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    Appraisal of Market Value, Las Brisas Gold Mining Concessions, Bolivar State, Venezuela

    In 2005, Strongbow Capital Ltd, an investment fund, contracted EIS to develop a market value appraisal of Gold Reserve Inc.’s undeveloped Las Brisas gold property in Venezuela. The company held a substantial interest in Gold Reserve Inc. The gold mining concessions that compose the Las Brisas property contained a Mineral Reserve of 10 million ounces of gold and 1.3 billion pounds of copper. A comprehensive feasibility study had been completed and plans were in place to begin development of the mine. Applications for relevant permits to allow plant construction and mine development were being filed and processed.

    At Strongbow’s request, EIS conducted the valuation in two phases. EIS first developed a preliminary, restricted use appraisal report, designed only for internal use by Strongbow management familiar with the Las Brisas project. Then EIS developed a comprehensive, 223-page report, designed for wide distribution, based on information and data updated to early 2006.

    To assist with the project, EIS contracted a Spanish speaking PhD geologist who had previous experience working at the Las Brisas property. He conducted the site inspection of the property and review of legal documents in Venezuela. Then he assisted Trevor Ellis at Gold Reserve’s Spokane office with reviewing geological documents and verification of drilling results.

    The valuation in the comprehensive 2006 report was based on Sales Comparison Approach analysis of nine transactions of similar scale gold properties from around the globe and one validation transaction, Income Approach analysis of four mining scenarios, and component value extraction from Gold Reserve’s capitalized value. Particular features of this report include:

    • The valuation process and valuation reporting were developed to abide by the International Valuation Standards and the USA’s USPAP;
    • Analysis of transactions in many countries;
    • The Transaction (Sales) Analysis section includes extraction of market discount rate (IRR) information from a number of transactions for use in the Income Approach;
    • For the Sales Comparison Approach, the transaction comparison adjustment table includes adjustments for operating cost, country risk, and operating margin changes due to a rapidly increasing gold price, among its many adjustments;
    • Use of probability scenarios with the NPV/DCF method;
    • Use of the Stock Market Entity Value Extraction method;
    • Reconciliation of estimates derived by a number of methods.

    Strongbow Capital Ltd, has generously allowed the International Institute of Minerals Appraisers and Ellis International Services to place this comprehensive 2006 report in the public domain for educational purposes. View entire report 9.7MB pdf file.