FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2006
Commission file number...001-31819
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 of Form 20-F or Form 40-F. Form 20-F X Form 40-F.
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1): ___
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7): ___
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 or incorporated by reference in this Form 6-K
contains both historical information and forward-looking statements
(including 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 "U.S. 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,
concentration of operations and assets in Venezuela; corruption and
uncertain legal enforcement; requests for improper payments;
regulatory, political and economic risks associated with Venezuelan
operations (including changes in previously established legal regimes,
rules or processes); the ability to obtain or maintain the necessary
permits or additional funding for the development of the Brisas
Project; in the event any key findings or assumptions previously
determined by the Company or the Company's consultants in conjunction
with the feasibility study concerning the Brisas Project prepared in
2005 (as updated or modified from time to time) significantly differ or
change as a result of actual results in the Company's expected
construction and production at the Brisas Project (including capital
and operating cost estimates); risk that actual mineral reserves may
vary considerably from estimates presently made; impact of currency,
metal prices and metal production volatility; fluctuations in energy
prices; changes in proposed development plans (including technology
used); the Company's dependence upon the abilities and continued
participation of certain key employees; and risks normally incident to
the operation and development of mining properties. This list is not
exhaustive of the factors that may affect any of the Company's
forward-looking statements.
Statements concerning reserves and mineral resource estimates may also
be deemed to constitute forward-looking statements to the extent that
they involve estimates of the mineralization that is expected to be
encountered if the property is developed, and in the case of mineral
reserves, such statements reflect the conclusion based on certain
assumptions that the mineral deposit can be economically exploited.
The words "believe," "anticipate," "expect," "intend," "estimate,"
"plan," "assume," "positioned," "may," "could" and other similar
expressions that are predictions of or indicate future events and
future trends that 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 interim financial report
to shareholders or any documents incorporated by reference herein 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 the Company's 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 Canadian and U.S.
securities regulatory agencies, which can be viewed on-line at
www.sedar.com or www.sec.gov. Additionally, investors can request a
copy of any of these filings directly from the Company.
Exhibits
--------
The following are filed as exhibits to this Form 6-K:
Exhibit
Number Description
-------- ----------------
99.1 September 30, 2006 Interim Financial Report To Shareholders
99.2 Chief Executive Officer's certification of interim filings
99.3 Chief Financial Officer's certification of interim filings
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
GOLD RESERVE INC.
By: s/ Robert A. McGuinness
Vice President - Finance & CFO
November 14, 2006
Exhibit Index
-------------
Exhibit
Number Description
-------- ----------------
99.1 September 30, 2006 Interim Financial Report To Shareholders
EXHIBIT 99.1
GOLD RESERVE INC.
September 30, 2006
Interim Financial Report to Shareholders
U.S. Dollars
Operations Overview
===================
Brisas Project
------------------------
The Company's primary mining asset, the Brisas Project, is a
gold/copper deposit located in the Kilometre 88 mining district of the
State of Bolivar in southeastern Venezuela. In 2005, the Company, with
the assistance of a number of independent consultants, completed a
Bankable Feasibility Study for the Brisas Project, as updated from time
to time as described herein (the "Feasibility Study"). Based on the
conclusions contained in the Feasibility Study, the board of directors
approved proceeding with the financing and construction of the mine.
The Brisas Project consists of the following: a 500-hectare land parcel
consisting of the Brisas alluvial concession and the Brisas hardrock
concession beneath the alluvial concession (the "Brisas concessions").
Together these concessions contain the mineralization identified in the
Feasibility Study. The Brisas Project also includes a number of other
existing or pending applications for concessions, alfarjetas (a land
parcel not meeting the minimum size to be considered as a concession),
Corporacion Venezolana de Guayana ("CVG") work contracts, land use
permits and easements, adjacent to or near the Brisas concessions,
totaling an estimated 13,000 hectares.
The Company's original Brisas Project operating plan was approved by
the Ministry of Energy and Mines (now the Ministry of Basic Industries
and Mines ("MIBAM")) in 2003 and, since that approval, the Company has
submitted to MIBAM updates focused on minimizing the impact on the
environment and optimizing the economics of the Brisas Project.
Contained within the approved operating plan are the existing or
pending applications for concessions, alfarjetas, CVG work contracts,
land use permits and easements, adjacent to or near the Brisas
concessions described above. These land parcels comprise the bulk of
the land required for the mining and milling facility and related
infrastructure contemplated in the Feasibility Study. A number of these
parcels are integral to the Company's proposed operating plan and others
may be necessary for future needs. Failure to obtain one or more of
these permits, rights or properties could have a material adverse
effect on the development of the Brisas Project.
In addition to the pending land use issues related to project
infrastructure needs, the Company has a number of permits and approvals
relating to the Brisas Project pending before MIBAM, the Venezuelan
Ministry of Environment ("MINAMB") and other regulatory or government
agencies. Most importantly, the Company must obtain the Administrative
Authorization to Affect Natural Resources for Construction of
Infrastructure and Exploitation of Alluvial and Vein Deposits of Gold
and Copper ("Permit to Affect the Natural Resources") from MINAMB,
which is issued, in part, based on MIBAM's approval of the project
operating plan as well as the Company's Venezuelan Environmental and
Social Impact Assessment (V-ESIA), both of which have already been
submitted to MINAMB for approval.
The Company can commence construction of the Brisas Project only after
the receipt of the various permits and authorizations described above,
a number of which have been outstanding for some time. The resolution
of these pending matters may be further delayed or be withheld for
reasons outside of the Company's control.
The Company requires significant financing to commence construction of
the Brisas Project and any financing relating to the Project is subject
to the receipt of the Permit to Affect the Natural Resources. The
Company's current financial plan is to proceed with finalizing the
required debt and equity financing after the receipt of this permit,
although this plan is subject to, among other matters, the effect of
changes in the price of the common shares, gold and copper prices,
changes in capital and operating costs and the Venezuelan political
environment.
Bankable Feasibility Study
--------------------------
Since the completion of the 2005 Feasibility Study, management has
continued to update the inputs and assumptions contained therein. In
April 2006, the Company updated its estimate of initial capital costs
for the Brisas Project, which now totals approximately US$638 million
(exclusive of costs incurred to date) compared to the capital cost
estimate of $552 million contained in the January 2005 Feasibility
Study.
In November 2006 Pincock, Allen & Holt ("PAH") updated the mineral
resource and reserve estimate and prepared a new Canadian Securities
Act ("CSA") National Instrument 43-101 report for the Brisas Project,
which is summarized below. The Brisas Project operating plan assumes a
large open pit mine containing proven and probable reserves of
approximately 10.4 million ounces of gold and 1.3 billion pounds of
copper in 485 million tonnes of ore grading 0.67 grams of gold per
tonne and 0.13% copper, at a revenue cutoff grade of $3.04 per tonne
for hard rock and $3.24 per tonne for saprolite. Mineral reserves were
estimated within a final pit design based on updated economic
parameters, $400 per ounce of gold and $1.15 per pound of copper. The
study anticipates that the Brisas Project, at full production levels,
utilizing conventional truck and shovel mining methods and processing
ore at 70,000 tonnes per day, would yield an average annual production
of 456,000 ounces of gold and 60 million pounds of copper over an
estimated mine life of approximately 18.5 years. Although total proven
and probable ounces of gold and pounds of copper increased, average
annual production declined from previous disclosures primarily as a
result of lower average grade per tonne and, to a lesser extent, longer
mine life, reduction in metal payable and average tonnes mined per year.
For purposes of economic analysis, the base case economic model
utilizes an average price of $470 per ounce gold and $1.80 per pound
copper based on the historical three-year rolling average for metal
prices as of September 2006. At such prices, cash operating costs (net
of copper credits) are estimated at $126 per ounce of gold and total
costs per ounce, including operating costs and initial and sustaining
capital (excluding sunk cost), are estimated to be $245 per ounce of
gold. The estimated initial capital cost to construct and place the
Brisas Project into production totaling $638 million excludes value
added taxes of 14% on as much as 80% of the capital costs. Tax
exonerations or tax payment holidays are available for various taxes
including value added tax and import duty tax on the initial capital
costs. Management plans to submit the required applications for all
available exonerations and expects to obtain such exonerations prior to
the construction of the project. As a result, the cost of such taxes and
import duties are not included in the initial costs of the project.
There can be no assurances that such exonerations will be obtained, the
result of which would be to increase initial capital and operating
costs. In October 2006, the Venezuelan government passed a law
exempting certain imported items from VAT and import duties. As the new
law is not directed specifically at the mining industry, it is unclear
at this time if there will be any positive impact on the economics of
the Brisas Project.
Mineral Resource and Reserve Estimate
-------------------------------------
In November 2006 PAH calculated an updated mineral resource and reserve
estimate in accordance with CSA National Instrument 43-101 which is
summarized in the tables below. The qualified persons involved in the
property evaluation and resource and reserve estimate were Susan Poos,
P.E. of Marston & Marston Inc. and Richard Lambert, P.E. and Richard
Addison, P.E. of Pincock, Allen & Holt.
Cautionary Note to U.S. Investors. We advise U.S. investors that
definitions contained in CSA National Instrument 43-101 differ in
certain respects from those set forth in the U.S. Securities and
Exchange Commission Industry Guide 7.
This quarterly report uses the terms "measured," "indicated" and
"inferred" resource. We advise U.S. investors that while these terms
are recognized by Canadian regulations, the U.S. Securities and
Exchange Commission does not recognize them. U.S. investors are
cautioned not to assume that the mineralization not already categorized
as mineral reserves, will ever be converted into reserves. Further, an
"inferred resource" has a great amount of uncertainty as to its
existence and its economic and legal feasibility. Under Canadian
disclosure rules, estimates of inferred mineral resources may not form
the basis of feasibility or pre-feasibility studies, except in rare
cases. U.S. investors are cautioned not to assume that part or all of
an inferred resource exists, is economically or legally mineable or
that all or any part of an inferred mineral resource will ever be
upgraded to a higher category. Also, disclosure of contained ounces is
permitted under Canadian regulations however the SEC generally requires
mineral resource information to be reported as in-place tonnage and
grade.
Mineral Resource Estimate
-------------------------
The estimated measured and indicated mineral resource utilizing an
off-site smelter process is summarized in the following table:
Measured Indicated Measured and Indicated
(kt=1,000 tonnes) --------------------- --------------------- ------------------------
Au Eq Au Cu Au Cu Au Cu
Cut-off Grade kt (gpt) (%) kt (gpt) (%) kt (gpt) (%)
---------------------------------------------------------------------------------------------
0.40 gpt 250,565 0.69 0.12 332,371 0.64 0.13 573,936 0.66 0.13
---------------------------------------------------------------------------------------------
Measured Indicated Measured and Indicated
(In Millions) --------------------- --------------------- ------------------------
Au Eq Au Cu Au Cu Au Cu
Cut-off Grade oz. lb. oz. lb. oz. lb.
---------------------------------------------------------------------------------------------
0.40 gpt 5.527 657 6.621 927 12.148 1,584
---------------------------------------------------------------------------------------------
The inferred mineral resource, based on an off-site smelter process
(0.4 gram per tonne gold equivalent cut-off), is estimated at 115.0
million tonnes containing 0.590 grams gold per tonne and 0.12 percent
copper, or 2.18 million ounces of gold and 294 million pounds of
copper. The mineral resource and gold equivalent (AuEq) cut-off is
based on $400 per gold ounce and $1.15 per pound copper.
Mineral Reserve Estimate
------------------------
Reserve Au Cu Au Cu Waste Total
tonnes Grade Grade ounces pounds tonnes tonnes Strip
Class (millions) (gpt) (%) (thousands) (millions) (millions) (millions) Ratio
---------------------------------------------------------------------------------------------
Proven 226.3 0.69 0.12 5,032 600
Probable 258.4 0.64 0.13 5,357 737
---------------------------------------------------------------------------------------------
Total 484.7 0.67 0.13 10,389 1,338 952.3 1,436.9 1.96
---------------------------------------------------------------------------------------------
Note that the mineral resource estimate does not represent material
that exists in addition to the mineral reserve. The mineral reserve
estimates disclosed above which are designated as commercially viable
are included in and a part of the mineral resource estimates shown in
the previous section.
The mineral reserve (within a pit design) has been estimated in using
average recovery rates for gold and copper of approximately 83% and 87%
respectively, metal prices of U.S. $400 per ounce gold and U.S. $1.15
per pound copper and an internal revenue cut-off of $3.04 per tonne for
hard rock and $3.24 per tonne for saprolite.
Brisas Project Work To Date
---------------------------
Over US $100 million has been expended (including costs capitalized and
costs expensed in the period incurred) on the Brisas Project since its
acquisition by the Company in 1992. These costs include: property and
mineral rights, acquisition costs, equipment expenditures, litigation
settlement costs and extensive exploration costs including geology,
geophysics and geochemistry, approximately 875 drill holes totaling
over 200,000 meters of drilling, independent audits of 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 and a Feasibility Study, including a number of subsequent
updates, and an independent CSA National Instrument 43-101 report which
was most recently updated in November 2006 as described above.
Management continues to execute its critical-path plan for obtaining
required permits (most notably the Permit to Affect the Natural
Resources), continuing detailed engineering and various technical
studies focused on optimizing the design and economics of the Project
required to commence pre-construction activities. In addition, efforts
related to port facilities, concentrate sales contracts, electricity
and fuel supply contracts, land use permits and a number of other
agreements related to the construction and operation of the Brisas
Project are progressing. Concurrent with these activities, management
has and continues to devote substantial time and effort to obtain debt
and equity financing for the Brisas Project.
Recent Brisas Developments
--------------------------
In early November 2006 the Company appointed Corporacion Andina de
Fomento (CAF), Export Development Canada (EDC), UniCredit Group (HVB)
and WestLB AG (WestLB) of Germany as Mandated Lead Arrangers (MLAs) to
arrange up to US$425 million of project debt for the Brisas Project.
Any future funding is, among other things, contingent on the receipt of
the Permit to Affect the Natural Resources. It is also subject to
satisfactory due diligence findings, sufficient equity capital being
raised for the project, market conditions, final credit committee
approval and other conditions precedent.
In November 2006 PAH calculated an updated mineral resource and reserve
estimate for the Brisas Project which was previously discussed in this
report. The Brisas Project operating plan assumes a large open pit mine
containing proven and probable reserves of approximately 10.4 million
ounces of gold and 1.3 billion pounds of copper in 485 million tonnes
of ore grading 0.67 grams of gold per tonne and 0.13% copper, at a
revenue cutoff grade of $3.04 per tonne for hard rock and $3.24 per
tonne for saprolite. Mineral reserves were estimated within a final pit
design based on updated economic parameters, a gold price of $400 per
ounce and a copper price of $1.15 per pound. The study anticipates that
the Brisas Project at full production levels, utilizing conventional
truck and shovel mining methods and processing ore at 70,000 tonnes per
day would yield an average annual production of 456,000 ounces of gold
and 60 million pounds of copper over an estimated mine life of
approximately 18.5 years.
In October 2006 a Venezuela-Canada Business Forum was organized by the
Government of Venezuela to promote trade and investment between the two
countries. The program facilitated one-on-one meetings, technology
transfer, and investment opportunities. In addition to meeting with
Canadian and Venezuelan diplomatic officials and representatives of
MINAMB and MIBAM, management met with representatives of Crystallex
International Corporation, operators of the Las Cristinas Project to
the north, to discuss potential areas of cooperation that might result
in certain synergies not only economically but environmentally and
socially. Representatives of the two companies agreed to cooperate on a
number of issues including management of regional ground and surface
water and the relocation of the Las Cristinas water diversion ditch
allowing for a more rational exploitation of the Brisas deposit (for
which Brisas agreed to withdraw an earlier protest related to the same
once the agreement is accepted and approved by the appropriate
government ministries and Corporacion Venezolana de Guayana), joint
explosives management and storage, use of a single landing strip,
development and use of a community sanitary landfill, development of a
single National Guard post for explosive storage, and joint efforts
aimed at optimizing access to the projects with limited impact on the
community. In addition, both companies agreed to continue exploring
ways to take advantage of other synergies that protect the environment
and contribute to the quality of life of the local community.
In June 2006, a new draft Organic Law on Mines (Ley Organica de Minas)
(the "Draft Mining Law") was submitted by the Office of the Vice
President of the Republic to the National Assembly's (Asamblea
Nacional) Standing Committee on Energy and Mines. Primary mining
activities, as defined in the Draft Mining Law, can only be conducted
by the State, either directly or through the National Mining Company
(Empresa de Produccion Social Minera Nacional, C.A.) or via a joint
venture with private entities in which the Venezuelan State holds more
than 50% of the capital stock. As a result, the Draft Mining Law
eliminates the possibility of granting new mining concessions in the
future.
However, the Draft Mining Law would not extinguish pre-existing mining
concessions granted under previous mining legislation, such as those
held by the Company. Pre-existing mining concessions are grandfathered
under the draft legislation and will remain in force until expiration
of their term. Pre-existing CVG work contracts not previously converted
into mining concessions must adapt to the joint venture structure
provided for in the Draft Mining Law.
Subsequent to its introduction in the National Assembly strong
opposition to the terms of the new law (primarily the "no more
concessions" provisions) has developed throughout the industry,
including the small miners. Until the Draft Mining Law completes the
law-formation procedure under the Venezuelan constitution, the 1999
Mining Law remains in force. Recent announcements by members of the
National Assembly suggest that the Draft Mining Law is unlikely to be
implemented in 2006. It is unclear what provisions the final law will
contain, if or when they will be enacted, or how those final provisions
will impact the Company's operations in the future.
In the second quarter of 2006, the Company announced an updated
estimate of initial capital costs for the Brisas Project of
approximately US$638 million compared to the Feasibility Study initial
capital costs of US$552 million. The capital cost estimate includes the
costs of the EP and CM contracts referred to below, but does not include
costs incurred to date. The Company also announced the completion of the
initial engineering definition phase of the Brisas Project and the
signing of the Engineering Procurement ("EP") and Construction
Management ("CM") contracts with SNC Lavalin. The scope of work for the
contracts includes detailed engineering, procurement and construction
management for the process, infrastructure, tailings and camp
facilities as further defined in the EP&CM contracts. Commencement of
construction activities at the Brisas Project will commence after
receipt of the Permit to Affect Natural Resources from MINAMB and after
obtaining the necessary financing for construction. The estimated cost
of the EP contract is approximately US$22.8 million and for the CM
contract is approximately US$16.3 million for a total of approximately
US$39.1 million. The Company has the right to terminate for convenience
such contracts at any time with notice and upon payment to SNC Lavalin
of any unpaid amounts that have accrued under the terms of the
contracts to the date of termination plus the demobilization costs and
associated expenses of SNC Lavalin. Construction is estimated to take
approximately 24 to 30 months from date of commencement.
In the first quarter of 2006, the Company announced that MINAMB granted
the Company's subsidiary additional permits are geotechnical
drilling to support detailed engineering work related to pit slope
analysis, crusher design, process facility design, tailing dam design,
and overall site development for the Brisas Project and announced that
MINAMB had issued to the Company's subsidiary the "Permit to Impact
Natural Resources" for the quarry on the Barbarita property, which is
expected to provide aggregate and basic construction material for the
Brisas Project. The Barbarita property is located approximately 5
kilometres from the Brisas Project site and near the planned mill site.
Throughout 2006, management has advanced its efforts to obtain the
permit required to begin construction of the Brisas Project. Management
has been advised by MINAMB that the information submitted by the Company
in support of its request for the Permit to Affect the Natural Resources
is complete. In recent public statements, MINAMB has said that permits
would be issued as early as November 2006 and more recently Ministry
officials reiterated their interest in issuing the permit in the near
future during the Venezuela-Canada Business Forum discussed above. It
appears that the delay in obtaining the permit is bureaucratic and
possibly the upcoming presidential election, not due to the pending
Draft Mining Law noted above nor, to management's knowledge, the
failure of the Company to provide MINAMB any material information
required for the issuance of the Permit to Affect the Natural
Resources. Although management believes the issuance of the required
permit has entered the final stages, no assurances can be given when
MINAMB will formally issue the Permit to Affect the Natural Resources.
Brisas Work Plan
----------------
SNC Lavalin's scope of work under the EP and CM contracts includes
providing engineering services related to, and management of, the
construction of a 70,000 metric tonne per day hard rock ore copper
concentrator and related systems, a tailings dam, concentrate storage
and load-out facilities, the initial pit dewatering wells and support
facilities including mobile equipment shop, administration building,
communications and IT services, laboratory, maintenance facilities,
warehouse and employee and construction man camp. Pursuant to the EP
and CM contracts, SNC Lavalin is to also provide all services and
supplies necessary for commissioning and start-up of the project,
manage the health, safety and environmental plans and assure its
services and those of the trade contractors, comply with commitments
contained in the I-ESIA and V-ESIA, and local permit requirements.
Concurrent with SNC Lavalin's activities, management, with the
assistance of Endeavour Financial continues to focus on project
financing. Significant work has been completed in the evaluation and
design of the project financing and Endeavour has assisted the Company
in identifying and evaluating several sources of finance for the
project.
In November 2006, with the assistance of Endeavour Financial, the
Company signed a Mandate Letter including an indicative term sheet
reflecting current funding requirements and market conditions, and
structures involving a mix of commercial finance, off-take finance,
equipment finance and multilateral agency finance and support. The
Company has also received initial expressions of interest from
investment banks for the equity portion of the project finance
requirements, which would be contingent upon the project debt being
arranged and obtaining the required permits primarily the Permit to
Affect the Natural Resources.
Work on-site such as geo-tech drilling, road construction, condemnation
drilling, environmental sampling and testing and various planning
activities will continue or commence, as the case may be, along with
the addition of various management and staff positions as the Company
receives the appropriate permits and advances toward commencement of
construction. Community assistance and development programs are
expected to continue and be expanded to include programs to develop and
initiate basic skills training for construction in the Km 88 area. In
addition, management will be finalizing contracts for the supply of
electricity, gold/copper concentrate smelting and port facilities.
Choco 5 Property
----------------
The Choco 5 property, a grass roots gold exploration target, is a 5,000
hectare concession 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 $700,000 on acquisition
and exploration costs. On-going activities on the property include
environmental permitting, geologic mapping and reconnaissance,
comprehensive grid of soil geochemical sampling, geophysical testing of
established gold anomalies in the eastern sector of the property as well
as other identified targets, trenching and selective diamond drilling of
gold anomalies, and construction of access roads to facilitate the above
activities. The Company's exploration efforts are managed out of its
office in the community of El Callao.
Financial Overview
==================
Overview
--------
The following discussion of the Company's financial position as of
September 30, 2006 and results of operations for the three and nine
months ended September 30, 2006 and 2005 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 November 14, 2006, 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 at www.sedar.com
and www.sec.gov.
The Company is engaged in the business of exploration and development
of mining projects and continues to focus the majority of its
management and 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.
As previously noted, the Company completed a Feasibility Study with
respect to the construction and operation of the Brisas Project in
2005. In April 2006, the Company updated its estimated initial capital
costs for the Brisas Project to approximately US$638 million (exclusive
of costs incurred to date) compared to the Feasibility Study capital
costs of US$552 million. In November 2006 PAH completed an updated CSA
National Instrument 43-101 mineral resource and reserve estimate for
the Brisas Project which is discussed in detail above. The Brisas
Project operating plan assumes a large open pit mine containing proven
and probable reserves of approximately 10.4 million ounces of gold and
1.3 billion pounds of copper in 484.6 million tonnes of ore grading
0.67 grams of gold per tonne and 0.13% copper, at a revenue cutoff
grade of $3.04 per tonne for hard rock and $3.24 per tonne for
saprolite. The final pit (mineral reserves) was created with industry
standard pit optimization software using a gold price of $400 per ounce
and a copper price of $1.15 per pound. The study anticipates that the
Brisas Project at full production levels, utilizing conventional truck
and shovel mining methods and processing ore at 70,000 tonnes per day
would yield an average annual production of 456,000 ounces of gold and
60 million pounds of copper over an estimated mine life of
approximately 18.5 years.
Venezuela has, at times, experienced high levels of inflation,
political and civil unrest, bureaucratic delays and changes in and
proposed changes in regulatory regimens during the last several years.
Despite these matters, the Company has not curtailed its investment
activities in the country. However, our operations and investments in
Venezuela could be adversely affected by bureaucratic delays, political
events and changes in legal, tax and regulatory regimes in the future.
We are dependent on the Venezuelan regulatory authorities issuing the
Company certain operational and land use permits before we may begin
construction on, and operate, the Brisas Project. Obtaining these
required permits is necessary for the Company to obtain suitable
financing for the Brisas Project. A number of these pending items have
been outstanding for a number of months and the resolution of these
pending issues may be further delayed or withheld for any number of
reasons outside of the Company's control or in response to the
Company's lawful actions, including policy decisions of the Venezuelan
government or its regulators and agents, changes in laws or
regulations, arbitrary decisions by relevant officials, requests for
improper payments, favoritism towards other companies or persons or any
other actions that may result from the changing and uncertain regulatory
environment with respect to mining rights.
To our knowledge, all of our properties are in compliance in all
material respects with the appropriate regulations and requirements of
the mining law and our agreements. Our various social, cultural and
environmental programs in the immediate and surrounding areas near
Brisas are consistent with the government's social agenda including 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
environment as well as their integration into the formal economy. We
believe we enjoy a good working relationship with the MIBAM, MINAMB and
in general the Venezuelan Government and are committed to the economic
and social development of the Brisas Project in a mutually beneficial
manner with the communities located near the project, the people in
Bolivar State, and the Bolivarian Republic of Venezuela.
We believe references in this report to cash costs per ounce (a
non-GAAP measure of performance) enables certain investors to better
understand the Brisas Project's potential profitability and ability to
generate operating cash flow. Non-GAAP measures do not have any
standardized meaning prescribed by Canadian and U.S. GAAP, and
therefore they may not be comparable to similar measures prescribed by
other companies. The data is intended to provide additional information
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP, such as the
nearest comparable GAAP measure total cost per ounce. Such measures are
not necessarily indicative of operating profit or cash flow from
operations as determined under GAAP.
Critical Accounting Estimates
-----------------------------
Critical accounting estimates represent estimates that are highly
uncertain and changes in those estimates could materially impact our
financial statements. The significant accounting estimates contained in
the financial statements include: carrying value of the Brisas Project;
mineral reserve and resource estimates and contingencies. Management
has reviewed the development and selection of our critical accounting
estimates with the Company's Audit Committee with which they have
concurred.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Substantially all of the Company's investment in property, plant and
equipment represents amounts invested in the Brisas Project located in
Venezuela. Management's capitalization of exploration and development
costs and assumptions regarding the future recoverability of such costs
is subject to among other things, the Company's current mineral reserves
which are based on engineering and geological estimates, gold and copper
prices, estimated plant construction and operating costs and the
procurement of all necessary regulatory permits and approvals. These
estimates could change in the future and this could affect the carrying
value and the ultimate recoverability of the amounts recorded as
property and mineral rights and capitalized exploration and development
costs. See the Company's Annual Information Form for further discussion
of risk factors.
The Company operates and files tax returns in a number of
jurisdictions. The preparation of such tax filings requires
considerable judgment and the use of assumptions. Accordingly, the
amounts reported could vary in the future.
Significant Accounting Policies
-------------------------------
The Company's accounting policies are described in Note 1 of the
consolidated financial statements contained in the Company's 2005
Annual Information Form. The more significant accounting policies are
as follows:
Marketable Securities. Equity securities are carried at the lower of
cost and net realizable value. Corporate debt securities and U.S.
treasuries and agency obligations are carried at amortized cost.
Stock Based Compensation. The Company uses the fair value method of
accounting for stock options granted to employees and directors.
Consideration paid for shares on exercise of share options in addition
to the fair value attributable to stock options granted is credited to
capital stock.
Exploration and Development Costs. Exploration costs incurred in
locating areas of potential mineralization are expensed as incurred.
Exploration costs of properties or working interests with specific
areas of potential mineralization are capitalized at cost pending the
determination of a property's economic viability. Development costs of
proven mining properties not yet producing are capitalized at cost and
classified as property, plant and equipment. Property holding costs
are charged to operations during the period if no significant
exploration or development activities are being conducted on the
related properties. Upon commencement of production, capitalized
exploration and development costs will be amortized based on the
estimated proven and probable reserves benefited. Properties which
are abandoned are written-off and properties determined to be impaired
are written-down to the estimated fair value. Carrying values do not
necessarily reflect present or future values.
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 nine months
ended September 30, 2006 amounted to $2,501,572 and $1,918,768 or $0.06
and $0.05 per share compared to consolidated net loss of $1,755,640 and
$5,682,434 or $0.05 and $0.16 per share, respectively, for the same
periods in 2005.
Other income for the three and nine month periods ended September 30,
2006 increased by $724,002 and $5,860,891, respectively, over the
comparable periods in 2005. The change was primarily due to a
significant non-recurring gain on sale of marketable securities.
Operating expense for the three and nine months ended September 30,
2006 increased by $1,285,477 and $1,759,737, respectively, over the
comparable periods in 2005. The change was primarily due to an increase
in general and administrative costs principally related to personnel
costs and technical services principally associated with the
development of the Brisas Project.
Selected Quarterly Financial Data (Unaudited)
---------------------------------------------
The Company recorded net income in the three-month period ended March
31, 2006 as a result of a non-recurring gain on sale of marketable
securities. Total expense during the third quarter of 2006 increased
over the second quarter of 2006 mainly due to an increase in general
and administrative costs principally related to personnel costs and
technical services principally associated with the development of the
Brisas Project.
The change in 2005 fourth quarter results of operations is primarily
due to increases in costs associated with the development and financing
of the Brisas Project, personnel costs, investor relations and the
impact of implementing new rules related to accounting for stock-based
compensation.
(Unaudited)
Quarter ended 9/30/06 6/30/06 3/31/06 12/31/05 9/30/05 6/30/05 3/31/05 12/31/04
---------------------------------------------------------------------------------------------------------------------
Other Income 1,119,412 $ 888,611 $ 4,826,080 $ 429,656 $ 395,410 $ 392,064 $ 217,982 $ 372,064
Net income
(loss) before tax (2,317,115) (1,610,458) 2,346,293 (3,343,377) (1,755,640) (1,803,271) (2,123,523) (1,970,437)
Per share (0.06) (0.04) 0.07 (0.10) (0.05) (0.05) (0.06) (0.07)
Fully diluted (0.06) (0.04) 0.07 (0.10) (0.05) (0.05) (0.06) (0.07)
Net income (loss) (2,501,572) (1,716,975) 2,299,779 (3,344,848) (1,755,640) (1,803,271) (2,123,523) (1,970,437)
Per share (0.06) (0.05) 0.06 (0.10) (0.05) (0.05) (0.06) (0.07)
Fully diluted (0.06) (0.05) 0.06 (0.10) (0.05) (0.05) (0.06) (0.07)
Liquidity and Capital Resources
-------------------------------
In May 2006 the Company entered into an underwriting agreement with a
syndicate of underwriters pursuant to which the underwriters purchased
3,335,000 Class A common shares of Gold Reserve at a price of Cdn.$9.00
per share, representing aggregate gross proceeds to the Company of
Cdn.$30,015,000 or approximately US $27,000,000.
The Company's significant investing activities during the three and
nine months ended September 30, 2006 included the sale or maturity of
marketable securities, on a net basis, of approximately $0.8 and $5.4
million and the purchase of property, plant and equipment of
approximately $4.1 and $11.2 million respectively. Capitalized
development costs incurred on the Brisas project represent the majority
of the amount invested in property, plant and equipment.
The total financial resources of the Company, which includes cash plus
marketable securities, increased approximately $11.9 million from
December 31, 2005 to approximately $34.3 million as of September 30,
2006.
As of November 14, 2006, the Company had the following shares, equity
units, warrants and share options issued:
Class A common shares 39,152,302
Equity units 1 1,085,099
Class A common share purchase warrants 2 2,680,500
Class A common share purchase options 3 3,165,917
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) In 2004, the Company completed a Unit offering which included Class
A common share purchase warrants entitling the holders to acquire
2,680,500 Class A common shares at a price of Cdn $6.50 per share for a
period of 24 months following the closing date or November 6, 2006. In
late October 2006, the Company announced its plan to delist all of the
2,680,500 issued and outstanding warrants from the Toronto Stock
Exchange. Thereafter on October 31, 2006, the Company received approval
from the Toronto Stock Exchange to amend certain terms of the 2,680,500
unlisted warrants. Subject to the receipt of shareholder approval at
the next annual shareholders' meeting and the signing of a supplemental
warrant indenture with the warrant agent, the expiry date of the
Warrants will be extended to July 31, 2007 and the exercise price of
the Warrants will be amended from Cdn$6.50 to Cdn$6.55. Until the date
and time shareholders of the Company authorize the proposed amendments
to the Warrants, the proposed amendments to the Warrants will not be
effective.
3) Exercisable at between $0.57 and $4.89 per share.
With the completion of the Feasibility Study in early 2005 and the
engagement of SNC Lavalin, our efforts continue to be focused primarily
on identifying suitable funding sources, completion of detailed project
engineering, development and implementation of project related
contracts such as 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,
most importantly, obtaining the required permits, especially the Permit
to Affect Natural Resources from MINAMB. Initial capital expenditures
required to put the Brisas Project into production as presently
proposed by the Company, is estimated to be approximately $638 million
over a 24-30 month construction period. Commencement of the
construction of the Brisas Project is primarily dependent upon
obtaining the required permits and obtaining sufficient financing.
As of November 14, 2006 the Company held approximately $32 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-development activities through 2007 (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 future work plans, our assessment of the financial markets, the
political, regulatory 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 will be unable to
construct and operate the Brisas Project.
CONSOLIDATED BALANCE SHEETS
===========================
September 30, 2006 and December 31, 2005
(unaudited)
U.S. Dollars 2006 2005
----------------------------------------------------------------------------
ASSETS
------
Current Assets
--------------
Cash and cash equivalents $ 30,639,251 $ 19,370,252
Marketable securities 3,634,836 2,985,234
Deposits, advances and other 1,691,474 442,130
----------------------------------------------------------------------------
Total current assets 35,965,561 22,797,616
Property, plant and equipment, net 69,155,839 58,016,102
Other 1,657,541 1,141,154
----------------------------------------------------------------------------
Total assets $ 106,778,941 $ 81,954,872
============================================================================
LIABILITIES
-----------
Current Liabilities:
--------------------
Accounts payable and accrued expenses $ 1,252,518 $ 1,187,565
----------------------------------------------------------------------------
Total current liabilities 1,252,518 1,187,565
Minority interest in
consolidated subsidiaries 1,475,666 1,129,541
----------------------------------------------------------------------------
Total liabilities 2,728,184 2,317,106
----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
--------------------
Serial preferred stock, without par value
Common shares and equity units,
without par value 166,256,889 140,512,063
Less common shares held by affiliates (636,267) (674,598)
Stock options 2,605,202 1,867,537
Accumulated deficit (63,901,784) (61,983,016)
KSOP debt (273,283) (84,220)
----------------------------------------------------------------------------
Total shareholders' equity 104,050,757 79,637,766
----------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 106,778,941 $ 81,954,872
============================================================================
The accompanying notes are an integral part of the
consolidated financial statements.
Approved by the Board of Directors:
s/ Chris D. Mikkelsen s/ Patrick D. McChesney
CONSOLIDATED STATEMENTS OF OPERATIONS
=====================================
For the Three and Nine Months Ended September 30, 2006 and 2005 (unaudited)
Three Months Ended Nine Months Ended
--------------------- ----------------------
U.S. Dollars 2006 2005 2006 2005
-------------------------------------------------------------------------------
OTHER INCOME
Interest $ 331,014 $ 223,918 $ 830,619 $ 635,864
Gain on sale of
marketable securities 788,398 171,492 6,003,484 337,348
-------------------------------------------------------------------------------
1,119,412 395,410 6,834,103 973,212
EXPENSES
General and
administrative 1,590,356 1,019,136 3,656,320 3,240,124
Technical services 1,223,543 874,792 3,304,297 2,604,617
Corporate communications 134,606 126,636 466,152 476,115
Legal and accounting 214,536 148,343 555,060 243,973
Foreign currency
(gain) loss 4,061 (22,839) 87,429 83,101
Minority interest
in net income (loss) of
consolidated
subsidiaries 269,425 4,982 346,125 7,716
-------------------------------------------------------------------------------
3,436,527 2,151,050 8,415,383 6,655,646
-------------------------------------------------------------------------------
Net loss before tax $ (2,317,115) $ (1,755,640) $ (1,581,280) $ (5,682,434)
Income tax (184,457) 0 (337,488) 0
-------------------------------------------------------------------------------
Net loss $(2,501,572) $ (1,755,640) $ (1,918,768) $ (5,682,434)
===============================================================================
Net loss per share,
basic and diluted $ (0.06) $ (0.05) $ (0.05) $ (0.16)
===============================================================================
Weighted average common
shares outstanding 39,310,892 35,304,253 37,461,731 34,904,722
===============================================================================
CONSOLIDATED STATEMENTS OF DEFICIT
==================================
For the Nine Months Ended September 30, 2006 and 2005 (unaudited)
U.S. Dollars
-------------------------------------------------------------------------------
Deficit, December 31, 2005 $ (61,983,016)
Net loss for the period (1,918,768)
-------------------------------------------------------------------------------
Deficit, September 30, 2006 $ (63,901,784)
===============================================================================
Deficit, December 31, 2004 $ (52,955,734)
Net loss for the period (5,682,434)
-------------------------------------------------------------------------------
Deficit, September 30, 2005 $ (58,638,168)
===============================================================================
The accompanying notes are an integral part of the
consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
=====================================
For the Three and Nine Months Ended September 30, 2006 and 2005 (unaudited)
Three Months Ended Nine Months Ended
-------------------- ----------------------
U.S. Dollars 2006 2005 2006 2005
-------------------------------------------------------------------------------
Cash Flows from Operating Activities:
-------------------------------------
Net loss $ (2,501,572) $ (1,755,640) $ (1,918,768) $ (5,682,434)
Adjustments to reconcile net loss to net cash used by operating activities:
Stock option compensation 563,522 248,357 835,415 788,189
Depreciation 37,536 24,173 100,871 64,166
Amortization of premium
(discount) on
marketable securities (2,513) (419) 713
Foreign currency (gain) loss 4,061 (22,839) 87,429 83,101
Minority interest
in net income of
consolidated subsidiaries 269,425 4,982 346,125 7,716
Net gain on sale of
marketable securities (788,398) (171,492) (6,003,484) (337,348)
Shares issued for
compensation 196,355 55,891 298,875 491,811
Changes in non-cash working capital:
Net (increase) decrease
in deposits, advances and
accrued interest (37,802) 10,199 (1,249,344) 12,845
Net increase (decrease)
in accounts payable
and accrued expenses (250,834) (90,456) 64,953 (489,313)
-------------------------------------------------------------------------------
Net cash used by
operating activities (2,507,707) (1,699,338) (7,438,347) (5,060,554)
===============================================================================
Cash Flows from Investing Activities:
-------------------------------------
Proceeds from the sale
and maturity of
marketable securities 2,318,016 1,171,492 10,615,609 5,786,299
Purchase of
marketable securities (1,527,349) (1,318,104) (5,261,308) (2,318,104)
Purchase of property,
plant and equipment (4,067,450) (1,352,676) (11,240,608) (3,188,229)
Other (199,558) (37,287) (363,667) (142,950)
-------------------------------------------------------------------------------
Net cash provided (used)
by investing activities (3,476,341) (1,536,575) (6,249,974) 137,016
===============================================================================
Cash Flows from Financing Activities:
-------------------------------------
Proceeds from the issuance
of common shares 145,974 6,504 24,957,320 2,612,344
-------------------------------------------------------------------------------
Net cash provided by
financing activities 145,974 6,504 24,957,320 2,612,344
===============================================================================
Change in Cash and Cash Equivalents:
------------------------------------
Net increase (decrease) in
cash and cash
equivalents (5,838,074) (3,229,409) 11,268,999 (2,311,194)
Cash and cash equivalents
- beginning of period 36,477,325 28,096,920 19,370,252 27,178,705
-------------------------------------------------------------------------------
Cash and cash equivalents
- end of period $ 30,639,251 $ 24,867,511 $ 30,639,251 $ 24,867,511
===============================================================================
The accompanying notes are an integral part of the
consolidated financial statements.
Selected Notes To Consolidated Financial Statements
For the Nine Months Ended September 30, 2006 and 2005 (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 September 30, 2006, and the results of operations
and the cash flows for the nine months ended September 30, 2006 and
2005. The results of operations for the nine months ended September
30, 2006 and 2005 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 audited
financial statements and should be read in conjunction with the
consolidated financial statements including notes thereto included in
the Company's 2005 annual report.
2. Geographic Segments
-----------------------
Net Income (Loss) for the Three and Nine Months Ended
September 30,2006 and 2005
Three Months Ended Nine Months Ended
---------------------- ----------------------
2006 2005 2006 2005
-------------------------------------------------------------------------------
North America $ (1,488,375) $ (1,086,020) $843,243 $ (3,647,839)
South America (1,013,197) (669,620) (2,762,011) (2,034,595)
-------------------------------------------------------------------------------
Consolidated $ (2,501,572) $ (1,755,640) $ (1,918,768) $ (5,682,434)
===============================================================================
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 575,151 options
remaining for future grants at September 30, 2006. Share option
transactions for the nine months ended September 30, 2006 and 2005 are
as follows:
2006 2005
--------------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
-------------------------------------------------------------------------------
Options outstanding at
beginning of period 3,148,844 1.36 3,316,374 $ 1.39
Options exercised (426,594) 0.89 (573,030) $ 1.00
Options canceled (54,333) 2.72 (115,000) $ 4.18
Options granted 498,000 4.28 374,500 $ 3.65
-------------------------------------------------------------------------------
Options outstanding
at end of period 3,165,917 1.86 3,002,844 $ 1.64
-------------------------------------------------------------------------------
Options exercisable at
end of period 2,555,287 1.57 2,678,270 $ 1.44
===============================================================================
Price Price
Range Range
-----------------------------------------------------------------------------
Exercise price at end of period $0.57 - $ 4.89 $ 0.57 - $ 4.90
Exercise price for
exercisable shares $0.62 - $ 4.19 $ 0.57 - $ 4.90
The Company recorded additional compensation expense of $835,415 and
$788,189 for stock options vested during the nine months ended
September 30, 2006 and 2005. During 2006, the shareholders approved
extending the expiration date of 1,755,250 options from June 8, 2006 to
December 31, 2006. The fair value of the options granted was calculated
using the Black-Scholes model. In 2006, the model assumed a weighted
average risk free interest rate of 4.6%, expected life of three years,
expected volatility of 83% and a dividend yield of nil. In 2005 the
model assumed a weighted average risk free interest rate of 3.8%,
expected life of three years, expected volatility of 65% and a dividend
yield of nil.
4. Common Stock
----------------
In May 2006, the Company closed a public offering of 3,335,000 Class A
common shares of the Company, representing aggregate net proceeds to
the Company of approximately US $24.6 million. In addition to the
shares issued in the public offering, during the nine months ended
September 30, 2006, 426,594 shares were issued upon exercise of stock
options, 100,000 shares were issued to the KSOP and 69,500 shares were
issued as compensation.
During the nine months ended September 30, 2005, 573,030 shares were
issued upon exercise of stock options, 533,735 shares were issued upon
exercise of warrants, 130,500 shares were issued for compensation and
75,000 shares were issued to the KSOP plan
99.2 Chief Executive Officer's certification of interim filings
GOLD RESERVE INC.
Date: November 14, 2006
I, Rockne J. Timm, Chief Executive Officer, Gold Reserve Inc., certify
that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers
Annual and Interim Filings) of Gold Reserve Inc., ("the issuer") for
the interim period ending September 30, 2006;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings;
3. Based on my knowledge, the interim financial statements together
with the other financial information included in the interim filings
fairly present in all material respects the financial condition,
results of operations and cash flows of the issuer, as of the date and
for the periods presented in the interim filings; and
4. The issuers other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures for the
issuer, and we have:
a. designed such disclosure controls and procedures, or caused them to
be designed under our supervision, to provide reasonable assurance that
material information relating to the issuer, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which the interim filings are being
prepared.
Signature:/S/Rockne J. Timm
Rockne J. Timm
Chief Executive Officer
99.3 Chief Financial Officer's certification of interim filings
GOLD RESERVE INC.
Date: November 14, 2006
I, Robert A. McGuinness, Chief Financial Officer, Gold Reserve Inc.,
certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers
Annual and Interim Filings) of Gold Reserve Inc., ("the issuer") for
the interim period ending September 30, 2006;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings;
3. Based on my knowledge, the interim financial statements together
with the other financial information included in the interim filings
fairly present in all material respects the financial condition,
results of operations and cash flows of the issuer, as of the date and
for the periods presented in the interim filings; and
4. The issuers other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures for the
issuer, and we have:
a. designed such disclosure controls and procedures, or caused them to
be designed under our supervision, to provide reasonable assurance that
material information relating to the issuer, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which the interim filings are being
prepared.
Signature:/S/Robert A. McGuinness
Robert A. McGuinness
Chief Financial Officer