SPOKANE, WA, Nov. 13 /CNW/ - Gold Reserve Inc. (TSX: GRZ - AMEX:GRZ)
announced the completion of an updated CSA National Instrument 43-101 Report
for the Brisas Project. The Report, prepared by Pincock Allen and Holt (PAH)
includes updated resource and reserve estimates, capital and operating costs,
and current project economics.
The current 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 using a gold price of $400 per ounce and a copper price of $1.15 per
pound. The plan 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 456,000 ounces of gold and
60 million pounds of copper over an estimated mine life of approximately
18.5 years. The stripping ratio is estimated at 1.96:1.
The updated 2006 mine plan extends the mine life to 18.5 years as
compared to the 2005 feasibility study mine life of 16 years. Estimated annual
gold and copper production declined approximately 6% although the estimated
life of mine production has increased approximately 10% from 7.59 million
ounces to 8.41 million ounces of gold and copper production has increased from
997 million pounds to 1.113 billion pounds.
This revised 43-101 Report assumes a base-case economic model utilizing
$470 per ounce gold and $1.80 per pound copper which is derived from the
historical three-year rolling average for metal prices as of September 2006.
At such prices, cash operating costs (net of copper byproduct credits) are
estimated at $126 per ounce of gold. Total costs including cash operating
costs, exploitation taxes, initial capital costs (excluding sunk cost), and
sustaining capital costs are estimated at $245 per ounce of gold. Initial
capital costs are currently estimated to be $638 million. All amounts are in
U.S. dollars.
Doug Belanger, President of Gold Reserve stated, "We are very pleased
with the results of the updated 43-101 Report. The mining industry has
experienced significant increases in capital and operating costs, the Brisas
Project included. However, the Brisas Project continues to demonstrate low
projected operating costs, robust economics at conservative metal prices,
excellent leverage and significant value at current metal prices."
The more important conclusions contained in the updated 43-101 Report are
summarized below and compared to the previous 43-101 Report published in 2005.
<<
Proven & Probable Reserve - 2006 43-101 Report
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Au Au Au Cu Cu
Reserve Tonnage Grade Grams Ounces Grade Cu pounds
Category (000's) g/t (000's) (000's) % Tonnes (000,000's)
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Proven 226,252 0.69 156,517 5,032 0.12 272,376 600
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Probable 258,398 0.64 166,628 5,357 0.13 334,397 737
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Total Ore 484,649 0.67 323,145 10,389 0.13 606,773 1,338
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Strip ratio
(waste to
ore) -
1.96:1
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Based on Internal Cutoff Using Revenue of $3.04/tonne ($400/oz Au,
$1.15/lb Cu). Note that Gold Reserve updated the proven and probable
reserve in May 2005 to reflect drilling completed after the January 2005
Bankable Feasibility Study. The results shown above are based on the same
drilling as the May 2005 reserve. See Gold Reserve Inc.'s press release
NR-05-04 dated May 17, 2005 for details on the May 2005 reserve update.
Proven & Probable Reserve - 2005 43-101 Report
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Au Au Au Cu Cu
Reserve Tonnage Grade Grams Ounces Grade Cu pounds
Category (000's) g/t (000's) (000's) % Tonnes (000,000's)
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Proven 193,248 0.71 136,826 4,399 0.12 237,985 525
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Probable 221,315 0.68 149,548 4,808 0.13 296,823 654
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Total Ore 414,563 0.69 286,375 9,207 0.13 534,808 1,179
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Strip ratio
(waste to
ore) -
1.81:1
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Based on Internal Cutoff Using Revenue of $2.76/tonne ($350/oz Au,
$0.90/lb Cu).
Key Economic Parameters and Results
2006 2005
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Mill Through-Put (tonnes per day) 70,000 70,000
Metallurgical Recovery
Plant Recovery - Gold 83% 83%
Plant Recovery - Copper 87% 87%
Net Payable Metal - Gold 81% 82%
Net Payable Metal - Copper 83% 84%
Life of Mine Production (payable metals)
Gold (million ounces) 8.41 7.59
Copper (million pounds) 1,113 997
Average Annual Production
Gold (ounces) 456,000 487,000
Copper (million pounds) 60 64
Mine Life (years) 18.5 16.0
Initial Capital Cost ($million)(1) 2006(2) 2005
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Mine $ 76.6 $ 106.7
Mill 241.5 201.0
Infrastructure 65.8 75.7
Tailings 14.1 31.6
Owner's Costs 65.3 10.0
Pre-Stripping 18.3 15.0
Indirect Costs (includes EPCM and Camp) 97.0 57.3
Contingency 59.4 54.8
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Total Initial Capital $ 638.0 $ 552.1
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(1) A value added tax (VAT) of approximately US$70 million, is not part
of the initial capital cost as it is expected to be recovered within
the first few years of construction and operations, pursuant to
Venezuelan tax regulations. All IRR, NPV and total cost calculations
include VAT and sustaining capital.
(2) Capital costs were developed by SNC-Lavalin Engineers & Constructors,
Inc. ("SNC-Lavalin") and Gold Reserve in April 2006 as part of the
Project Scope and Definition phase of the EPCM process.
Base Case Economics 2006 2005
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Metal Prices
Gold $ 470 $ 400
Copper $ 1.80 $ 1.00
Cash Operating Cost Per Ore Tonne
Mining and Dewatering $ 2.08 $ 1.70
Processing 2.59 2.21
General and Administrative 0.42 0.39
Transport and Freight 0.34 0.37
Smelting and Refining 1.02 0.61
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Total cash operating cost per tonne $ 6.45 $ 5.28
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Cost Per Ounce of Gold
Cash Operating Costs(1) $ 126 $ 153
Exploitation Tax 16 13
Capital Cost (initial and sustaining) 111 96
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Total Costs(2) $ 253 $ 262
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Pre-Tax
Internal Rate of Return(3) 15.4% 12.1%
Net Present Value (NPV)
(at) 0 % discount (billions) $ 1.91 $ 1.05
(at) 5 % discount (millions) $ 783 $ 392
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(1) Net of copper by-product credit.
(2) Net of copper credit and excluding sunk costs.
(3) The 2006 and 2005 after-tax IRR is 11.4% and 9.1%, respectively.
Brisas Project Gold and Copper Price Sensitivity
Pre-Tax
------------------------------------
Cash
Operating Total NPV NPV
Metal Prices Cost per Cost per (at) 0% (at)5% Payback
Gold and Copper Ounce(1) Ounce(2) IRR%(3) millions millions Years(4)
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$570 Au /
$2.80 Cu ($2) $127 25.8% $3,756 $1,812 4.3
$520 Au /
$2.30 Cu $ 62 $186 20.9% $2,833 $1,298 5.2
$470 Au
$1.80 Cu $126 $245 15.4% $1,909 $ 783 6.7
$420 Au /
$1.30 Cu $181 $297 9.5% $1,043 $ 303 10.2
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Current Prices:
$620 Au /
$3.10 Cu ($40) $93 29.3% $4,468 $2,207 3.9
(1) Net of copper by-product credit.
(2) Net of copper credit and excluding sunk costs.
(3) The after-tax IRR is 11.4% using $470 gold and $1.80 copper.
(4) Payback Years relates to recovery of equity invested as the financial
model has been prepared on an after tax, un-leveraged equity only
basis.
>>
Initial Capital and Operating Cost Variance
Initial capital cost for the Brisas Project is now estimated to be
$638 million compared to the previous estimates of $552 million. Primary cost
variances are noted in Gold Reserve Inc.'s press release NR-06-04 dated
April 24, 2006.
Total cash operating cost per ore tonne is currently estimated at $6.45
compared to the previous estimate of $5.28. Primary cost variances are as
follows:
Mining costs are $2.08 per tonne compared to $1.70 per tonne. The
increase is due mainly to price escalations in manpower, explosives, and
operating supplies. Tire costs have escalated significantly for each
equipment type.
Processing costs are estimated at $2.59 per tonne compared to the
previous estimate of $2.21 per tonne. Primary cost variances are due to
increases in reagents, liners and grinding media, and electrical demand
and rate changes. The electrical rate has increased 6.8 percent from the
original estimate contained in the 2005 feasibility study.
Smelting and Refining costs are $1.02 per tonne compared to the previous
estimate of $0.61 per tonne. The costs were updated based on negotiated
smelter terms, which are based on a sliding scale dependent on metal
prices. If metal prices in the current model are reduced to $400 per
ounce for gold and $1.00 per pound for copper, as used in the previous
feasibility study estimate, smelting and refining costs would be
approximately $0.67 per tonne, which is are more in line with the
previous feasibility study estimate.
Preparation of the updated CSA National Instrument 43-101 Report
Pincock, Allen and Holt (PAH) was retained by Gold Reserve Inc. to update
the Brisas Project 43-101 Report in accordance with the Canadian Securities
Act National Instrument 43-101. This update includes the results of various
studies that have been completed since the January 2005 Brisas Project
Feasibility Study. The resource and reserve estimates were conducted in
accordance with the Standards for Disclosure for Mineral Projects, Form
43-101F1 and Companion Policy 43-101CP dated December 23, 2005.
The updated financial model was prepared on an un-leveraged (equity only)
basis, provided for depreciation and amortization on a straight line and units
of production basis, assumed a 34% Venezuelan corporate income tax rate, and
excluded an inflation allowance.
Previous work by PAH on the Brisas Project includes the preparation of
the resource model, mine plans, resource and reserve estimates, and economic
model for the Brisas Project January 2005 Feasibility Study. Additionally, in
November 2005 PAH issued a supplement to the Feasibility Study based on
additional drillhole information. Marston & Marston Inc. (Marston) has used
the PAH resource model to develop a new mine design, production schedule and
resource and reserve estimates.
The Qualified Personnel for the updated 43-101 Report are Susan Poos of
Marston, Richard Addison of PAH, and Richard Lambert of PAH, all registered
professional engineers.
Ms. Poos has been involved with the project since January 2004. Ms. Poos
was responsible for the development of the resource and reserve estimates
reported in the 2005 Feasibility Study and the 2005 43-101 report. She was
also responsible for developing the current mine design and production
schedules on which the reserve estimate was based and providing the applicable
sections of the current 43-101 Report.
Mr. Addison reviewed the metallurgy and processing portions of the 2005
Brisas Project Feasibility Study (previously prepared by an independent
engineering firm) and SNC-Lavalin prepared the current scope and project
definition documentation. Based on this review, he wrote the applicable
sections of the current 43-101 Report.
Mr. Lambert developed the mine capital and operating cost estimates, and
the economic model for the Feasibility Study. He has updated the capital and
operating costs in the current economic model and has provided the
corresponding sections for the current 43-101 Report.
The proven and probable reserve (within a pit design) has been estimated
in accordance with the SME Reporting Guide, SEC Industry Guide 7 and CIMM
Standards as adopted by CSA National Instrument 43-101. The qualified person
involved in the property evaluation and resource and reserve estimates was
Susan Poos, P.E. of Marston.
The 43-101 Report will be available to the public at www.sedar.com and
www.sec.gov, as well as, the Company's website at www.goldreserveinc.com
within 45 days of the date of this release.
Gold Reserve Inc. is a Canadian company, currently developing its Brisas
gold/copper project in Southeastern Venezuela. The Company currently has
$32 million in cash and investments. Before full construction can proceed, the
Company must obtain the Permit to Affect Natural Resources and adequate
financing.
Forward-Looking Statements
Certain statements included herein, including those that express
management's expectations or estimates of our future performance, 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 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 risk factors that may cause the actual
financial results, performance, or achievements of the Company 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 the risk that
actual mineral reserves may vary considerably from estimates presently made,
our ability to obtain funding for development and production of the Brisas
project, the impact of currency, metal prices and metal production volatility,
the concentration of our operations and assets in Venezuela, the regulatory,
political and economic risks associated with Venezuelan operations, changes in
proposed development plans (including technology used), delays or inability in
obtaining required permits or concession interpretations or extensions, 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. These are discussed in greater detail in Gold Reserve's
filings with the U.S. Securities and Exchange Commission at www.sec.gov
(including under the heading "Risk Factors") and the Annual Information Form
and other reports filed with Canadian provincial securities commissions at
www.sedar.com. Gold Reserve expressly disclaims any intention or obligation to
update or revise any forward looking statement whether as a result of new
information, events or otherwise.
TO THE EXTENT IT IS DETERMINED THE COMPANY'S FINANCING PLANS WILL INCLUDE
THE ISSUANCE OF ANY SECURITIES, ANY SECURITIES THAT MAY BE ISSUED PURSUANT TO
ANY FINANCING OR OTHER OFFERING BY THE COMPANY MAY NOT BE OFFERED OR SOLD IN
THE UNITED STATES EXCEPT PURSUANT TO THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, SUCH
REGISTRATION REQUIREMENTS. THIS NEWS RELEASE SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SUCH SECURITIES, NOR SHALL
THERE BE ANY SALE OF ANY SUCH SECURITIES IN ANY STATE IN WHICH SUCH AN OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO APPLICABLE REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
