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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 September 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.
September 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 mining and processing facility as currently contemplated for the Brisas
property is expected 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 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 for the Brisas
property 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.
Financial Overview
The total financial resources of the Company, cash plus current and
non-current marketable securities, decreased $1.8 million from December 31,
2001 to approximately $13.0 million as of September 30, 2002.
September 30, December 31,
2002 2001
- ----------------------------------------------------------------------------
Cash and equivalents $ 2,084,619 $ 5,764,665
Marketable securities - current 8,602,509 9,006,362
Marketable securities - non-current 2,320,919 2,500
- ----------------------------------------------------------------------------
$ 13,008,047 $ 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.
Certain costs associated with the Brisas property, which prior to 2002 were
capitalized, are now expensed in the period incurred. Consolidated net loss
for the three and nine months ended September 30, 2002 amounted to $643,273
and $2,248,257 or $0.03 and $0.10 per share compared to consolidated net loss
of $2,030 and $461,799 or $0.00 and $0.02 per share for the same periods in
2001. The increase in net loss from the comparable nine- 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.
A Bolivar/Dollar exchange peg policy was maintained by Venezuela 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. 1,474
to the Dollar at September 30, 2002.
As of November 25, 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
September 30, 2002 and December 31, 2001 (unaudited)
September 30, December 31,
U.S. Dollars 2002 2001
- ------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 2,084,619 $ 5,764,665
Marketable securities 8,602,509 9,006,362
Deposits, advances and other 366,218 350,995
Accrued interest 122,261 52,524
- ------------------------------------------------------------------------------
Total current assets 11,175,607 15,174,546
- ------------------------------------------------------------------------------
Property, plant and
equipment, net 46,156,317 46,197,434
Marketable securities 2,320,919 2,500
Other 626,020 1,178,134
- ------------------------------------------------------------------------------
Total assets $ 60,278,863 $ 62,552,614
==============================================================================
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 253,114 $ 320,782
- ------------------------------------------------------------------------------
Total current liabilities 253,114 320,782
Minority interest in
consolidated subsidiaries 1,069,659 1,062,852
- ------------------------------------------------------------------------------
Total liabilities 1,322,773 1,383,634
==============================================================================
SHAREHOLDERS' EQUITY
Serial preferred stock, without par value - -
Common shares and equity
units, without par value 102,435,278 102,265,911
Less, common shares held by affiliates (674,598) (674,598)
Deficit (42,586,803) (40,338,546)
KSOP debt (217,787) (83,787)
- ------------------------------------------------------------------------------
Total shareholders' equity 58,956,090 61,168,980
- ------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 60,278,863 $ 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 Nine Months Ended September 30, 2002 and 2001 (unaudited)
Three Months Ended Nine Months Ended
U.S. Dollars 2002 2001 2002 2001
- -------------------------------------------------------------------------------
OTHER INCOME
Interest $167,040 $185,376 $477,219 $634,711
Gain (loss) on sale of
marketable securities (6) 284,101 (4,254) 385,358
- -------------------------------------------------------------------------------
167,034 469,477 472,965 1,020,069
EXPENSES
General and administrative 376,381 269,124 921,301 833,983
Technical services 326,922 77,648 1,030,683 270,706
Corporate communications 58,407 66,434 215,279 209,221
Legal and accounting 6,733 10,438 97,897 73,667
Foreign currency loss 32,999 42,565 435,021 75,384
Minority interest in net income
of consolidated subsidiaries 8,865 5,298 21,041 18,907
- -------------------------------------------------------------------------------
810,307 471,507 2,721,222 1,481,868
- -------------------------------------------------------------------------------
Net loss $(643,273) $(2,030) $(2,248,257) $(461,799)
===============================================================================
Net loss per share $ (0.03) $ (0.00) $ (0.10) $ (0.02)
===============================================================================
Weighted average common
shares outstanding 23,273,564 22,926,808 23,272,816 22,925,287
===============================================================================
CONSOLIDATED STATEMENTS OF DEFICIT
For the Nine Months Ended September 30, 2002 and 2001 (unaudited)
U.S. Dollars
Deficit, December 31, 2001 $ (40,338,546)
Net loss (2,248,257)
- -----------------------------------------------------------------
Deficit, September 30, 2002 $ (42,586,803)
=================================================================
Deficit, December 31, 2000 $ (39,487,340)
Net loss (461,799)
- -----------------------------------------------------------------
Deficit, September 30, 2001 $ (39,949,139)
=================================================================
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, 2002 and 2001 (unaudited)
Three Months Ended Nine Months Ended
U.S. Dollars 2002 2001 2002 2001
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net loss $ (643,273) $(2,030)$(2,248,257) $(461,799)
Adjustments to reconcile
net loss to net cash
used by operating activities:
Depreciation 12,294 10,881 47,352 33,188
Amortization of (discount)
premium on
marketable securities 33,865 8,744 76,341 9,729
Foreign currency loss 32,999 42,565 435,021 75,384
Minority interest in net income
of consolidated subsidiaries 8,865 5,298 21,041 18,907
Net (gain) loss on sale
of marketable securities 6 (284,101) 4,254 (385,358)
Other 30,000
Changes in current assets
and liabilities:
Net decrease (increase) in
current assets (22,569) (6,545) (84,957) 10,037
Net (decrease) increase
in current liabilities 5,313 12,436 (67,668) 35,575
- --------------------------------------------------------------------------------
Net cash used by operating activities(572,500) (212,752)(1,786,873) (664,337)
- --------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from the sale and maturity
of marketable securities 199,994 1,484,401 7,413,246 6,228,289
Purchase of marketable securities (2,281,800)(3,366,136)(9,408,410) (7,885,886)
Purchase of property,
plant and equipment (543) (375,267) (6,235) (1,044,894)
Other (4,536) 30,052 95,266 41,773
- --------------------------------------------------------------------------------
Net cash used by
investing activities (2,086,885)(2,226,950)(1,906,133) (2,660,718)
- --------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from the issuance
of common shares 10,800 2,160 12,960 4,285
- --------------------------------------------------------------------------------
Net cash provided by
financing activities 10,800 2,160 12,960 4,285
- --------------------------------------------------------------------------------
Change in Cash and Cash Equivalents:
Net decrease in cash and
cash equivalents (2,648,585) (2,437,542)(3,680,046) (3,320,770)
Cash and cash equivalents -
beginning of period 4,733,204 9,224,883 5,764,665 10,108,111
- --------------------------------------------------------------------------------
Cash and cash equivalents -
end of period $2,084,619 $6,787,341 $2,084,619 $6,787,341
================================================================================
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, 2002, and the results of operations and the cash flows for
the nine months ended September 30, 2002 and 2001. The results of
operations for the nine months ended September 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 (income) for the Three and Nine Months Ended September 30, 2002
and 2001
Three Months Ended Nine Months Ended
2002 2001 2002 2001
- ------------------------------------------------------------------------
United States 292,110 (30,546) 880,323 399,899
Venezuela 351,163 32,576 1,367,934 61,900
- ------------------------------------------------------------------------
Consolidated $643,273 $2,030 $2,248,257 $461,799
========================================================================
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 25, 2002