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, 2004
GOLD RESERVE INC.
Commission file number 001-31819
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, 2004
Interim Financial Report
U.S. Dollars
Forward Looking Statements
The information presented or incorporated by reference in this interim
report, including management's 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 advancement 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
Brisas Project
Our primary mining asset, the Brisas project, is a gold/copper deposit
located in the KM 88 mining district of the State of Bolivar in southeastern
Venezuela. A pre-feasibility study was completed in 1998 and updated in 2000
by JE MinCorp. The pre-feasibility study and update evaluated two processing
flowsheets: 1) a conventional flotation plant producing gold dore and copper
concentrates for off-site smelter processing and 2) a conventional flotation
plant producing gold dore and Cominco Engineering Services Limited (CESL)
copper processing using an autoclave for pressure oxidation of the
concentrates followed by a series of leaching sequences to recover the
copper and gold on-site.
In late 2003, the Company selected Aker Kvaerner Metals, Inc., a subsidiary
of the international engineering and construction services group, Aker
Kvaerner and a number of other consultants including Pincock Allen & Holt
and Vector Colorado LLC, to complete a bankable feasibility study for the
construction and operation of the Brisas project. During 2004, Aker Kvaerner
conducted several trade-off studies including different processing options
and plant throughputs and, based on that work, the Company selected a 70,000
tonne per day conventional flotation plant as the basis for completion of the
Brisas bankable feasibility study. Under this alternative, the Company plans
to produce gold dore on-site and ship gold/copper concentrate to an off-site
smelter.
The Company previously reported resource and mineral reserve estimates using
both a traditional off-site smelter process as well as the CESL process.
Management continues to evaluate high temperature pressure oxidation
processes to produce copper cathode on-site as a way to further improve the
project economics by eliminating significant transportation costs for the
copper/gold concentrates. However, as a result of significantly lower long
term concentrate treatment and refining charges, management has concluded a
conventional flotation plant will be the primary focus of the Brisas
bankable feasibility study, which is expected to be completed in late 2004
with a production decision thereafter. Based on the focus of the bankable
feasibility study, mineral resource and reserve estimates are no longer
disclosed using on-site copper processing technology.
Behre Dolbear originally calculated the previously disclosed mineral
resource and reserve estimates, which were updated by Pincock Allen & Holt
as noted below. As part of that engagement, Behre Dolbear audited our data
collection procedures and modeling and mineral reserve methodology for the
preliminary feasibility study. 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 concluded that the estimating techniques used were an accurate
representation for the mineral reserves; drill hole spacing was sufficient
to generate future estimates of proven and probable mineral reserves; and
the database was correct and reliable.
Mineral Resource Estimate (July 2004, off-site smelter process)
Based on work completed by Pincock Allen & Holt for the Brisas bankable
feasibility study, using an off-site smelter process for treating copper
concentrates, the Brisas project is estimated to contain a measured and
indicated mineral resource of 10.97 million ounces of gold and approximately
1.4 billion pounds of copper (based on 0.4 gram per tonne gold equivalent
cut-off). The July 2004 estimated measured and indicated mineral resource
utilizing an off-site smelter process is summarized in the following table:
(kt= 1,000 tonnes) Measured Indicated Measured and Indicated
----------------------------------------------------------------------------------------------
Au Eq
Cutoff Au Cu Au Cu Au Cu
Grade kt (gpt) (%) kt (gpt) (%) kt (gpt) (%)
----------------------------------------------------------------------------------------------
0.40 217,847 0.700 0.118 284,869 0.662 0.132 502,716 0.678 0.126
==============================================================================================
(In Millions) Measured Indicated Measured and Indicated
----------------------------------------------------------------------------------------------
Au Eq
Cutoff Au Cu Au Cu Au Cu
Grade oz. lb. oz. lb. oz. lb
----------------------------------------------------------------------------------------------
0.40 - 4.904 566 - 6.064 827 - 10.968 1,393
==============================================================================================
The inferred mineral resource, based on an off-site smelter process
(0.4 gram per tonne gold equivalent cut-off), is estimated at 126.5
million tonnes containing 0.65 grams gold per tonne and 0.13 percent copper,
or 2.64 million ounces of gold and 370 million pounds of copper.
The mineral resource estimate has been calculated in accordance with CSA
National Instrument 43-101. The mineral resource and gold equivalent (AuEq)
cut-off is based on $350 per gold ounce and $0.90 per pound copper. The
qualified persons involved in the property evaluation and resource estimate
were Raul Borrastero, C.P.G. and Susan Poos P.E. of Pincock Allen & Holt and
Brad Yonaka, Exploration Manager for Gold Reserve.
Mineral Reserve Estimate (August 2004, off-site smelter process)
Based on work completed by Pincock Allen & Holt for the Brisas bankable
feasibility study, using an off-site smelter process for treating copper
concentrates, the Brisas project is estimated to contain a proven and
probable mineral reserve of approximately 9.1 million ounces of gold and
1.2 billion pounds of copper. The August 2004, estimated proven and
probable mineral reserve utilizing traditional flotation and off-site smelter
processes is summarized in the following table:
Reserve Au Cu Waste Total
tonnes Au grade Cu grade ounces pounds tonnes tonnes Strip
Class (thousands) (gpt) (%) (thousands) (millions)(thousands) (thousands) Ratio
-----------------------------------------------------------------------------------------------
Proven 190,073 0.71 0.123 4,343 516
Probable 216,970 0.68 0.133 4,754 638
-----------------------------------------------------------------------------------------------
Total 407,043 0.70 0.129 9,097 1,154 753,012 1,160,055 1.85
===============================================================================================
The mineral reserve (within a pit design) has been estimated in accordance
with the SME Reporting Guide and CIM Standards as adopted by CSA National
Instrument 43-101. The mineral reserve was estimated using metal prices of
US $350 per ounce gold and US $0.90 per pound copper with an internal
revenue cut-off of $2.76 per tonne. The qualified persons involved in the
property evaluation and reserve estimate were Raul Borrastero, C.P.G. and
Susan Poos P.E. of Pincock Allen & Holt and Brad Yonaka, Exploration
Manager for Gold Reserve.
Brisas Project Work To Date.
Considerable work has taken place to establish the mineral resource and
reserve. Over $73 million has been expended on the Brisas project including
property and mineral rights, acquisition costs, equipment expenditures,
litigation settlement costs and exploration costs. Other activities on the
property include: extensive geology, geophysics and geochemistry, over 800
exploration drill holes totaling approximately 180,000 meters of core
drilling (including approximately 40 holes totaling 15,000 meters completed
in the first quarter of 2004), audits by Behre Dolbear (of exploration
drilling, sampling, assaying procedures and ore reserves methodology),
environmental baseline work/socioeconomic studies, hydrology studies,
geotechnical studies, mine planning, advanced stage grinding and
metallurgical testwork, tailings dam designs, milling process flow sheet
designs, pre-feasibility study with JE MinCorp, supplement to the
pre-feasibility study with JE MinCorp, and bench scale testing of an on-site
copper process.
Additional work has also been initiated related to environmental analysis,
permitting and environmental impact studies. Management has engaged
independent consultants to assist in the negotiation of a contract for the
future sale of copper concentrates as well as negotiations related to future
electrical power contracts.
In July 2004, the Company selected a 70,000 tonne per day conventional
flotation plant as the basis for completion of the Brisas bankable
feasibility study. In addition, the Company revised its estimate of the
measured and indicated gold and copper resource on the Brisas property to
approximately 10.97 million ounces of gold and 1.4 billion pounds of copper.
The inferred resource at Brisas is an additional 2.64 million ounces of gold
and 370 million pounds of copper.
In August 2004, the Company revised its estimate of the proven and
probable gold and copper reserve on the Brisas property to approximately
9.1 million ounces of gold and 1.2 billion pounds of copper.
2004 Brisas Work Plan.
During the second half of 2004 we will continue the activities on the Brisas
project that are required to complete a bankable feasibility study.
Expenditures related to the completion of the bankable feasibility study in
the second half of 2004 are expected to be approximately $4.5 million.
Concurrent with the completion of the feasibility study, the Company will
also complete the metallurgical testing and engineering on the high
temperature pressure oxidation (HTPOX) of the gold-copper concentrates to
produce gold dore and copper cathode on-site.
The ultimate design and future cost of construction of a plant is subject to
the results of a bankable feasibility study which will be required to be
completed before a production decision can be made. Actual construction
costs, production rates and cost of production will vary from the
preliminary feasibility study estimates based on the results of the
bankable feasibility study, as well as factors encountered if and when
production commences. Management currently plans to complete the required
feasibility study in late 2004 and to make a production decision thereafter.
The timing of these activities is subject to, among other things, project
financing, typical environmental and regulatory permits as well as the
scheduling of third party consultants and contractors.
Choco 5 Property
The Company continues to be focused primarily on its Brisas project however,
to a lesser extent, the Company is continuing limited exploration activities
on its Choco 5 property. The Choco 5 property, a grass-roots gold
exploration target, is located in the El Callao mining district in the State
of Bolivar, southeastern Venezuela. Since acquiring the property in 2000, the
Company has invested approximately $200,000 on acquisition and exploration
costs and expects during 2004, to expend up to $300,000 on further
exploration. Exploration activities will include the following:
environmental permitting, additional geologic mapping and reconnaissance,
comprehensive grid of soil geochemical sampling, exploration drilling,
geophysical testing of established gold anomalies in the eastern sector of
the property, trenching and selective diamond drilling of gold anomalies,
and construction of access roads to facilitate the above activities.
Financial Overview
Overview. The following discussion of financial position as of June 30, 2004
and results of operations for the three and six months ended June 30, 2004
and 2003 are to be read in conjunction with the Company's unaudited
consolidated financial statements and related notes, included herein.
We prepare our consolidated financial statements in U.S. Dollars in
accordance with accounting principles generally accepted in Canada. These
financial statements together with the following management's discussion and
analysis, dated August 3, 2004, are intended to provide investors with a
reasonable basis for assessing the financial performance of the Company as
well as certain forward-looking statements relating to the Company's
potential future performance. Additional information on the Company can be
found in the Company's Annual Information Form filed with Canadian
Securities Regulators at www.sedar.com and its Form 20F filed with the US
Securities and Exchange Commission at www.sec.gov.
The Company is engaged in the business of exploration and development of
mining projects and is presently focusing its financial resources on its
most significant asset, the Brisas project, and to a lesser extent the
exploration of its Choco 5 property, both located in Bolivar State,
Venezuela. The Company has no commercial production at this time. As a
result, the Company has not recorded revenue or cashflow from its mining
operations and has experienced losses from operations for each of the last
five years, a trend we expect to continue until the Brisas project is fully
developed and put into commercial production. The Company has historically
financed its operations through the sale of common stock and other equity
securities. Management expects the Brisas project to be similarly financed
along with project debt financing.
Venezuela has experienced high levels of inflation during the last several
years as well as ongoing political instability and civil unrest, including
national work stoppages and a number of civil disturbances. In addition,
Venezuela has experienced fuel shortages, currency and exchange controls,
and a decline in industrial output and foreign investment. Venezuela is
holding a mid-term presidential recall referendum (as provided in the
Constitution) August 15, 2004 to determine if President Chavez should be
removed from office. The results of the recall may further impact the
political stability of the country. Despite this political and economic
turmoil, we have not experienced any significant adverse impact to date on
our operations in Venezuela nor have we curtailed our investment activities
in the country. However, our operations and investments in Venezuela could
be adversely affected in the future.
In late 2003, the Company engaged a number of engineering and construction
services consultants to complete the bankable feasibility study for the
construction and operation of the Brisas project. Completion of the
feasibility study will be the Company's primary focus during the remainder
of 2004. Management plans to complete the feasibility study in late 2004 in
order to make a production decision thereafter.
The total financial resources of the Company, cash plus current and
non-current marketable securities, decreased $4.3 million from December 31,
2003 to approximately $15.4 million as of June 30, 2004 (unaudited):
June 30, December 31,
2004 2003
--------------------------------------------------------------------------
Cash and equivalents $ 6,521,544 $ 11,331,503
Marketable securities - current 8,100,959 8,450,478
Marketable securities - non-current 815,166
--------------------------------------------------------------------------
$ 15,437,669 $ 19,781,981
==========================================================================
As of August 3, 2004, the Company had the following shares,
equity units, warrants and share options issued:
Class A common 27,888,842
Equity units* 1,217,750
Warrants to purchase Class A common shares 2,021,000
Options to purchase Class A common shares 3,396,874
*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.
Results of Operations. The Company's results of operation are a product of
operating expenses, primarily related to the development of the Brisas
project, net of investment income. Consolidated net loss for the three and
six months ended June 30, 2004 amounted to $1,868,015 and $4,208,879 or
$0.07 and $0.15 per share compared to consolidated net loss of $715,181 and
$1,264,869 or $0.03 and $0.05 per share for the same periods in 2003.
Other income for the three and six month periods ended June 30, 2004
increased by approximately $65,000 over the comparable three month period
in 2003 and was substantially unchanged from the comparable six month period
in 2003. The change was primarily due to an increase in investment gains.
Operating expenses for the six months ended June 30, 2004 amounted to
$4,543,356, which is an increase from the comparable six-month period in
2003 of $2,944,988. The increase in operating expenses is due to an increase
in expenditures related to the completion of the bankable feasibility study
as well as the impact of adopting the Canadian Institute of Chartered
Accountants Standard 3870 under which the fair value method of accounting
for stock options granted to employees and directors is recorded as
compensation expense. See footnote 3 to the consolidated financial
statements.
Liquidity and Capital Resources. The Company had no significant investing
activities during the six months ended June 30, 2004, other than the
purchase and sale of marketable securities, which, on a net basis, totaled
approximately $400,000 in purchases of marketable securities.
Planned corporate expenditures for 2004, including amounts to be expended
for the completion of the bankable feasibility study on the Brisas property,
exploration activities on the Choco 5 property and general corporate
activities, are estimated at $10 million. Interest and investment income for
2004 is projected to be approximately $600,000.
Activities related to the completion of the Brisas bankable feasibility
study are expected to cost approximately $7 million. These activities
will include further analysis of the applicability of producing
copper cathode on-site, 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 is subject to, among other things, typical environmental
and regulatory permits as well as the scheduling of third party consultants
and contractors.
As of August 3, 2004, the Company held approximately $15 million in cash and
investments. In the near-term management believes that current cash and
investment balances are sufficient to allow the Company to fund its
activities into 2005. The ultimate design and cost of the Brisas mining
facility and associated expenditures (currently estimated to cost as much as
$400 million) are subject to the results of a final feasibility study.
Future production of gold and copper on 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. 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.
CONSOLIDATED BALANCE SHEETS
June 30, 2004 (unaudited) and December 31, 2003
June 30, December 31,
U.S. Dollars 2004 2003
-------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 6,521,544 $ 11,331,503
Marketable securities 8,100,959 8,450,478
Deposits, advances and other 396,086 310,820
Accrued interest 68,534 68,651
-------------------------------------------------------------------------
Total current assets 15,087,123 20,161,452
-------------------------------------------------------------------------
Property, plant and equipment, net 46,186,457 46,126,317
Marketable securities 815,166
Other 750,792 742,713
-------------------------------------------------------------------------
Total assets $ 62,839,538 $ 67,030,482
=========================================================================
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 420,459 $ 765,860
-------------------------------------------------------------------------
Total current liabilities 420,459 765,860
Minority interest in
consolidated subsidiaries 1,119,874 1,126,151
-------------------------------------------------------------------------
Total liabilities 1,540,333 1,892,011
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Serial preferred stock, without par value
Common shares and equity
units, without par value 113,038,104 112,971,425
Less common shares held
by affiliates (674,598) (674,598)
Stock options 722,035
Accumulated deficit (51,681,984) (47,054,004)
KSOP debt (104,352) (104,352)
-------------------------------------------------------------------------
Total shareholders' equity 61,299,205 65,138,471
-------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 62,839,538 $ 67,030,482
=========================================================================
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, 2004 and 2003 (unaudited)
Three Months Ended Six Months Ended
U.S. Dollars 2004 2003 2004 2003
-------------------------------------------------------------------------------
OTHER INCOME
Interest $107,328 $140,899 $236,153 $321,699
Gain on sale of
marketable securities 98,324 98,324 11,800
-------------------------------------------------------------------------------
205,652 140,899 334,477 333,499
EXPENSES
General and administrative 422,067 367,053 1,097,237 604,679
Technical services 1,443,945 305,130 2,956,525 626,085
Corporate communications 161,777 96,236 383,867 197,297
Legal and accounting 46,341 70,997 71,018 98,177
Foreign currency loss 747 11,062 40,986 57,270
Minority interest in net
income (loss) of
consolidated subsidiaries (1,210) 5,602 (6,277) 14,860
-------------------------------------------------------------------------------
2,073,667 856,080 4,543,356 1,598,368
-------------------------------------------------------------------------------
Net loss $(1,868,015) $(715,181) $(4,208,879) $(1,264,869)
===============================================================================
Net loss per share $(0.07) $(0.03) $(0.15) $(0.05)
===============================================================================
Weighted average common
shares outstanding 28,260,776 23,492,776 28,243,724 23,492,776
===============================================================================
CONSOLIDATED STATEMENTS OF DEFICIT
For the Six Months Ended June 30, 2004 and 2003 (unaudited)
U.S. Dollars
Deficit, December 31, 2003 $ (47,054,004)
Adjustment for stock option
compensation from 2002 and 2003 (419,101)
Net loss (4,208,879)
----------------------------------------------------
Deficit, June 30, 2004 $ (51,681,984)
====================================================
Deficit, December 31, 2002 $ (43,346,668)
Net loss (1,264,869)
----------------------------------------------------
Deficit, June 30, 2003 $ (44,611,537)
====================================================
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, 2004 and 2003 (unaudited)
Three Months Ended Six Months Ended
U.S. Dollars 2004 2003 2004 2003
---------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net loss $(1,868,015) $(715,181) $(4,208,879) $(1,264,869)
Adjustments to reconcile
net loss to net cash
used by operating activities:
Stock option compensation 302,934
Depreciation 13,121 11,072 25,112 22,377
Amortization of premium on
marketable securities 29,699 18,930 66,857 45,218
Foreign currency loss 747 11,062 40,986 57,270
Minority interest in net income (loss)
of consolidated subsidiaries (1,210) 5,602 (6,277) 14,860
Net gain on sale of marketable securities (98,324) (98,324) (11,800)
Shares issued for compensation 13,279
Changes in non-cash working capital:
Net decrease in deposits,
advances and accrued interest 6,730 41,434 23,951 54,409
Net decrease in accounts payable
and accrued expenses (206,141) (32,001) (345,401) (73,188)
---------------------------------------------------------------------------------------------
Net cash used by operating activities (2,123,393) (659,082) (4,185,762) (1,155,723)
---------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from the sale and maturity of
marketable securities 848,324 2,400,000 1,848,324 4,851,300
Purchase of marketable securities (500,000) (1,045,515) (2,282,504) (3,185,607)
Purchase of property, plant and equipment (39,396) (2,004) (85,252) (5,001)
Other (118,121) (22,693) (158,165) 9,102
---------------------------------------------------------------------------------------------
Net cash provided (used) by
investing activities 190,807 1,329,788 (677,597) 1,669,794
---------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from the issuance of common shares 53,400
---------------------------------------------------------------------------------------------
Net cash provided by financing activities 53,400
---------------------------------------------------------------------------------------------
Change in Cash and Cash Equivalents:
Net Increase (decrease) in cash
and cash equivalents (1,932,586) 670,706 (4,809,959) 514,071
Cash and cash equivalents -
beginning of period 8,454,130 1,427,997 11,331,503 1,584,632
---------------------------------------------------------------------------------------------
Cash and cash equivalents -
end of period $6,521,544 $2,098,703 $6,521,544 $2,098,703
=============================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Selected Notes To Consolidated Financial Statements
For the Six Months Ended June 30, 2004 and 2003 (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 June 30, 2004, and the results of operations and the cash flows for the
six months ended June 30, 2004 and 2003. The results of operations for the
six months ended June 30, 2004 and 2003 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 2003 annual report.
2. Geographic Segments
Net Loss for the Three and Six Months Ended June 30, 2004 and 2003
Three Months Ended Six Months Ended
2004 2003 2004 2003
------------------------------------------------------------------------
United States $ 808,042 $ 363,531 $1,644,803 $ 630,988
Venezuela 1,059,973 351,650 2,564,076 633,881
------------------------------------------------------------------------
Consolidated $1,868,015 $ 715,181 $4,208,879 $1,264,869
========================================================================
3. Share Option Plan:
The Company's Equity Incentive Plan (the "Plan") allows for the granting of
common share purchase options to officers, directors and key individuals for
terms of up to ten years. The vesting period of options ranges from
immediately to up to three years. There were 642,641 options remaining for
future grants at June 30, 2004. Share option transactions for the six months
ended June 30, 2004 and 2003 are as follows:
2004 2003
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
Options outstanding
at beginning of period 3,204,124 $ 0.95 3,368,549 $ 0.80
Options exercised (62,500) $ 0.83
Options canceled
Options granted 135,000 $ 3.94 123,075 $ 1.56
-------------------------------------------------------------------------------
Options outstanding
at end of period 3,276,624 $ 1.08 3,491,624 $ 0.83
-------------------------------------------------------------------------------
Options exercisable
at end of period 3,078,773 $ 0.97 3,399,320 $ 0.81
===============================================================================
Price Price
Range Range
Exercise price at
end of period $ 0.55 - $ 4.14 $ 0.50 - $ 1.56
Exercise price
for exercisable shares $ 0.55 - $ 4.14 $ 0.50 - $ 1.56
Effective January 1, 2004, the Company adopted the new requirements of the
Canadian Institute of Chartered Accountants standard 3870 under which the
fair value method of accounting for stock options granted to employees and
directors is followed. Accordingly, compensation expense was recorded on a
retroactive basis to retained earnings to show the effect of compensation
expense associated with stock option grants to employees and directors from
January 1, 2002 to December 31, 2003, which amounted to $419,101.
The Company recorded additional compensation expense of $302,934 for stock
options granted during the six months ended June 30, 2004. The fair value of
the options granted was calculated using the Black-Scholes model assuming a
risk free interest rate of 3.25%, expected life of five years, expected
volatility of 65% and a dividend yield of nil.
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 3, 2004