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, 2005
GOLD RESERVE INC.
Commission file number O001-31819
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.
March 31, 2005
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 forwardlooking statements, including without limitation, our ability
to obtain additional funding for the development of the Brisas Project, in
the event any key findings or assumptions previously determined by our
experts in the final feasibility study significantly differ or change as a
result of actual results in our expected construction and production at the
Brisas Project, the risk that actual mineral reserves may vary considerably
from estimates presently made, the impact of currency, metal prices and metal
production volatility, concentration of operations and assets in Venezuela,
the regulatory, political and economic risks associated with Venezuelan
operations, changes in proposed development plans (including technology
used), 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 Companyis filings with
U.S. and Canadian securities regulatory agencies, which can be viewed on-line
at www.sec.gov, www.sedar.com or at the Companyis 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. The Brisas Project consists of the Brisas alluvial concession, the
Brisas hardrock concession beneath the alluvial concession, applications for
other mineralization contained in these concessions, and contracts, land use
permits and concessions for mineralization (primarily gold, copper and
molybdenum) on land parcels contiguous to the existing concessions.
In early 2005, a bankable feasibility study with respect to the construction
and operation of the Brisas Project was completed. Based on the positive
conclusions contained in the bankable feasibility study, the Board of
Directors approved proceeding with the financing and construction of the mine
to produce gold dorE on-site and ship gold/copper concentrate to an off-site
smelter. We are currently exploring financing options for the Brisas Project
and have retained Endeavour Financial to assist in our efforts.
The bankable feasibility study, which was prepared by Aker Kvaerner Metals,
Inc., a subsidiary of the international engineering and construction services
group, Aker Kvaerner ("Aker Kvaerner"), includes work performed by other
independent consultants under the coordination of Aker Kvaerner. The geology,
mineral resources, proven and probable reserves, mining sections and the
financial analysis for the study were performed by Pincock Allen and Holt
("PAH"). SGS Lakefield Research conducted metallurgical pilot plant test work
with guidance from Aker Kvaerner. Aker Kvaerner designed the metallurgical
process flowsheet and Vector Colorado LLC ("Vector") performed the tailings
facility design, hydrology study, geotechnical analysis and geochemical
analysis. AATA International, Inc. ("AATA") of Fort Collins, Colorado, and
Ingenieria Caura, SA of Venezuela, are conducting the environmental fieldwork
in Venezuela and are in the final stages of preparing the Venezuelan
Environmental and Social Impact Assessment (V-ESIA) and the International
Environmental and Social Impact Assessment (I-ESIA) for the financial
institutions.
The feasibility study operating plan assumes a large open pit mine and
anticipates utilizing conventional truck and shovel mining methods with the
processing of ore at full production of 70,000 tonnes per day, yielding an
average annual production of 486,000 ounces of gold and 63 million pounds of
copper over an estimated mine life of approximately 16 years. The operating
plan further assumes proven and probable reserves of approximately 9.2
million ounces of gold and 1.2 billion pounds of copper in 414 million tonnes
of ore grading 0.69 grams of gold per tonne and 0.13% copper, at a revenue
cutoff grade of $2.76 per tonne using a gold price of $350 per ounce and a
copper price of $0.90 per pound.
Initial costs to put the Brisas Project into production (construction and
related development costs) are estimated to be approximately $552 million.
The feasibility study assumed an economic base case utilizing $400 per ounce
gold and $1.00 per pound copper. At such prices, total cash operating costs
(net of copper credits) are estimated at $154 per ounce of gold and total
costs per ounce, including operating costs and initial and sustaining capital
would be $263 per ounce of gold. Costs of certain Venezuelan taxes and import
duties are not currently included in the initial cost of the project due to
the expected exoneration of such items.
Following completion of environmental studies, receipt of necessary permits
and obtaining sufficient funding, construction of the planned facility is
expected to take 24-26 months, with commissioning and achievement of
commercial production shortly thereafter.
The following are the key assumptions contained in the feasibility study:
Proven Reserves 193.2 million tonnes; 0.71 g/t gold and 0.12% copper
Probable Reserves 221.3 million tonnes; 0.68 g/t gold and 0.13% copper
Strip ratio
(waste:ore) 1.81:1
Mine Life (minimum) 16 years
Mill throughput 70,000 tonnes per day "Hardrock" ore
6,000 tonnes per day "Sulfide" saprolite
6,000 tonnes per day "Oxide" saprolite
Plant Metal recoveries gold 83.1%
copper 87.0%
Net payable Metals gold 82.4%
copper 83.0%
Life of Mine Production
(payable metals) gold 7.59 million ounces
copper 979 million pounds
Average annual gold production 486,000 ounces
Average annual copper production 63 million pounds
Average annual copper concentrate production 124,000 mt
Preliminary Economic Indicators (Pre-Tax)
Gold price $400 per ounce
Copper price $1.00 per pound
Total cash operating cost (on site and off site) $5.26 per tonne ore
Initial capital cost $552.4 million
Working capital $39.3 million
Ongoing capital $132.3 million
Cash Operating cost* $154 per ounce of gold
Production Taxes $13 per ounce of gold
Total Cash costs* $167 per ounce of gold
Capital Cost Amortization $96 per ounce of gold
Total Cost $263 per ounce of gold
Internal rate of return (Pre-Tax) 12.0%
Project net present value (Pre-Tax) @ 0% $1.04 billion
@ 5% $388 million
Project payback 8 years
* Net of copper by product credit
Mineral Resource and Reserve Estimates
PAH reviewed the methods and procedures utilized by the Company at the Brisas
Project to gather geological, geotechnical, and assaying information and found
them reasonable and meeting generally accepted industry standards for a
bankable feasibility study. PAH believes that the Brisas Project has
conducted exploration and development sampling and analysis programs using
standard practices, providing generally reasonable results and that the data
can effectively be used in the estimation of resources and reserves.
PAH calculated the mineral resource and reserve estimates in February 2005.
The mineral reserves have been calculated in accordance with National
Instrument 43-101, as required by Canadian Securities regulatory authorities.
We believe that the calculation of such mineral reserves is substantially the
same as those under the U.S. Securities and Exchange Commission Industry
Guide 7, except for references to"Inferred Mineral Resources." We advise U.S.
investors that while this term is recognized and required by National
Instrument 43-101 under Canadian regulations, the U.S. Securities and
Exchange Commission pursuant to Industry Guide 7 does not recognize such
term.U.S. investors are cautioned not to assume that any part or all of an
inferred mineral resource exists or is economically or legally mineable.
The qualified persons involved in the property evaluation and resource and
reserve estimate were Raul Borrastero, C.P.G. and Susan Poos P.E. of PAH and
Brad Yonaka, Exploration Manager for Gold Reserve.
Mineral Resource Estimate
Based on work completed by PAH 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 February
2005 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 Au Cu Au Cu Au Cu
Cut-off Grade kt (gpt) (%) kt (gpt) (%) kt (gpt) (%)
0.40 217,883 0.700 0.118 284,941 0.662 0.132 502,824 0.678 0.126
(In Millions) Measured Indicated Measured and Indicated
Au Eq Au Cu Au Cu Au Cu
Cut-off Grade oz. lb. oz. lb. oz. lb.
0.40 4.905 566 6.066 827 10.971 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.
Mineral Reserve Estimate
Based on work completed by PAH 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 9.2 million ounces of gold and 1.2 billion pounds of copper.
The February 2005 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 193,248 0.71 0.123 4,399 525
Probable 221,315 0.68 0.133 4,808 654
Total 414,563 0.69 0.129 9,207 1,179 748,333 1,162,895 1.81
The mineral reserve (within a pit design) has been estimated in accordance
with the SME Reporting Guide and CIMM Standards as adopted by CSA National
Instrument 43-101, which we believe is substantially the same as SEC
Industry Guide 7. The mineral reserve was estimated using metal prices of
U.S. $350 per ounce gold and U.S. $0.90 per pound copper with an internal
revenue cut-off of $2.76 per tonne.
Brisas Project Work To Date.
Considerable work has taken place to establish the mineral resource and
reserve. Over $80 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,
approximately 860 drill holes or approximately 200,000 meters of core
drilling, independent audits of our drilling, sampling, assaying procedures
and ore reserves methodology, environmental baseline work/socioeconomic
studies, hydrology studies, geotechnical studies, mine planning, advanced
stage grinding and metallurgical test work, tailings dam designs, milling
process flow sheet designs, bench scale testing of an on-site copper process
and a final bankable feasibility study.
2005 Brisas Work Plan.
Management has developed a critical-path plan for obtaining the required
permits (most notable is the permits for construction and operation),
obtaining funding and commencing construction. This plan includes the
development and implementation of project related contracts such as
engineering, procurement and construction management, port facilities,
concentrate sales contracts, electricity and fuel supply contracts, final
permit approvals and a number of other agreements related to the construction
and operation of the Brisas Project. Concurrent with these activities,
management will also devote substantial time and effort on obtaining
financing for the Brisas Project.
Proposals have been solicited and received from a number of major
engineering, procurement and construction management firms (EPCM) with
international experience for the detailed design and construction management
and geotechnical consultants required for the final tailings dam design.
Management anticipates the completion of this selection process in the second
quarter of 2005. Detailed engineering for earthwork activities, the
construction camp and other early construction facilities would commence
thereafter and run concurrently, depending upon our obtaining permits and
sufficient financing. In addition, orders for equipment that require long
lead times for manufacturing and delivery will be prepared in anticipation of
financing. Likewise, negotiations will be concluded for electrical power,
concentrate smelting agreements and final port arrangements.
An International Environmental and Social Impact Assessment (I-ESIA) is in
process, which is expected to meet IFC and World Bank standards for financing
international projects. Baseline data for the ESIA was collected over the past
several years. The environmental and social analysis and assessment is
scheduled for completion in the second quarter of 2005. Also, a Venezuelan
Environmental and Social Impact Assessment (V-ESIA) is being completed to
satisfy Venezuelan requirements to obtain an "Authorization to Affect Natural
Resources (AANR)" (AutorizaciUn de AfectaciUn de Recursos Naturales), which is
granted by the Ministry of the Environment and Natural Resources (the MARN).
Final assessments of air emissions, water quality, geochemistry of tailings
and waste rock and other environmental impacts and mitigation are ongoing.
In late 2004, the Company completed an additional drilling program consisting
of 32 holes totaling approximately 15,000 meters and costing approximately
$800,000. The focus of the drilling program was to test the down-dip
extension of the ore body and convert inferred ore tonnes to measured and
indicated. The results of the drill program have been compiled throughout the
first quarter of 2005 and will be incorporated in a mineral reserve update
during the second quarter. In addition, condemnation drilling on the property
has commenced and will continue throughout 2005.
In January 2005, the Company announced the addition of five key managerial
personnel to its operations and technical staff: Corporate- Metallurgist,
Manager, Technical Services; Venezuela - Manager, Special Projects;
Manager, Logistics; and Institutional Relations Manager. Management is in the
process of identifying additional personnel that will be needed to construct
and operate the Brisas Project.
We continue to expand our participation in various social, cultural and
environmental programs in the immediate and surrounding areas near Brisas.
Our social work has most recently focused on providing a better environment
for the youth in nearby communities. These efforts have included the
construction of new recreational facilities such as parks, refurbishment of
multiple-use sport courts and year-round cultural and sport programs, all of
which have received a very favorable response from the community. The Company
continues to work on its proposal to the Ministry of Basic Industries and
Mines (MIBM) to implement a support program within the framework of Mission
Piar, one of President Chavez's social initiatives which includes the local
small miners and encompasses technical assistance and training to explore and
minimize the impact to the environmental as well as their integration into the
formal economy.
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 to
expend up to $500,000 beginning in mid 2005, 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 March 31, 2005
and results of operations for the three months ended March 31, 2005 and 2004
are to be read in conjunction with the Companyis 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 managementis discussion and analysis,
dated May 11, 2005, 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 Companyis potential future
performance. Additional information on the Company can be found in the
Companyis 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 cash flow 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, if constructed, to be similarly
financed along with project and corporate debt financing.
Venezuela has experienced high levels of inflation during the last several
years as well as political and civil unrest. During this period Venezuela has
a experienced decline in industrial output and foreign investment. 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.
As noted elsewhere, Aker Kvaerner and a number of other consultants,
including PAH and Vector, completed a bankable feasibility study with respect
to the construction and operation of the Brisas Project. Based on the results
of the study, the feasibility study operating plan assumes a large open pit
mine and anticipates utilizing conventional truck and shovel mining methods
with the processing of ore at full production of 70,000 tonnes per day. The
study anticipates the Brisas Project will yield an average annual production
of 486,000 ounces of gold and 63 million pounds of copper over an estimated
mine life of approximately 16 years. Initial costs to construct and place the
Brisas Project into production are currently estimated to be $552 million.
Construction of the planned facility, the start of which is primarily
dependant upon receiving the required permits and obtaining sufficient
financing, is expected to take 24-26 months, with commissioning and
achievement of commercial production shortly thereafter. Obtaining the
required permits and the necessary funding for the Brisas project will
continue to be the Companyis primary focus during the remainder of 2005 and
into 2006.
Results of Operations. The Companyis 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 months
ended March 31, 2005 amounted to $2,123,523 or $0.06 per share compared to
consolidated net loss of $1,212,008 or $0.04 per share for the same period in
2004. Other income for the three month period ended March 31, 2005 increased
by $89,157 over the comparable three month period in 2004. The change was
primarily due to an increase in the amount of invested cash. Operating
expenses for the three months ended March 31, 2005 increased by $1,000,672
over the comparable three month period in 2004. The change was primarily due
to the cost of implementing directorsi and officersi insurance, increases in
consulting costs associated with the development of the Brisas project,
increased compensation expense primarily as a result of new hires and overall
increases in expenditures as a result of the increased corporate management
activity associated with the development of the Brisas Project and financing
activities.
Liquidity and Capital Resources.
The Company had no significant investing activities during the three months
ended March 31, 2005, other than the purchase and sale or maturity of
marketable securities, which, on a net basis, totaled approximately $1.2
million in sales and maturities of marketable securities. The total financial
resources of the Company, cash plus marketable securities, decreased $1
million from December 31, 2004 to approximately $32 million as of March 31,
2005. As of the date of this report, the Company had the following shares,
equity units, warrants and share options issued:
Class A common 34,649,819
Equity units 1 1,157,397
Class A common share purchase warrants 2 2,680,500
Class A common share purchase options 3 3,190,085
1) 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.
2) Consist of 5,361,000 Class A common share purchase warrants exercisable
for one-half share or 2,680,500 Class A Common Shares, exercisable at Cdn
$5.40 per whole share and expiring in November 2006.
3) Exercisable at between $0.57 and $4.90 per share.
With the completion of the bankable feasibility in early 2005, our efforts
are focused primarily on identifying suitable funding sources, completion of
detailed project engineering, development and implementation of project
related contracts such as engineering, procurement and construction
management, port facilities, concentrate sales contracts, electricity and
fuel supply contracts, and a number of other agreements related to the
construction and operation of the Brisas Project and completion of the Brisas
Project Environmental and Social Impact Assessment Study, obtaining the
required permits (primarily the permits to construct and operate). Initial
capital expenditures required to put the Brisas Project into production as
presently proposed in the Brisas bankable feasibility study, is estimated to
be approximately $552 million over a 24-26 month construction period.
Commencement of the construction of the Brisas Project is primarily dependant
upon obtaining the required permits and obtaining sufficient financing.
As of May 11, 2005, the Company held approximately $31 million in cash and
investments. In the near-term, management believes that cash and investment
balances are sufficient to enable the Company to fund its pre-construction
activities through 2006 (excluding substantial Brisas Project construction
activities). The timing and extent of additional funding or project
financing, if any, depends on a number of important factors, including, but
not limited to the actual timetable of our 2005-2006 work plan, our
assessment of the financial markets, the political and economic conditions in
Venezuela, our share price and the price of gold and copper. Management
provides no assurances that it will be able to obtain the substantial
additional financing that will be needed to construct the Brisas Project.
Failure to raise the required funds will mean the Company is unable to
construct and operate the Brisas Project.
CONSOLIDATED BALANCE SHEETS
March 31, 2005 (unaudited) and December 31, 2004
March 31, December 31,
U.S. Dollars 2005 2004
ASSETS
Current Assets
Cash and cash equivalents $ 27,836,332 $ 27,178,705
Marketable securities 4,314,299 5,528,776
Deposits, advances and other 339,845 336,128
Accrued interest 13,444
Total current assets 32,490,476 33,057,053
Property, plant and equipment, net 53,374,363 52,535,018
Other 956,881 1,013,460
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Total assets $ 86,821,720 $ 86,605,531
============================================================================
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 683,075 $ 1,307,635
Total current liabilities 683,075 1,307,635
Minority interest in consolidated subsidiaries 1,125,083 1,121,838
Total liabilities 1,808,158 2,429,473
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SHAREHOLDERS' EQUITY
Serial preferred stock, without par value
Common shares and equity units,
without par value 139,671,362 136,907,516
Less common shares held by affiliates (674,598) (674,598)
Stock options 1,201,378 1,004,197
Accumulated deficit (55,079,257) (52,955,734)
KSOP debt (105,323) (105,323)
Total shareholders' equity 85,013,562 84,176,058
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Total liabilities and shareholders' equity $ 86,821,720 $ 86,605,531
============================================================================
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, 2005 and 2004 (unaudited)
U.S. Dollars 2005 2004
OTHER INCOME
Interest $ 217,982 $ 128,825
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217,982 128,825
EXPENSES
General and administrative 1,318,688 675,170
Technical services 763,262 383,724
Corporate communications 149,290 222,090
Legal and accounting 6,283 24,677
Foreign currency loss 88,276 40,239
Loss on sale of marketable securities 12,461
Minority interest in net income
(loss) of consolidated subsidiaries 3,245 (5,067)
2,341,505 1,340,833
Net loss $ (2,123,523) $ (1,212,008)
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Net loss per share $ (0.06) $ (0.04)
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Weighted average common
shares outstanding 34,267,324 28,226,672
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CONSOLIDATED STATEMENTS OF DEFICIT
For the Three Months Ended March 31, 2005 and 2004 (unaudited)
U.S. Dollars
Deficit, December 31, 2004 $ (52,955,734)
Net loss (2,123,523)
----------------------------------------------------------------------
Deficit, March 31, 2005 $ (55,079,257)
----------------------------------------------------------------------
Deficit, December 31, 2003 $ (47,054,004)
Adjustment for stock option
compensation from 2002 and 2003 (419,101)
Net loss (1,212,008)
----------------------------------------------------------------------
Deficit, March 31, 2004 $ (48,685,113)
----------------------------------------------------------------------
The accompanying notes are an integral part of
the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2005 and 2004 (unaudited)
U.S. Dollars 2005 2004
----------------------------------
Cash Flows from Operating Activities:
Net loss $ (2,123,523) $ (1,212,008)
Adjustments to reconcile net loss to net cash
used by operating activities:
Stock option compensation 197,181 302,934
Depreciation 19,424 11,991
Amortization of premium on
marketable securities 3,226 37,158
Foreign currency loss 88,276 40,239
Minority interest in net income (loss) of
consolidated subsidiaries 3,245 (5,067)
Net loss on sale of marketable securities 32,245
Shares issued for compensation 435,920 13,279
Changes in non-cash working capital:
Net decrease in deposits,
advances and accrued interest 9,727 17,221
Net decrease in accounts payable
and accrued expenses (624,560) (139,260)
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Net cash used by operating activities (1,958,839) (933,513)
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Cash Flows from Investing Activities:
Proceeds from the sale and maturity of
marketable securities 1,679,006 1,000,000
Purchase of marketable securities (500,000) (1,782,504)
Purchase of property, plant and equipment (858,769) (1,174,712)
Other (31,697) (40,044)
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Net cash provided (used) by
investing activities 288,540 (1,997,260)
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Cash Flows from Financing Activities:
Proceeds from the issuance of common shares 2,327,926 53,400
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Net cash provided by financing activities 2,327,926 53,400
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Change in Cash and Cash Equivalents:
Net increase (decrease) in
cash and cash equivalents 657,627 (2,877,373)
Cash and cash equivalents -
beginning of period 27,178,705 11,331,503
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Cash and cash equivalents - end of period $ 27,836,332 $ 8,454,130
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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, 2005 and 2004 (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, 2005, and the results of operations and the cash flows for the
three months ended March 31, 2005 and 2004. The results of operations for the
three months ended March 31, 2005 and 2004 are not necessarily indicative of
the results to be expected for the full year.
In September 2004, the Company reviewed costs incurred on the Brisas project
and in accordance with its accounting policy, capitalized $1,128,856
associated with its Brisas feasibility study which previously had been
expensed in the first quarter of 2004.
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 2004 annual report.
2. Geographic Segments
Net Loss for the Three Months Ended March 31, 2005 and 2004
2005 2004
-------------------------------------------------------------
North America $ 1,446,816 $ 431,325
South America 676,707 780,683
-------------------------------------------------------------
Consolidated $ 2,123,523 $ 1,212,008
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 no options remaining for future
grants at March 31, 2005. Share option transactions for the three months
ended March 31, 2005 and 2004 are as follows:
2005 2004
----------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
-----------------------------------------------------------------------------
Options outstanding at
beginning of period 3,316,374 $ 1.39 3,204,124 $ 0.95
Options exercised (286,289) $ 1.00 (62,500) $ 0.83
Options canceled (90,000) $ 4.12
Options granted 250,000 $ 3.80 135,000 $ 3.94
Options outstanding
at end of period 3,190,085 $ 1.54 3,276,624 $ 1.08
Options exercisable
at end of period 2,767,084 $ 1.22 3,048,005 $ 0.96
Price Price
Range Range
Exercise price at
end of period $ 0.57 - $ 4.90 $ 0.55 - $ 4.14
Exercise price for
exercisable shares $ 0.57 - $ 4.14 $ 0.55 - $ 4.14
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 $197,181, and 302,934
for stock options granted during the three months ended March 31, 2005 and
2004. The fair value of the options granted in 2005 was calculated using the
Black-Scholes model assuming a weighted average risk free interest rate of
3.6%, expected life of three years, expected volatility of 104% 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
May 11, 2005