Gold Reserve Inc. (AMEX:GRZ stock message board forums) (TSX:GRZ):
2007 was a landmark year for the Company’s
Brisas gold copper project, achieving a number of positive milestones as
we continue the advancement of the Brisas project towards production.
The primary milestone of 2007 was the receipt of the Permit to Affect
Natural Resources from the Venezuelan Ministry of the Environment which
enabled us to begin the construction process at the Brisas Mine. We now
are awaiting the Initiation Act to commence full-scale construction.
There were also many other milestones and positive events that were
achieved that continued the advancement of the Brisas project towards
production.
After receiving the Permit to Affect, we started the process of
preparing the project for construction. A major issue in the mining
industry today is the long lead times for items such as grinding mills
and mining equipment. We immediately commenced procurement efforts with
the assistance of SNC-Lavalin Inc. (“SNC”),
our EPCM contractor, and we placed orders for the gyratory crusher, two
SAG mills, four ball mills, two vertical mills, and the gear drives and
motors for the mills. The suppliers are coordinating the fabrication and
delivery of these critical pieces of equipment according to project
schedule. We have also begun the process of a phased order for mining
and construction equipment from Caterpillar and are pleased to report
that we have already taken delivery of the first phase of that equipment
order. A substantial portion of the procurement function is now complete.
The detailed engineering performed by SNC was substantially advanced
during 2007 and was approximately 70% complete by year end. We expect
the bulk of the detailed engineering to be complete by mid 2008.
Detailed engineering includes thousands of construction drawings, site
layout, manpower requirements, construction planning, and many other
functions required in a project of this magnitude. This is the final
step in the engineering process for mine development work and is a major
requirement for the construction process. The advanced state of detailed
engineering is allowing us to complete the capital cost estimate that
will support the financing of the mine. We expect to report the new
capital costs and operating costs in the first quarter and follow up
with an updated 43-101 report on the Brisas project early in the second
quarter.
An area of great concern in the industry today is rising capital costs
and, like others, we are also experiencing an increase in costs, but not
to the extent other projects have noted in recent press reports. This is
primarily because we are near the end of this process and have already
faced many of the issues that can substantially affect the scope of a
project and its capital costs. We have already made the necessary scope
changes in the project to bring the Brisas project to industry best
practice standards, have the detailed engineering at an advanced level,
and have placed the orders for long lead items.
As part of this process, an independent engineering company has been
reviewing our project, has monitored our progress, and has contributed
to the objective of meeting industry best practices and the Equator
Principles. Compliance with the Equator Principles has added to the
original operating and capital costs; however, in the long run, the
Brisas project demonstrates best practices in all areas of mine
development needed to qualify the project for conventional project
financing.
In 2007 we completed two concurrent financings totaling $183 million.
The lead underwriters were J. P. Morgan Securities, Inc., RBC Capital
Markets and Cormark Securities, Inc. We also continue to work on the
$425 million project debt financing with a consortium of banks to
complete all the conditions precedent for commitment. At year end we had
a cash position of $140 million and are well positioned to commence
full-scale construction once we receive the Initiation Act.
Other permits and authorizations were received from various government
agencies. We are pleased to report that the approval of the
Environmental and Social Impact Study, which was a requirement for the
issuance of the Permit to Affect from the Ministry of Environment, was
obtained without variations in the project design. In 2007 we received,
from the Ministry of Environment, the Exploitation Permit for the
quarry. This is also a key permit as the quarry will provide the
critical construction aggregates for infrastructure, roads and concrete.
We also received our annual compliance certificates from the Ministry of
Basic Industries and Mines (“MIBAM”)
for all of our properties in the KM 88 project area, demonstrating our
compliance to the mining law, mining titles, and contracts.
In mid 2007 it was determined that there was a conflict with the
location of the new 9 km access road with some small miner mineral
rights and in coordination with MIBAM we re-engineered this road
receiving the final approval from MIBAM in September of 2007. This
process underscored the fact that there is no one permit in developing a
mine, not in Venezuela, nor any other country. There are numerous
permits and authorizations required to develop a mine of this magnitude
and they come from many agencies. In constructing the Brisas mine, we
will need municipal, state and federal permits from various agencies.
There are a number of laws that govern mining, including the mining law,
the environmental law, transportation laws, currency and tax laws,
import regulations, etc. The key aspect of this is that the two
Ministries that have the most oversight responsibility for mining have
approved the Brisas project plan in its entirety.
2007 was a year of great uncertainty and social unrest in the world and
mining was not immune from these issues. We have enjoyed quite a
different experience than many others in the mining industry. As part of
our corporate social commitment, and acting along the social policies
set forth by the Venezuelan government, the Company promoted the
creation of a Community Liaison Commission for the Brisas project which
initiated activities in October 2007. This commission is composed of
legal representatives from the 22 community counsels from the San Isidro
Parish, both Indigenous and Creole, and from the construction union, the
heavy machinery union, the Mayor’s office and
local commerce. Most recently, MIBAM has requested to be part of the
commission. The main objective of this commission is to actively
participate in finding solutions to potential events that may cause
delays or affect the normal development of the Brisas project.
We were particularly gratified when we were informed late in 2007 that
the local communities around KM88 had come together and collected a
petition with over 1,500 signatures on it. This petition was addressed
by the Liaison Commission to President Chavez and requested his support
so that the Brisas project can proceed without delays.
Environmental and social aspects worldwide have become a critical
element in the mine development process and we are proud of our
achievements and our adherence to the highest standards in the industry.
The support of the project by the local population is an important part
of the development of Brisas. The Brisas project will have a substantial
impact on this area and Gold Reserve is determined to bring the local
communities the greatest benefit possible, directly and indirectly, in
order to significantly improve their way of life.
We are very proud of the people who have become part of Gold Reserve in
Venezuela. In a ceremony in December, Arturo Rivero, our President in
Venezuela, presented 28 people with long service recognition awards.
Some of these people have been with the company for 15 years. Arturo
himself has been with the Company for over 10 years. It is these people
who share in the credit for the success the Company has achieved to date.
We look forward to 2008 to continue our goal of placing the Brisas Mine
into production.
On Behalf of the Board of Directors Gold Reserve Inc. A.
Douglas Belanger, President
About Gold Reserve Inc.
Gold Reserve Inc. is a Canadian company developing the Brisas gold
copper project in southeastern Venezuela. Brisas has NI-43-101 reserves
of 485 million tonnes of ore grading 0.67 grams per tonne gold and 0.13%
copper containing 10.4 million ounces of gold and 1.3 billion pounds of
copper (using a revenue cutoff grade of US $3.04 per tonne and a gold
price of US $400 and a copper price of US $1.15 per pound). The mine
plan anticipates using 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 456,000 ounces of gold and 60
million pounds of copper for a mine life of 18.5 years. Using US $1.80
copper as a byproduct, operating costs are expected to be US $126 per
ounce. The Qualified Personnel for the NI 43-101 Report are Susan Poos
of Marston and Marston, Inc. and Richard Addison and Richard Lambert of
Pincock, Allen and Holt, all registered professional engineers.
Certain statements included herein, including those that express
management’s expectations or estimates
of our future performance concerning the Brisas Project or the Choco 5
Exploration Project, constitute “forward-looking
statements” within the meaning of the
United States Private Securities Litigation Reform Act of 1995.
Forward-looking statements are necessarily based upon a number of
estimates and assumptions that, while considered reasonable by
management at this time, are inherently subject to significant business,
economic and competitive uncertainties and contingencies. We caution
that such forward-looking statements involve known and unknown risks,
uncertainties and other risks that may cause the actual financial
results, performance, or achievements of Gold Reserve Inc. to be
materially different from our estimated future results, performance, or
achievements expressed or implied by those 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 us or our
experts in conjunction with our 2005 bankable feasibility study (as
updated or modified from time to time) significantly differ or change as
a result of actual results in our 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); our 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. Investors are cautioned not to put undue reliance on
forward-looking statements. 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.
