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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, 2003
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, 2003
Interim Financial Report
U.S. Dollars
Forward Looking Statements
The information presented or incorporated by reference in this interim
report, including managements discussion and analysis of financial
condition and results of operations, contains 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)). These forward-looking statements involve
risks and uncertainties, as well as assumptions that, if they never
materialize, prove incorrect or materialize other than as currently
contemplated, could cause the results of the Company and its consolidated
subsidiaries to differ materially from those expressed or implied by such
forward-looking statements.
Numerous factors could cause actual results to differ materially from
those in the forward-looking statements, including without limitation the
risk that actual reserves may vary considerably from estimates presently
made, the impact of currency, metal prices and metal production
volatility, the concentration of operations and assets in Venezuela, the
regulatory, political and economic risks associated with Venezuelan
operations, our ability to obtain additional funding for future
development of the Brisas property, our dependence upon the abilities and
continued participation of certain key employees, and the risks normally
incident to the operation and development of mining properties.
The words "believe," "anticipate," "expect," "intend," "estimate," "plan,"
"assume," "positioned," "may," "will," "could" and other similar
expressions that are predictions of or indicate future events and future
trends which do not relate to historical matters, identify forward-looking
statements. Any such forward-looking statements are not intended to give
any assurances as to future results.
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 report that would warrant
any modification of any forward-looking statement made in this document,
other documents filed periodically with securities regulators or documents
presented on our Company website. 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.
Investors are urged to read the Company's filings with U.S. and Canadian
regulatory agencies, which can be viewed on-line at www.sec.gov,
www.sedar.com or at the Company's website, www.goldreserveinc.com.
Additionally, you can request a copy directly from the Company.
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 1.1 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 south 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.
Construction of a mining facility at the Brisas property is estimated to
cost approximately $353 million (including working capital of
approximately $19.5 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
The mineral reserve and resource estimates set forth in this document have
been prepared by management in accordance with the disclosure requirements
of applicable Canadian and U.S. Securities Commissions. The definitions
related to reserves, used herein, are pursuant to Canadian National
Instrument 43-101, Standards of Disclosure for Mineral Projects, which
management believes are substantially the same as those definitions used
in the U.S. Securities Commission Industry Guide 7.
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 audited the Company's data collection
procedures and modeling and mineral reserve methodology for the
preliminary feasibility study conducted in 1998, as well as the updated
1999 reserve. Behre Dolbear concluded in their reports that: technical
data collection procedures met or exceeded accepted industry standards;
assay laboratories provided reliable and acceptable results; and the
compiled database was of a quality appropriate for utilization in a
mineral reserve study suitable for obtaining financing. Further, Behre
Dolbear has concluded that Gold Reserve has an adequate basis for
supporting the estimated mineral reserves at the Brisas project in
accordance with Canadian National Instrument 43-101, Standards of
Disclosure for Mineral Projects as well as the standards contained in the
U.S. Securities and Exchange Commission Industry Guide 7.
Mineral Resource Estimates
The Brisas property is estimated to contain a total mineral resource of
9.9 million ounces of gold and approximately 1.1 billion pounds of copper
(based on 0.5 gram per tonne gold equivalent cut-off). The mineral
resource prepared by management and 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 prepared by management and effective January
2000, is presented in tabular form below. Using an average gold and copper
price of $300 per ounce and $0.80 per pound, 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 per ounce and $0.90 per pound, 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
Brisas Project Development
Due to the low gold price during the past several years, we evaluated
alternatives to improve the economics of the Brisas project. We determined
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 Cristinas property to the north. These
efforts accelerated in late 2001 into 2002 and, for this reason,
substantive development activities on the Brisas project were limited in
2002 while management pursued efforts to combine the Brisas and Cristinas
properties into one mining project. These efforts were terminated in
September 2002, when CVG awarded a work contract related to the Cristinas
property to another company. While management still believes that the best
alternative is the combined project, the Company is proceeding with the
Brisas project on a stand-alone basis.
During the first quarter of 2003, MEM approved an operating plan for the
alluvial and hardrock ore and project infrastructure for the Brisas
project. Earlier, MARNR approved an EIS for the alluvial-ore mining
plan. Based on the alluvial and hardrock ore operating plan approved by
MEM, the Company is preparing an updated and expanded EIS for the larger
project. The Brisas project is located in the Imataca Forest Reserve
("Imataca") in an area previously set aside for mining. In 1997 the
Supreme Court issued a preventive measure that no new mining concessions
or rights could be granted in the Imataca. Subsequent to the Supreme Court
order, MEM granted the Company the hardrock exploitation concession. Prior
to the granting of the hardrock concession and subsequent to the Supreme
Court order the Company had submitted to MEM and MARNR several concession
and permit applications related to the Brisas project. These applications
are currently pending the resolution of the Imataca matter. In accordance
with the 1945 mining law, exploitation activities are required to commence
within two years from the approval of the operating plan. Representatives
from MEM and MARNR have indicated that the Imataca issue should be
resolved during the next twelve months. In addition, these representatives
have indicated that any delay in the resolution of the Imataca matter
further delays any obligation required of the concession and/or contract
holder.
During 2003 we recommenced activities on the Brisas property, which are
required to complete a final feasibility study. These additional
activities, which are expected to cost approximately $7 million, may
include mining of a bulk sample for the applicability of Cominco
Engineering Services Limited (CESL), further metallurgical testing,
drilling, geotechnical studies and environmental studies, final
feasibility and engineering, as well as permitting and on-going
maintenance. The timing of these activities are subject to, among other
things, typical environmental and regulatory permits as well as the
scheduling of third party consultants and contractors. As a result, we
cannot say with certainty when, or if, the final feasibility study will be
completed.
Financial Overview
Overview
We prepare our consolidated financial statements in U.S. Dollars in
accordance with accounting principles generally accepted in Canada. The
Company has not recorded revenue or cashflow from mining operations and
has experienced losses from operations for each of the last five years, a
trend we expect to continue until the Brisas property is fully developed
and put into production. The information contained herein should be read
in conjunction with the Company's consolidated financial statements,
included herein.
Venezuela has experienced high levels of inflation during the last several
years and has also most recently experienced ongoing political instability
and civil unrest (including a national work stoppage and a number of civil
disturbances), fuel shortages, currency and exchange controls, and a
decline in industrial output and foreign investment. Despite this
political and economic turmoil, we have not experienced any significant
adverse impact on our operations in Venezuela nor have we curtailed our
investment activities in the country. However, our future operations and
investments in Venezuela could be adversely affected by continued
political instability and civil unrest, as well as, exchange controls,
currency fluctuations, political instability, changes in mining laws or
regulations, taxation, judicial decisions and laws or policies of
Venezuela and the United States affecting trade, investment, taxation and
other factors.
The total financial resources of the Company, cash plus current and
non-current marketable securities, decreased $0.5 million from December
31, 2002 to approximately $12.0 million as of March 31, 2003 (unaudited):
March 31, December 31,
2003 2002
- -------------------------------------------------------------------------
Cash and equivalents $ 1,427,997 $ 1,584,632
Marketable securities - current 9,846,764 10,945,768
Marketable securities - non-current 773,308
- -------------------------------------------------------------------------
$ 12,048,069 $ 12,530,400
=========================================================================
Consolidated net loss for the three months ended March 31, 2003 amounted
to $549,688 or $0.02 per share compared to consolidated net loss of
$626,317 or $0.03 per share for the same period in 2002. The decrease in
net loss from the comparable three-month period results primarily from a
decrease in foreign currency loss. The Company had no significant
financing transactions and no significant investing activities during the
three months ended March 31, 2003, other than investments in
marketable securities, which, on a net basis, totaled approximately $0.3
million in sales and maturities of marketable securities.
Planned corporate expenditures for 2003, excluding the amounts that may be
expended for the completion of the feasibility study on the Brisas property
and other exploration as noted below, are estimated at $3.0 million.
Interest and investment income for 2003 is projected to be approximately
$0.7 million.
We have recommenced activities on the Brisas property that are required to
complete a final feasibility study. We expect these activities to cost
approximately $7 million. Although we hope to complete the final
feasibility in 2004, the timing of these activities are subject to, among
other things, typical environmental and regulatory permits as well as the
scheduling of third party consultants and contractors. As a result, we
cannot say with certainty when the final feasibility study will be
completed. We also expect to perform initial exploratory work on a
grass-roots exploration target, the Choco 5 property, which, if completed,
is expected to cost approximately $0.3 million in 2003.
As of May 29, 2003, the Company held approximately $12 million in cash and
investments. We will be required to seek additional funding in the coming
months in order to maintain our current cash position, which management
believes is in the best interest of the Company. We expect to seek
additional financing concurrently with completing the Brisas work program
(as described above) and the limited exploration program on the
Choco 5 property. We have evaluated a number of financing options
presented by our investment bankers in the last several months, but have
no firm commitments to proceed with a financing. If we are unable to
acquire additional funding on acceptable terms in the short-term, there
are no assurances that we will complete as planned, the final feasibility
study on the Brisas project. The Company can make no assurances that it
can obtain necessary financing on acceptable terms, if at all.
Development of the Brisas property, as presently proposed in the Brisas
preliminary feasibility study, is estimated to cost $353 million over a
twelve to eighteen month construction period. The ultimate design and cost
of the plant and associated expenditures are subject to the results of a
final feasibility study and would be expected to vary to some degree from
original estimates. Future development of the Brisas property is dependent
upon, among other things, the price of gold and copper, obtaining adequate
financing, and obtaining the appropriate environmental and operating
permits. It is unclear, if and when the development of the Brisas property
will commence.
In the near-term management believes that current cash and investment
balances are sufficient to allow the Company to fund its activities
through 2004. The timing and extent of additional funding depends on a
number of important factors, including the actual timetable of our
2003-2004 work plan, our assessment of the financial markets, our share
price and the price of gold and copper. Longer term, our plan for
significant additional funding (approximately $350 million) is dependent
upon the successful completion of the final feasibility study, if and when
mine development activities on the Brisas project are commenced, the
acquisition of additional properties and the overall capital requirements
of the consolidated group. Management can provide no assurances that it
will be able to acquire the required significant additional financing that
will be needed, if and when, construction on the Brisas project commences.
Failure to raise the required funds will impede the Company's ability to
construct and operate the Brisas project and would, in the long-term, have
a material adverse effect on the Company.
The Bolivar/Dollar exchange rate ended 2002 at Bs. 1,403 to the Dollar, up
Bs. 645 (85%) from December 2001. In February 2002, a free-floating
exchange rate system was established, with the Venezuelan Central Bank
acting as the main foreign currency seller. During the first quarter of
2003, the exchange rate was fixed at Bs. 1,600 to the Dollar.
As of May 29, 2003, the Company had the following shares, equity units and
share options issued:
Class A common 22,996,158
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
March 31, 2003 (unaudited) and December 31, 2002
March 31, December 31,
U.S. Dollars 2003 2002
- -------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 1,427,997 $ 1,584,632
Marketable securities 9,846,764 10,945,768
Deposits, advances and other 338,914 348,798
Accrued interest 145,802 148,893
- -------------------------------------------------------------------------------
Total current assets 11,759,477 13,028,091
- -------------------------------------------------------------------------------
Property, plant and equipment, net 46,136,088 46,144,396
Marketable securities 773,308
Other 592,033 670,036
- -------------------------------------------------------------------------------
Total assets $ 59,260,906 $ 59,842,523
===============================================================================
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 309,074 $ 350,261
- -------------------------------------------------------------------------------
Total current liabilities 309,074 350,261
Minority interest in consolidated subsidiaries 1,089,499 1,080,241
- -------------------------------------------------------------------------------
Total liabilities 1,398,573 1,430,502
===============================================================================
SHAREHOLDERS' EQUITY
Serial preferred stock, without par value
Common shares and equity units,
without par value 102,498,071 102,498,071
Less, common shares held by affiliates (674,598) (674,598)
Accumulated deficit (43,896,356) (43,346,668)
KSOP debt (64,784) (64,784)
- -------------------------------------------------------------------------------
Total shareholders' equity 57,862,333 58,412,021
- -------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 59,260,906 $ 59,842,523
===============================================================================
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, 2003 and 2002 (unaudited)
U.S. Dollars 2003 2002
- --------------------------------------------------------------------
OTHER INCOME
Interest $ 180,800 $ 172,204
Gain on sale of marketable
securities 11,800 3,475
- --------------------------------------------------------------------
192,600 175,679
EXPENSES
General and administrative 237,626 215,442
Technical services 320,955 354,870
Corporate communications 101,061 65,422
Legal and accounting 27,180 21,011
Foreign currency loss 46,208 138,308
Minority interest in net income
of consolidated subsidiaries 9,258 6,943
- --------------------------------------------------------------------
742,288 801,996
- --------------------------------------------------------------------
Net loss $ (549,688) $ (626,317)
====================================================================
Net loss per share $ (0.02) $ (0.03)
====================================================================
Weighted average common
shares outstanding 23,492,776 23,176,843
====================================================================
CONSOLIDATED STATEMENTS OF DEFICIT
For the Three Months Ended March 31, 2003 and 2002 (unaudited)
U.S. Dollars
Deficit, December 31, 2002 $(43,346,668)
Net loss (549,688)
- ------------------------------------------------
Deficit, March 31, 2003 $(43,896,356)
================================================
Deficit, December 31, 2001 $(40,338,546)
Net loss (626,317)
- ------------------------------------------------
Deficit, March 31, 2002 $(40,964,863)
================================================
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2003 and 2002 (unaudited)
U.S. Dollars 2003 2002
- ---------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net loss $ (549,688) $ (626,317)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 11,305 21,169
Amortization of premium on
marketable securities 26,288 16,189
Foreign currency loss 46,208 138,308
Minority interest in net income of
consolidated subsidiaries 9,258 6,943
Net gain on sale of marketable
securities (11,800) (3,475)
Changes in non-cash working capital:
Net decrease (increase) in deposits,
advances and accrued interest 12,975 (15,731)
Net (decrease) in accounts payable
and accrued expenses (41,187) (32,951)
- ---------------------------------------------------------------------------
Net cash used by operating activities (496,641) (495,865)
- ---------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from the sale and maturity of
marketable securities 2,451,300 2,603,475
Purchase of marketable securities (2,140,092) (1,955,000)
Purchase of property, plant and equipment (2,997)
Other 31,795 32,882
- ---------------------------------------------------------------------------
Net cash provided by investing activities 340,006 681,357
- ---------------------------------------------------------------------------
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 (decrease) in cash and cash
equivalents (156,635) 187,652
Cash and cash equivalents - beginning of period 1,584,632 5,764,665
- ---------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 1,427,997 $ 5,952,317
===========================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Selected Notes To Consolidated Financial Statements
For the Three Months Ended March 31, 2003 and 2002 (unaudited)
Expressed in U.S. Dollars
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, 2003, and the results of operations and the
cash flows for the three months ended March 31, 2003 and 2002. The
results of operations for the three months ended March 31, 2003 and 2002
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 2002 annual report.
2. Geographic Segments
Net Loss for the Three Months Ended March 31, 2003 and 2002
2003 2002
- -----------------------------------------------------------
United States 267,457 217,357
Venezuela 282,231 408,960
- -----------------------------------------------------------
Consolidated $549,688 $ 626,317
===========================================================
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 29, 2003