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Gold Reserve Inc. (GRZ)

Q2 2009 Earnings Call

August 18, 2009 4:30 pm ET


A. Douglas Belanger – President, Director


Scott Newhall – Trees Investment Counsel LLC

John Bridges – JPMorgan

Robert C. Hodgson – BlackRock, Inc.



Good day, ladies and gentlemen, and welcome to the second quarter 2009 Gold Reserve earnings conference call. My name is Amisia, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to hand the call over to Mr. Doug Belanger, President of Gold Reserve. Please proceed, sir.

A. Douglas Belanger

Thank you very much, and welcome to the second quarter conference call. In my usual format, I will go through a number of issues and areas and then take Q&A.

First, financial statements. I think the most important thing that people focus on is our cash position in the first week of August is about just under $95 million. It actually went up a little bit as a result of small equipment sale and I’ll talk about that a little bit later. We also had a profit realized from some investments of $1.8 million. And of course, we’ve also as I have said in the past quarters, we’ve been looking to cut expenses, quarter-over-quarter from last year. Our expenses are down about 50% in total. In some cases, some areas like technically down way more than 50%. So that resulted with the gain from the sale, gain from investments and the reduction in expenses. Our net loss was reduced considerably from $0.07 a share to $0.01 a share and that cost cutting will continue, substantial cost cutting be at from this point will probably depend on more on what happens in Venezuela than anything else.

In Venezuela, we were notified by the government of the denial of the extension of both the Brisas and El Pauji concessions, however, if you read our news releases 9/16/2009 and 9/17/2009. You will see that we had already extended both those concessions and while they are not material in terms of the reserves, it does show continued situation in Venezuela that they are looking for a different direction in mining I think in terms of how mineral rights are held.

We made a strong point I believe in both news releases about the fact that this did not follow their mining law. This is a fairly clear legal opinion, because we did apply for these extensions on time and under Article 25 of the current Venezuelan Mining Law, which is all we can look to the extensions were timely filed. And therefore since there was no comment, which the government admits in the six-month timeframe required for government contact, then they are automatically renewed. So but it’s obviously sending a message. We get the message. We’re proceeding apace with the arbitration situation. I did want to note too though that we still are in compliance in Venezuela. In fact just recently we received a certificate of compliance from the Labor Ministry, which informed the Ministry of Mines and other Ministries that we are in full compliance with all of our labor issues in Venezuela.

So we follow the law and that will certainly help us as we go forward in arbitration. In arbitration, we are moving apace with that to prepare our Memorandum of Claim and unless something changes, it’s a somewhat of a fluid situation as many of you are aware in Venezuela, but something changes relative to for example, a settlement. We do expect to be in a position to file the claim in late October. And that is our intention to do so as I said unless something changes. We of course would like to settle this amicably, but the ball is definitely in Venezuela’s court.

And I will talk a little bit more about the other things in Venezuela. I think that are important litigation against in Endeavour and Rusoro is proceeding to discovery as a result of the rulings, which were not only the ruling and the injunction but the denial of the leave to appeal and some limited discovery we got as a result of the injunction hearings and whatnot. We may or we’re contemplating looking at modifying some of that suit but to talk more than that obviously wouldn’t be prudent. But that is proceeding towards the discovery phase.

The equipment, I mentioned we sold some of our mobile equipment, which is probably the, I mean there is a lot of mobile, as you can imagine there is a lot of mobile especially CAT equipment around the world. So we were able to sell it for $7.3 million, we took a loss on it. However any losses that we may or may not incur on this equipment as we go forward we would also be added to a potential arbitration claim.

Over the summer, the things were picked up a little bit in the late spring. We have a lot of interest in the equipment and we still have people looking at it. Things have slowdown I think it’s probably somewhat a little bit to do with the economy but probably more to do with the summer breaks. And but we did complete in July the equipment sale of the mobile equipment.

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