM
entered the formal contract with CVG regarding the gold rights. In the near
future it is expected that MEM will contract the Cristinas copper rights to
CVG.
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. CVG is implementing a plan to put the
Cristinas property out for selective bid, the terms of which and the minimum
financial and operational requirements for bidders, are expected to be
announced sometime in August 2002. CVG recently announced that it has
received inquiries from a number of the world's largest mining companies
regarding their interest in the Cristinas gold and copper deposit.
The development of the combined project will be influenced by: potential
legal implications related to the cancellation of the gold work contract by
CVG and cancellation of the copper concession by MEM; specious legal
challenges related to Cristinas 4 and 6; 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 gold and
copper 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 $1.2 million from December 31,
2001 to approximately $13.6 million as of June 30, 2002.
June 30, December 31,
2002 2001
- ------------------------------------------------------------------------------
Cash and equivalents $ 4,733,204 $ 5,764,665
Marketable securities - current 6,203,383 9,006,362
Marketable securities - non-current 2,672,113 2,500
- ------------------------------------------------------------------------------
$ 13,608,700 $ 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 and six months ended June 30, 2002
amounted to $978,667 and $1,604,984 or $0.04 and $0.07 per share compared to
consolidated net loss of $319,490 and $459,769 or $0.01 and $0.02 per share
for the same periods in 2001. The increase in net loss from the comparable
six-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. 1,356 to the Dollar
at June 30, 2002.
As of August 19, 2002, the Company had the following shares, equity units
and share options issued:
Class A common 22,936,158
Equity units* 1,289,980
Options to purchase Class A common shares 3,368,549
*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, 2002 and December 31, 2001 (unaudited)
June 30, December 31,
U.S. Dollars 2002 2001
- ------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 4,733,204 $ 5,764,665
Marketable securities 6,203,383 9,006,362
Deposits, advances and other 421,623 350,995
Accrued interest 44,284 52,524
- ------------------------------------------------------------------------------
Total current assets 11,402,494 15,174,546
- ------------------------------------------------------------------------------
Property, plant and equipment, net 46,168,068 46,197,434
Marketable securities 2,672,113 2,500
Other 676,310 1,178,134
- ------------------------------------------------------------------------------
Total assets $ 60,918,985 $ 62,552,614
==============================================================================
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 247,801 $ 320,782
- ------------------------------------------------------------------------------
Total current liabilities 247,801 320,782
Minority interest in
consolidated subsidiaries 1,075,028 1,062,852
- ------------------------------------------------------------------------------
Total liabilities 1,322,829 1,383,634
==============================================================================
SHAREHOLDERS' EQUITY
Serial preferred stock, without par value - -
Common shares and equity units,
without par value 102,298,071 102,265,911
Less, common shares held by affiliates (674,598) (674,598)
Deficit (41,943,530) (40,338,546)
KSOP debt (83,787) (83,787)
- ------------------------------------------------------------------------------
Total shareholders' equity 59,596,156 61,168,980
- ------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 60,918,985 $ 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 and Six Months Ended June 30, 2002 and 2001 (unaudited)
Three Months Ended Six Months Ended
U.S. Dollars 2002 2001 2002 2001
- -------------------------------------------------------------------------------
OTHER INCOME
Interest $137,975 $216,227 $310,179 $449,335
Gain (loss) on sale of
marketable securities (7,723) (2,506) (4,248) 101,257
- -------------------------------------------------------------------------------
130,252 213,721 305,931 550,592
EXPENSES
General and administrative 329,478 315,097 544,920 564,859
Technical services 348,891 88,132 703,761 193,058
Corporate communications 91,450 78,194 156,872 142,787
Legal and accounting 70,153 39,911 91,164 63,229
Foreign currency loss 263,714 6,909 402,022 32,819
Minority interest in net income
of consolidated subsidiaries 5,233 4,968 12,176 13,609
- -------------------------------------------------------------------------------
1,108,919 533,211 1,910,915 1,010,361
- -------------------------------------------------------------------------------
Net loss $(978,667) $(319,490) $(1,604,984) $(459,769)
===============================================================================
Net loss per share $ (0.04) $ (0.01) $ (0.07) $ (0.02)
===============================================================================
Weighted average common
shares outstanding 23,217,776 22,849,386 23,216,649 22,849,331
===============================================================================
CONSOLIDATED STATEMENTS OF DEFICIT
For the Six Months Ended June 30, 2002 and 2001 (unaudited)
U.S. Dollars
Deficit, December 31, 2001 $ (40,338,546)
Net loss (1,604,984)
- ------------------------------------------------------------------
Deficit, June 30, 2002 $ (41,943,530)
==================================================================
Deficit, December 31, 2000 $ (39,487,340)
Net loss (459,769)
- ------------------------------------------------------------------
Deficit, June 30, 2001 $ (39,947,109)
==================================================================
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, 2002 and 2001 (unaudited)
Three Months Ended Six Months Ended
U.S. Dollars 2002 2001 2002 2001
- --------------------------------------------------------------------------------
Cash Flows from
Operating Activities:
Net loss $(978,667) $(319,490)$(1,604,984)$(459,769)
Adjustments to reconcile
net loss to net cash
used by operating activities:
Depreciation 13,889 11,060 35,058 22,307
Amortization of (discount)
premium on marketable
securities 26,287 2,227 42,476 985
Foreign currency loss 263,714 6,909 402,022 32,819
Minority interest in net
income of consolidated
subsidiaries 5,233 4,968 12,176 13,609
Net (gain) loss on sale of
marketable securities 7,723 2,506 4,248 (101,257)
Other 30,000 30,000
Changes in current
assets and liabilities:
Net decrease (increase)
in current assets (46,657) (9,007) (62,388) 16,582
Net decrease in
current liabilities (40,030) 27,234 (72,981) 23,139
- --------------------------------------------------------------------------------
Net cash used by operating activities (718,508) (273,593)(1,214,373) (451,585)
- --------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from the sale and maturity
of marketable securities 4,609,777 547,494 7,213,252 4,743,888
Purchase of marketable securities (5,171,610)(2,019,750)(7,126,610)(4,519,750)
Purchase of property,
plant and equipment (5,692) (328,405) (5,692) (669,627)
Other 66,920 8,227 99,802 11,721
- --------------------------------------------------------------------------------
Net cash provided (used) by
investing activities (500,605)(1,792,434) 180,752 (433,768)
================================================================================
Cash Flows from Financing Activities:
Proceeds from the issuance
of common shares - 2,125 2,160 2,125
- --------------------------------------------------------------------------------
Net cash provided by
financing activities - 2,125 2,160 2,125
================================================================================
Change in Cash and Cash Equivalents:
Net increase in cash
and cash equivalents (1,219,113)(2,063,902)(1,031,461) (883,228)
Cash and cash equivalents -
beginning of period 5,952,317 11,288,785 5,764,665 10,108,111
- --------------------------------------------------------------------------------
Cash and cash equivalents -
end of period $4,733,204 $9,224,883 $4,733,204 $9,224,883
================================================================================
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, 2002, and the results of operations and the cash flows for the
six months ended June 30, 2002 and 2001. The results of operations for the
six months ended June 30, 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 and Six Months Ended June 30, 2002 and 2001
Three Months Ended Six Months Ended
2002 2001 2002 2001
- ---------------------------------------------------------------
United States 370,856 303,661 588,213 430,445
Venezuela 607,811 15,829 1,016,771 29,324
- ---------------------------------------------------------------
Consolidated $978,667 $319,490 $1,604,984 $459,769
===============================================================
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 19, 2002