GOLD RESERVE LTD 10-K/A

Item 2. Properties The Company acquired the Brisas Project and the Choco 5 property in 1992 and 2000, respectively. From 1992 to 2008 we focused substantially all of our management and financial resources on the development of the Brisas Project. In April 2008, Venezuela revoked the previously issued Authorization to Affect for the Brisas Project. This revocation and subsequent improper actions by Venezuela forced the Company to discontinue development of the Brisas Project and exploration of the Choco 5 property and to file a Request for Arbitration under the Additional Facility Rules of ICSID against Venezuela as discussed herein. Subsequent to our filing with ICSID, Venezuela took physical possession of the property, seized our assets and expelled our personnel. See Item 3. Legal Proceedings –Arbitration. The Company no longer characterizes historically reported mineralization related to the Brisas Project as “reserves”. The information contained in this Annual Report on Form 10-K relating to our past development efforts, regulatory process and reported mineral reserves for the Brisas Project and Choco 5 property are presented only for informational and historical purposes and should not be construed as an indication of our expectations regarding the future development and operation of these properties or the outcome of the arbitration proceedings. PROPERTIES Brisas Project Location The Brisas Project was located in the Km 88 mining district in the State of Bolivar in southeastern Venezuela approximately 373 kilometers (229 miles), by paved highway, southeast of Puerto Ordaz (Ciudad Guayana). The project, accessible by an all-weather road, was 5 kilometers west of the Km 88 marker on Highway 10. Puerto Ordaz is the center of major regional industrial development with nearby hydroelectric generating plants and port facilities accessible to ocean-going vessels from the Atlantic Ocean, via the Orinoco River. Properties The Brisas Project primarily consisted of 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 contained substantially all of the mineralization identified in the Company’s development plan documents including the Bankable Feasibility Study, as updated, and numerous other supporting documents and studies. Brisas also included a number of other existing concessions or pending applications for concessions, alfarjetas, Corporación Venezolana de Guayana (“CVG”) (a government-owned corporation) work contracts, land use authorizations or easements adjacent to or near the Brisas concessions for the planned mining and milling facility, related infrastructure and future needs totaling as much as 13,000 hectares. Generally, a concession represents a privilege, license or mining title granted by the MIBAM or its predecessor Ministry of Energy and Mines (“MEM”), pursuant to Venezuelan mining law, to explore and, if warranted, produce minerals from a specified property. An alfarjeta is a right similar to a concession except that the area of the land parcel is insufficient in size to be designated a concession. A CVG work contract is similar to rights granted pursuant to a concession, except contract law governs such rights. In 2003 CVG's authority to grant new mining contracts was eliminated. Land use authorizations and easements are generally the right to occupy land required for mining activities. Development History MIBAM’s approval of the Brisas operating plan in 2003 was a prerequisite for submitting the Brisas Environmental and Social Impact Study for the Exploitation and Processing of Gold and Copper Ore (“Estudio de Impacto Ambiental y Sociocultural” or “ESIA”) to the Ministry of Environment (“MinAmb”). MinAmb approved the ESIA in early 2007 and in March 2007 issued the Authorization to Affect. The Authorization to Affect provided for the commencement of construction for certain infrastructure work, including various construction activities at or near the mine site, but not the erection of the mill and the exploitation of the gold and copper mineralization at Brisas. - 9 - Based on the issuance of the Authorization to Affect, we commenced significant pre-construction procurement efforts with the assistance of our Engineering, Procurement and Construction Management (“EPCM”) contractor awarding contracts for Brisas site prep and construction camp facilities and placing orders for the gyratory crusher, pebble crushers, SAG and ball mills, mill motors and other related processing equipment, early-works construction equipment and various other site equipment totaling approximately $125 million, accelerated detailed project engineering, hired a number of senior technical staff, completed the sale of approximately $104 million of convertible notes and $74 million (net of expenses) in new equity, launched a number of environmental and social initiatives and commenced preparation of the Brisas site for construction activities. The Authorization to Affect mandated that before commencing significant permitted activities we were required to complete an administrative procedure by signing what was referred to as an initiation act with MinAmb representatives which indicated that all conditions precedent to commencing activities had been met, documented our understanding of the obligations throughout the term of the authorization and certified that the permitted activities had in fact commenced. The request for the approval of the initiation act was submitted shortly after the Authorization to Affect was approved and requested multiple times thereafter. However, MinAmb did not act on our requests. Management completed an original Bankable Feasibility Study in 2005. In March 2008, we updated the study and prepared a new National Instrument (“NI”) 43-101 report for the Brisas Project. The Company and the project’s EPCM (Engineering, Procurement, and Construction Management) contractor updated the capital costs contained therein. The 2008 NI 43-101 report assumed $600 per ounce gold and $2.25 per pound copper for the base-case economic model resulting in projected cash operating costs (net of copper byproduct credits) of $120 per ounce of gold. Total costs including cash operating costs, exploitation taxes, initial capital costs (excluding sunk cost), and sustaining capital costs were projected to be $268 per ounce of gold. The operating plan as last revised assumed a large open pit mine with projected proven and probable reserves of approximately 10.2 million ounces of gold and 1.4 billion pounds of copper in 483 million tonnes of ore grading 0.66 grams of gold per tonne and 0.13% copper, at a revenue cutoff grade of $3.54 per tonne using a gold price of $470 per ounce and a copper price of $1.35 per pound. The operating plan anticipated utilizing conventional truck and shovel mining methods with the processing of ore projected at full production of 75,000 tonnes per day, yielding an average annual production of 457,000 ounces of gold and 63 million pounds of copper over an estimated mine life of approximately 18.25 years. The strip ratio (waste to ore) was estimated at 2.24:1. The proposed mining and processing methods were all based on conventional technology and no new or unproven technology was expected to be employed. The reserve and resource estimates contained in this report were prepared in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum Classification System. The projected initial capital cost to construct and place Brisas into production at the date of the report totaled approximately $731 million excluding working capital, critical spares and initial fills of approximately $53 million and ongoing life-of-mine requirements estimated at $269 million and value added taxes of approximately $54 million. In April 2008, MinAmb arbitrarily revoked the Authorization to Affect referencing in its formal notice, among other things, the existence of environmental degradation and affectation on the Brisas property, the presence of a large number of miners on or near the property, the Imataca Forest Reserve and the effects of global warming as the basis for their decision. In response to the various points contained within the revocation notice, Venezuelan legal counsel advised management that the revocation of the Authorization to Affect was groundless and legally unsupported. Further, Venezuelan legal counsel advised management that the Authorization to Affect was granted to our Venezuelan subsidiary by MinAmb, a competent authority, following the corresponding legal procedure and in accordance with applicable laws and regulations. At the time the Authorization to Affect was issued, there was no legal norm prohibiting MinAmb from authorizing performance of mining activities in the area of the Brisas Project. In April 2009, as a result of Venezuela’s failure to reinstate the Authorization to Affect and the lack of any meaningful dialog to resolve the prolonged obstruction of our rights to the Brisas Project, we notified Venezuela of the existence of a dispute between the Company and Venezuela under both: (1) Canada – Venezuela Treaty and (2) the Barbados – Venezuela Treaty. - 10 - Further, in May 2009, MIBAM denied the normal course extension of our Brisas Alluvial Concession and also denied the extension of the El Pauji Concession held for infrastructure purposes. We applied for the extension of both the Brisas Alluvial Concession and the El Pauji Concession pursuant to Article 25 of the Venezuelan mining law, which provided MIBAM a six-month period ending in April 2008 and July 2008, respectively, to decide on the extension requests. MIBAM did not respond to either of our requests for extension during the requisite time period. As a result of MIBAM's failure to expressly deny the extension application in the requisite time period, the extensions were automatically granted pursuant to Article 25 of the mining law. More than one year after the six month time periods elapsed, MIBAM issued decisions denying the extension requests. Citing internal reports (the contents of which were not disclosed to us until months later) the decisions asserted without evidence and prior notice that the Company was not in compliance with its obligations in regards to the concessions. Those decisions were issued notwithstanding the fact that in September 2008, after the lapse of the six-month time period, we received from MIBAM a certificate of compliance (or good standing) confirming the Company’s compliance with obligations set forth in the mining law and in the title for the Brisas Alluvial and El Pauji Concessions. MIBAM acknowledged that we timely filed our extension application and acknowledged that it made its evaluation on the status of the concession subsequent to the six-month time period promulgated in Article 25 of the mining law, effectively ignoring its own regulations and laws. With no formal response from Venezuela concerning our April 2009 notice regarding the existence of a dispute between the Company and Venezuela, in August 2009 we delivered a follow-up notice reminding Venezuela of the existence of a dispute and confirming our intent to amicably settle the dispute if possible. Again, we received no formal response from Venezuela regarding the investment dispute between the Company and Venezuela. On October 21, 2009 we filed a Request for Arbitration under the Additional Facility Rules of ICSID, against Venezuela seeking compensation for the losses to the Company resulting from Venezuela's violations of the Canada –Venezuela Treaty in regard to the Company and its investments in Venezuela relating to the Brisas Project and the Choco 5 property in the Bolivar State of Venezuela. See Item 3. Legal Proceedings – Arbitration. In evident retaliation, Venezuelan government personnel arrived at the Brisas Project camp site on October 26, 2009, claimed ownership of the Brisas Alluvial Concession, seized assets, expelled our personnel, and took physical possession of the property. Subsequently, on November 4, 2009, Venezuela notified us through the issuance of an Administrative Act, dated October 20, 2009, of its intent to cancel our underlying hard rock concession which it did pursuant to a notice delivered to the Company in June 2010. Since acquiring the Brisas Alluvial Concession in 1992, we have expended close to $300 million on the Brisas Project (including equipment recorded in the Consolidated Balance Sheet and financial, legal and engineering costs incurred in support of our Venezuelan operations and the $151 million write-down of previously capitalized costs associated with our Venezuelan operations recorded in the Consolidated Statement of Operations). These costs include amounts expended for property and mineral rights, easements, acquisition costs, equipment expenditures, litigation settlement costs, general and administrative costs and extensive exploration costs including geology, geophysics and geochemistry, approximately 975 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, Environmental Impact Statement and Bankable Feasibility Study, including subsequent updates, and an independent CSA National Instrument 43-101 report which was most recently updated in March 2008. Detailed engineering for Brisas was approximately 85% complete at the date of its seizure by Venezuela. - 11 - Choco 5 Property The Choco 5 property was a grass-roots gold and other minerals exploration target also located in the State of Bolivar, Guayana region. The property consisted of a 5,000 hectare parcel located 24 kilometers west of the mining community of El Callao (population approximately 25,000) located in the El Callao gold mining district and 200 kilometers south of Puerto Ordaz, the nearest major city. The underlying mining title or concession for the area known as the Choco 5 property was issued by MEM to CVG on May 11, 1993. The concession was subsequently leased by CVG to CVG/Minerven (a CVG subsidiary) pursuant to an agreement dated December 22, 1998 (the “Choco 5 Lease”). On June 28, 2000, CVG/Minerven subleased the Choco 5 Concession to the Company (the “Choco 5 Sublease”). The Choco 5 concession was a vein (hardrock) and alluvial concession for the exploration and subsequent exploitation of primarily gold and copper as well as other minerals. Subsequent to acquiring the Choco 5 property, we invested approximately $1.5 million on the exploration, which included acquisition costs, geological mapping, airborne geophysics, stream sediment and soil geochemistry, mapping, geomorphological study, drilling and assaying. We suspended all Choco 5 exploration activities pending the resolution of the Brisas investment dispute with Venezuela. See Item 3. Legal Proceedings – Arbitration.