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, 2000
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):
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,
- inability to obtain 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.
Exploration and development activities on the Brisas property, which
commenced in 1992, have included surface mapping and geochemical sampling,
assaying, petrology, mineral studies and metallurgical sampling as well as
approximately 165,000 meters of drilling comprised of 763 holes.
The Brisas property is presently 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), which is contained
within an area approximately 1,900 meters long and 500 to 900 meters wide.
Scattered drill holes to the west of the main body of the deposit demonstrate
that mineralization continues for an unknown distance down dip to the west
and to the north. Additional mineralized areas have also been intersected
below the current mineralized resource.
Reserve Estimate Audits
The extensive data compiled by the Company, which serves as the basis of its
pre-feasibility study, has been closely scrutinized by its consultants. Behre
Dolbear & Company, Inc. ("Behre Dolbear") originally audited the Company's
data collection procedures in 1997. In 1998, Behre Dolbear completed an
additional audit of the Company's modeling and reserve methodology and in
early 1999 verified the published reserve estimates.
In total, Behre Dolbear's audits have concluded that technical data collection
procedures meet or exceed accepted industry standards; assay laboratories
provide 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; estimating techniques used were an accurate
representation for the reserves; 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.
Total Mineral Resource Estimates
The mineral resource based on 0.5 gold equivalent cut-off grade is summarized
in the following tables:
<TABLE>
<CAPTION>
Measured Indicated Inferred Total
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Measured** Indicated** Inferred** Total**
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
==============================================================================================================
</TABLE>
** in millions
Reserve Estimate
Audited reserve estimates contained in the most recent pre-feasibility
supplement have been prepared in accordance with reporting requirements of
applicable Canadian Securities Commissions and calculated using $300 per
ounce of gold and $0.80 per pound of copper (and $3.30/tonne revenue
cutoff). The most current estimates are as follows:
<TABLE>
<CAPTION>
Reserve Au Cu Waste Total
tonnes Au grade Cu grade ounces pounds tonnes tonnes Strip
Class (thousands) (g/t) (%) (thousands) (thousands) (thousands) (thousands) Ratio
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Proven 187,443 0.814 0.119 4,906 491,841
Probable 47,411 0.682 0.205 1,040 214,309
---------------------------------------------------------------------------------------------------
Total 234,854 0.787 0.136 5,946 706,150 383,912 618,766 1.63
===================================================================================================
</TABLE>
Outlook
The Company continues its work to complete a feasibility study on the Brisas
property. The most recent supplement to the pre-feasibility study, which was
originally completed in 1998, contemplates the implementation of on-site copper
processing using the Cominco Engineering Services Limited (CESL) technology. The
CESL process utilizes an autoclave for pressure oxidation of the concentrates
followed by a series of leaching sequences to recover the copper and gold.
Implementation of the CESL process would eliminate significant transportation
costs for the copper gold concentrates to an off-site smelter resulting in
improved Brisas project economics.
Current cost estimates (U.S. Dollars), in accordance with the Gold Institute
guidelines, result in cash operating costs of $153 per ounce of gold net of
copper revenues (using $300 per ounce gold, $0.90 per pound copper and the CESL
process). Total after-tax costs are estimated at $243 per ounce of gold
(including operating costs (net of copper revenues), working capital, initial
capital and life of mine capital less sunk costs).
Estimated cost per ounce of gold is determined net of copper revenues. As a
result, the price of copper is a significant factor in determining net
production costs. For example, every $0.10 per pound change in the price of
copper results in a corresponding change in our cash and total costs of $13 per
ounce of gold.
The proposed plant is presently estimated to cost between $350 and $400 million
and process an estimated 55,000 tonnes per day, yielding an average annual
production of as much as 362,000 ounces of gold and 46 million pounds of
copper, over a mine life of 13 years. Construction of the planned facility is
expected to take approximately 18 to 24 months, with commissioning and
achievement of commercial production expected shortly thereafter. The Brisas
property economics and plant design are subject to the results of the final
feasibility study which management expects to complete in 2001.
Management's operational focus continues to be obtaining the required permits,
securing additional sites required for process facilities, infrastructure,
waste deposition and the completion of the final feasibility study. In
addition, continuation or completion of metallurgical testing, geotechnical and
hydrological investigations, electrical power supply and development and
condemnation drilling will occur prior to completion of the final feasibility
study. It is estimated that an additional $3 to $4 million will be spent for
completion of the final feasibility study.
Reorganization
In February 1999, the shareholders of Gold Reserve Corporation (a U.S.
corporation) approved a plan of reorganization whereby Gold Reserve
Corporation became a subsidiary of Gold Reserve Inc. (a Canadian
corporation), the successor issuer. The primary purpose of the formation of a
Canadian parent was to expand the Company's profile among Canadian
investors who generally are significant investors in resource companies.
Gold Reserve Inc. continues to make filings with the U.S. Securities and
Exchange Commission and The Toronto Stock Exchange along with the
applicable Canadian Securities Commissions. After the reorganization, a
shareholder of Gold Reserve Inc. continued to own an interest in the business,
through subsidiary companies, that in aggregate is essentially the same as
before the reorganization.
Financial Overview
The December 31, 1999 balance sheet is derived from the audited consolidated
financial statements as set forth in the Company's 1999 Form 20-F. You are
urged to refer to the notes to those audited consolidated financial statements
which also apply to these interim financial statements at March 31, 2000 and
are not repeated here. The financial information given in the accompanying
unaudited financial statements reflects all normal, recurring adjustments
which, in the opinion of management, are necessary for a fair presentation for
the periods reported.
The total financial resources of the Company, cash plus current and
non-current marketable securities (primarily consisting of highly liquid US
treasury and agency obligations), decreased $0.8 million from December 31,
1999 to approximately $19 million as of March 31, 2000. (All amounts are
stated in U.S. Dollars).
March 31, December 31,
2000 1999
-----------------------------------------------------------------
Cash and equivalents $ 8,310,910 $ 4,377,521
Marketable securities - current 5,489,132 9,884,909
Marketable securities - non-current 5,039,703 5,350,417
-----------------------------------------------------------------
$ 18,839,745 $ 19,612,847
=================================================================
The overall budgeted corporate expenditures for 2000, excluding interest
income estimated at approximately $1 million, is estimated at $3.2 million.
Approximately $1.2 million will be spent directly on the Brisas property,
primarily to complete a final feasibility study and related activities. The
remaining budgeted expenditures relate to corporate management of the
Brisas property, exploration activities other than on the Brisas property and
general corporate activities. Management anticipates that its combined cash
and investment position will be sufficient to cover estimated operational and
capital expenditures (excluding estimated mine construction costs) associated
with the remainder of 2000 and all of 2001.
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, if and when mine development activities are commenced on
the Brisas property, 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. 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 however, does not plan to raise funds
through the sale of equity or debt for the next 18 to 24 months.
Consolidated net loss for the three months ended March 31, 2000 amounted to
$543,681 or $0.02 per share compared to consolidated net loss of $895,990
or $0.04 per share for the same period in 1999. Other income decreased
primarily as a result of lower levels of cash and investments. Expenses for
the three months ended March 31, 2000 decreased over the prior period
primarily as a result of various cost reduction measures undertaken by the
Company and the timing of some expenses, partially offset by a loss on the
sale of marketable securities.
Certain reclassifications of the 1999 financial statements have been made to
conform with the 2000 presentation. These reclassifications had no effect on
the net loss or accumulated deficit as previously reported.
As of May 30, 2000, the Company had the following shares and share options
outstanding:
------------------------------------------------------------
Class A common 21,815,383
Equity units* 1,285,817
Options to purchase Class A common shares 3,263,240
------------------------------------------------------------
*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 SHEET
March 31, 2000 and December 31, 1999 (unaudited)
March 31, December 31,
U.S. Dollars 2000 1999
----------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 8,310,910 $ 4,377,521
Marketable securities 5,489,132 9,884,909
Deposits, advances and other 358,389 346,834
Accrued interest 91,954 171,732
------------ ------------
Total current assets 14,250,385 14,780,996
Property, plant and equipment, net 43,712,049 43,374,065
Marketable securities 5,039,703 5,350,417
Other 1,263,769 1,295,014
------------ ------------
Total assets $ 64,265,906 $ 64,800,492
============ ============
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 316,323 $ 320,214
Note payable - KSOP 184,419 184,419
------------ ------------
Total current liabilities 500,742 504,633
Minority interest in consolidated
subsidiaries 1,005,573 992,587
------------ ------------
Total liabilities 1,506,315 1,497,220
------------ ------------
SHAREHOLDERS' EQUITY
Serial preferred stock,
without par value - -
Common shares and equity units,
without par value 102,067,298 102,067,298
Less, common shares held
by affiliates (403,331) (403,331)
Accumulated deficit (38,719,957) (38,176,276)
KSOP debt guarantee (184,419) (184,419)
------------ ------------
Total shareholders' equity 62,759,591 63,303,272
Total liabilities and ------------ ------------
shareholders' equity $ 64,265,906 $ 64,800,492
============ ============
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2000 and 1999
(unaudited)
U.S. Dollars 2000 1999
----------- -----------
OTHER INCOME
Interest $ 263,813 $ 286,118
EXPENSES
General and administratie 263,693 730,658
Technical services 115,161 204,084
Corporate communications 56,806 77,740
Legal and accounting 33,531 42,987
Foreign currency loss 38,151 44,741
Reorganization - 69,976
Loss on sale of marketable securities 283,507 -
Interest 3,659 5,865
Minority interest in net income
of consolidated subsidiaries 12,986 6,057
----------- -----------
807,494 1,182,108
----------- -----------
Net loss $ (543,681) $ (895,990)
=========== ===========
Net loss per share - basic and diluted $ (0.02) $ (0.04)
=========== ===========
Weighted average common
shares outstanding 23,101,200 22,730,840
=========== ===========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999
(unaudited)
U.S. Dollars 2000 1999
Cash Flows from Operating Activities:
Net loss $ (543,681) $ (895,990)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 10,967 9,683
Amortization of premium (discount)
on marketable securities (11,481) 22,156
Foreign currency loss 38,151 44,741
Minority interest in net income of
consolidated subsidiaries 12,986 6,057
Net loss on sale of marketable securities 283,507 -
Changes in current assets and liabilities:
Net decrease (increase) in current assets 68,223 260,785
Net increase in current liabilities (3,891) 60,198
----------- -----------
Net cash used by operating activities (145,219) (492,370)
----------- -----------
Cash Flows from Investing Activities:
Proceeds from the sale and maturity of
marketable securities 7,607,312 4,000,000
Purchase of marketable securities (3,172,847) (2,648,000)
Purchase of property, plant and equipment (387,102) (653,088)
Other 31,245 34,531
----------- -----------
Net cash provided by investing activities 4,078,608 733,443
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of common shares - 12,543
----------- -----------
Net cash provided by financing activities - 12,543
----------- -----------
Change in Cash and Cash Equivalents:
Net increase in cash and cash equivalents 3,933,389 253,616
Cash and cash equivalents - beginning of period 4,377,521 2,848,189
----------- -----------
Cash and cash equivalents - end of period $ 8,310,910 $ 3,101,805
=========== ===========
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, 2000
