Edgar Filing: GOLD RESERVE INC

As filed with the Securities and Exchange Commission on May 3, 2006

Registration No. 333-133746
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1 to

FORM F-10

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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GOLD RESERVE INC.
(Exact name of Registrant as specified in its charter)

Yukon Territory 1040 Not Applicable
(Province or other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number,
Incorporation or Classification if any)
Organization) Code Number)

926 West Sprague Ave., Suite 200
Spokane, WA 99201
(509) 623-1500
(Address and telephone number of Registrant's principal executive offices)
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Rockne J. Timm
President
Gold Reserve Corporation
926 West Sprague Ave., Suite 200
Spokane, WA 99201
(509) 623-1500
(Name, address (including zip code) and telephone number (including area code)
of agent for service in the United States)

Copies to:

John Galbavy Charles L.K. Higgins Jonathan B. Newton Kevin Rooney Christopher J. Barry
Gold Reserve Inc. Fasken Martineau DuMoulin LLP Baker & McKenzie LLP Heenan Blaikie LLP Dorsey & Whitney LLP
926 West Sprague Ave. Toronto Dominion Centre Pennzoil Place, South Tower Royal Bank Plaza U.S. Bank Centre
Suite 200 66 Wellington St. W., #4200 711 Louisiana St., Suite 3400 Suite 2600 1420 Fifty Ave., Suite 3400
Spokane, WA 99201 Toronto Ontario M5K 1N6 Houston, TX 77002 Toronto, ON M5S 2J4 Seattle, WA 98101-4010
(509) 623-1500 (416) 865-4392 (713) 427-5000 (416) 360-6336 (206) 903-8815

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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.

Province of Ontario, Canada
(Principal jurisdiction regulating this offering)

It is proposed that this filing shall become effective (check appropriate
box below):
A.[_] upon filing with the Commission, pursuant to Rule 467(a) (if in
connection with an offering being made contemporaneously in the United
States and Canada).
B.[X] at some future date (check appropriate box below)
1.[_] pursuant to Rule 467(b) on ( ) at ( ) (designate a time not sooner
than seven calendar days after filing).
2.[_] pursuant to Rule 467(b) on ( ) at ( ) (designate a time seven
calendar days or sooner after filing) because the securities
regulatory authority in the review jurisdiction has issued a receipt
or notification of clearance on ( ).
3.[_] pursuant to Rule 467(b) as soon as practicable after notification of
the Commission by the Registrant or the Canadian securities
regulatory authority of the review jurisdiction that a receipt or
notification of clearance has been issued with respect hereto.
4.[X] after the filing of the next amendment to this Form (if preliminary
material is being filed).

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to the home jurisdiction's shelf
prospectus offering procedures, check the following box. [_]

CALCULATION OF REGISTRATION FEE

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Title of each Class of Proposed Maximum
Securities to be Aggregate Offering Amount of
Registered Price (1)(2) Registration Fee
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Class A common shares,
no par value $30,987,900 (3) $3,316 (4)
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Class A common shares,
no par value $15,584 (5) $2 (6)
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Class A common share
purchase rights N/A N/A (7)
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(1) Includes Class A common shares that the Underwriters have the option to
purchase to cover over-allotments, if any.
(2) Rule 457(o) permits the registration fee to be calculated on the basis of
the maximum offering price of all of the securities listed and, therefore,
the table does not specify by each class information as to the amount to
be registered or the proposed maximum offer price per security.
(3) Determined based on the initial proposed maximum aggregate offering price in
Canadian dollars of $34,500,000 using an exchange rate of US$0.8982 per
Cdn.$1.00.
(4) Previously paid.
(5) Determined based on the additional amount of proposed maximum aggregate
offering price in Canadian dollars of $17,250 using an exchange rate of
US$0.9034 per Cdn.$1.00.
(6) Paid herewith.
(7) In accordance with Rule 457(g), no additional registration fee is required
in respect of the Class A common share purchase rights.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registration
Statement shall become effective as provided in Rule 467 under the Securities
Act of 1933 or on such date as the Commission, acting pursuant to Section 8(a)
of the Act, may determine.

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PART I
INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

I-1

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement +
+becomes effective. This prospectus shall not constitute an offer to sell or +
+the solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated May 3, 2006

AMENDED AND RESTATED SHORT FORM PROSPECTUS

[LOGO GOLD RESERVE INC.]

Cdn.$30,015,000

3,335,000 Class A Common Shares

This short form prospectus relates to the offering (the "Offering") by Gold
Reserve Inc. (the "Company" or "Gold Reserve") of 3,335,000 Class A common
shares ("Common Shares") of the Company at a price of Cdn.$9.00 per Common
Share. The offering price of the Common Shares was determined by negotiation
between the Company and Sprott Securities Inc. and RBC Dominion Securities Inc.
(the "Underwriters"). The Underwriters are acting as underwriters in respect of
the Offering in Canada and the Underwriters' U.S. affiliates are acting as
underwriters in respect of the Offering in the United States. The outstanding
Common Shares are listed for trading on the Toronto Stock Exchange (the "TSX")
and the American Stock Exchange (the "AMEX") under the symbol "GRZ". On May 2,
2006, the last trading day prior to the date of this short form prospectus, the
closing price of the Common Shares on the TSX and AMEX was Cdn.$9.67 and
US$8.73, respectively. Applications have been made to have the Common Shares
qualified for distribution by this short form prospectus listed on the TSX and
AMEX. Listing will be subject to the Company fulfilling all of the listing
requirements of the TSX and AMEX.

Investing in the Common Shares involves risks. See "Risk Factors" beginning on
page 9.

Price to Net Proceeds to
Public Underwriters' Fee the Company(1)
---------- ----------------- ----------------

Per Class A Common Share....... Cdn.$9.00 Cdn.$0.45 Cdn.$8.55
Total(2)....................... Cdn.$30,015,000 Cdn.$1,500,750 Cdn.$28,514,250

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(1) Before deducting the expenses of the Offering, which are estimated to be
approximately Cdn.$450,000, that will be paid by the Company from the
proceeds of the Offering.

(2) The Company has granted to the Underwriters an option (the "Over-Allotment
Option") exercisable at any time, in whole or in part, for a period of 30
days following the closing of the Offering, to purchase up to an additional
500,250 Common Shares at the same price as set forth above. This prospectus
qualifies the grant of the Over-Allotment Option and the distribution of the
Common Shares issuable upon exercise of the Over-Allotment Option. If the
Over-Allotment Option is exercised in full, the total "Price to the Public",
"Underwriters' Fee" and "Net Proceeds to the Company" will be
Cdn.$34,517,250, Cdn.$1,725,862.50, and Cdn.$32,791,387.50, respectively.
See "Plan of Distribution".

The public offering price of the Common Shares offered in Canada and the United
States is payable in Canadian dollars only.

Definitive certificates representing the Common Shares are expected to be
available for delivery at closing of the Offering, which is anticipated to be
on or about May 15, 2006 or such other date as may be agreed upon by the
Company and the Underwriters but in any event no later than may 30, 2006.

This offering is made by a foreign issuer that is permitted, under a
multijurisdictional disclosure system adopted by the United States, to prepare
this prospectus in accordance with Canadian disclosure requirements.
Prospective investors should be aware that such requirements are different from
those of the United States. Financial statements included or incorporated
herein have been prepared in accordance with Canadian generally accepted
accounting principles, and are subject to Canadian auditing and auditor
independence standards, and thus may not be comparable to financial statements
of United States companies. See "Additional Report with Respect to
Supplementary Information".

Prospective investors should be aware that the acquisition of the securities
described herein may have tax consequences both in the United States and in
Canada. Such consequences for investors who are resident in, or citizens of,
the United States may not be described fully herein. Prospective investors
should read the tax discussion under "Certain United States Federal Income Tax
Considerations".

The enforcement by investors of civil liabilities under the federal securities
laws may be affected adversely by the fact that the Company is incorporated
under the laws of Yukon Territory, Canada, that some of its directors are
residents of Canada, that some or all of the underwriters or experts named in
the registration statement are residents of a foreign country, and that a
substantial portion of the assets of the Company and said persons are located
outside the United States.

These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.

SPROTT SECURITIES RBC CAPITAL MARKETS
(U.S.A.) LIMITED

The date of this prospectus is May 3, 2006

TABLE OF CONTENTS

Page
----

CAUTIONARY NOTE TO UNITED STATES INVESTORS................................. 2
CURRENCY AND EXCHANGE RATE INFORMATION..................................... 3
ELIGIBILITY FOR INVESTMENT................................................. 3
DOCUMENTS INCORPORATED BY REFERENCE........................................ 3
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.................. 4
THE COMPANY................................................................ 5
RECENT DEVELOPMENTS........................................................ 8
RISK FACTORS............................................................... 9
USE OF PROCEEDS............................................................ 18
CONSOLIDATED CAPITALIZATION................................................ 18
DESCRIPTION OF SHARE CAPITAL............................................... 18
DESCRIPTION OF THE SECURITIES BEING DISTRIBUTED............................ 19
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS................................. 19
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.................... 21
PLAN OF DISTRIBUTION....................................................... 26
LEGAL MATTERS.............................................................. 28
INTEREST OF EXPERTS........................................................ 28
AUDITORS, TRANSFER AGENT AND REGISTRAR..................................... 29
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT...................... 29
ADDITIONAL INFORMATION..................................................... 29
ENFORCEABILITY OF CIVIL LIABILITIES........................................ 29
INTERNATIONAL ISSUER....................................................... 30
STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION.............................. 30
AUDITORS' REPORT WITH RESPECT TO SUPPLEMENTARY INFORMATION................. F-1

Investors should rely only on the information contained in or incorporated
by reference into this short form prospectus. The Company has not authorized
anyone to provide investors with different information. Neither the Company
nor the Underwriters are making an offer of these securities in any
jurisdiction where the offer is not permitted. Investors should not assume
that the information contained in this short form prospectus is accurate as of
any date other than the date on the front of this prospectus. The Company's
business, operating results, financial condition and prospects may have
changed since that date.

Unless otherwise indicated, all information in this prospectus assumes no
exercise of the Over-Allotment Option.

CAUTIONARY NOTE TO UNITED STATES INVESTORS

This prospectus, including the documents incorporated by reference herein,
has been prepared in accordance with the requirements of securities laws in
effect in Canada, which differ from the requirements of United States
securities laws. Without limiting the foregoing, this prospectus, including
the documents incorporated by reference herein, uses the terms "measured",
"indicated" and "inferred" resources. U.S. investors are advised that, while
such terms are recognized and required by Canadian securities laws, the United
States Securities and Exchange Commission (the "SEC") does not recognize them,
including under its Industry Guide 7. As further described in the Company's
annual information form incorporated herein by reference, under U.S.
standards, mineralization may not be classified as a "reserve" unless the
determination has been made that the mineralization could be economically and
legally produced or extracted at the time the reserve determination is made.
See "Documents Incorporated by Reference". U.S. investors are cautioned not to
assume that all or any part of measured or indicated resources will ever be
converted into reserves. Further, "inferred resources" have a great amount of
uncertainty as to their existence and as to whether they can be mined legally
or economically. It cannot be assumed that all or any part of the "inferred
resources" will ever be upgraded to a higher category. Therefore, U.S.
investors are also cautioned not to assume that all or any part of the
inferred resources exist, or that they can be mined legally or economically.
Disclosure of "contained ounces" is permitted disclosure under Canadian
regulations, however, the SEC normally only permits issuers to report
"resources" as in place tonnage and grade without reference to unit measures.
Accordingly, information concerning descriptions of mineralization, resources
and reserves contained in this prospectus or in the documents incorporated by
reference, may not be comparable to information made public by U.S. companies
subject only to the reporting and disclosure requirements of the SEC.

National Instrument 43-101 Standards of Disclosure for Mineral Projects
("NI 43-101") is a rule developed by the Canadian Securities Administrators
that establishes standards for all public disclosure an issuer makes of
scientific

and technical information concerning mineral projects. Unless otherwise
indicated, all resource estimates contained in or incorporated by reference in
this prospectus have been prepared in accordance with NI 43-101 and the
Canadian Institute of Mining, Metallurgy and Petroleum Classification System
and not the SEC's Industry Guide 7. These standards differ significantly from
the requirements of the SEC (including under its Industry Guide 7), and
resource information contained herein and incorporated by reference herein may
not be comparable to similar information disclosed by U.S. companies or in a
U.S.-style prospectus.

CURRENCY AND EXCHANGE RATE INFORMATION

Unless otherwise indicated, all references to "$", "Cdn.$" or "dollars" in
this short form prospectus refer to Canadian dollars and references to "US$"
or "U.S. dollars" in this short form prospectus refer to United States
dollars.

The Company's accounts are maintained in United States dollars but prepared
in accordance with Canadian generally accepted accounting principles.

The following table sets forth the rate of exchange for one Canadian
dollar, expressed in U.S. dollars, for each period indicated, the average of
such exchange rates, and the exchange rate at the end of such period, based
upon the noon buying rates provided by the Bank of Canada:

Year Ended December 31
-------------------------------------------------
2005 2004 2003 2002 2001
--------- --------- --------- --------- ---------
U.S. dollars per one Canadian dollar

Average rate for period....... US$0.8254 US$0.7684 US$0.7138 US$0.6369 US$0.6458
Rate at end of period......... US$0.8598 US$0.8319 US$0.7713 US$0.6339 US$0.6278

The noon rate of exchange on May 2, 2006 as reported by the Bank of Canada
for the conversion of Canadian dollars into United States dollars was
Cdn.$1.00 equals US$0.9034.

ELIGIBILITY FOR INVESTMENT

In the opinion of Fasken Martineau DuMoulin LLP, counsel to Gold Reserve,
and Heenan Blaikie LLP, counsel to the Underwriters, the Common Shares offered
hereby, if issued on the date hereof, would be qualified investments under the
Income Tax Act (Canada) and the regulations thereunder ("Tax Act") for trusts
governed by registered retirement savings plans, registered retirement income
funds, deferred profit sharing plans and registered education savings plans.

DOCUMENTS INCORPORATED BY REFERENCE

Information has been incorporated by reference in this short form
prospectus from documents filed with securities commissions or similar
authorities in Canada and forms an integral part of this short form
prospectus. Copies of the documents incorporated herein by reference may be
obtained on request without charge from Mary Smith, Secretary of Gold Reserve,
at 926 West Sprague Avenue, Suite 200, Spokane, Washington 99201, U.S.A.
(Telephone: (509) 623-1500). These documents are also available electronically
at www.sedar.com. The following documents filed with the securities
commissions or similar authorities in Canada are specifically incorporated by
reference and form an integral part of this short form prospectus. You should
review them prior to making an investment decision:

(a) annual information form of Gold Reserve in the form of Form 20-F (the
"AIF") for the year ended December 31, 2005;

(b) audited annual consolidated comparative financial statements of Gold
Reserve for the year ended December 31, 2005 and the auditors' report
thereon, together with management's discussion and analysis for the
year ended December 31, 2005;

(c) management information circular dated April 14, 2005 prepared in
connection with Gold Reserve's annual and special meeting of
shareholders held on June 2, 2005;

(d) management information circular dated January 31, 2006 prepared in
connection with Gold Reserve's special meeting of shareholders held on
March 22, 2006; and

(e) the summary, being pages 1.1 to 1.13 inclusive, of NI 43-101 Technical
Report Gold and Copper Project Brisas Project dated February 24, 2005
as prepared by Pincock, Allen & Holt.

Any document of the type referred to in items (a) to (d) above and any
material change reports (other than confidential material change reports)
filed by the Company with the securities commissions or similar authorities in
Canada after the date of this short form prospectus and prior to the
completion or termination of the Offering shall be deemed to be incorporated
by reference into and form an integral part of this short form prospectus. The
documents incorporated or deemed incorporated by reference herein contain
meaningful and material information relating to the Company and prospective
investors of Common Shares should review all information contained in this
short form prospectus and the documents incorporated by reference before
making an investment decision. Any information that is intended to be
incorporated by reference to the Company's SEC filings will only be
incorporated by reference if expressly referenced as such in the Company's
Registration Statement on Form F-10 filed with the SEC with respect to the
Offering (and of which this short form prospectus forms a part) or as
expressly referenced as such in any Report on Form 6-K furnished to the SEC
(or other applicable filing).

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for the purposes of this short form prospectus to
the extent that a statement contained herein, or in any other subsequently
filed document which also is incorporated or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. The modifying or
superseding statement need not state that it has modified or superseded a
prior statement or include any other information set forth in the document
that it modifies or supersedes. The making of a modifying or superseding
statement shall not be deemed an admission for any purposes that the modified
or superseded statement, when made, constituted a misrepresentation, an untrue
statement of a material fact or an omission to state a material fact that is
required to be stated or that is necessary to make a statement not misleading
in light of the circumstances under which it was made. Any statement so
modified or superseded shall not be deemed in its unmodified or prior form to
constitute a part of this short form prospectus.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The information presented or incorporated by reference in this short form
prospectus contains both historical information and forward-looking statements
(including within the meaning of Section 27A of the United States Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the United
States Securities Exchange Act of 1934, as amended (the "U.S. Exchange Act").
These forward-looking statements involve risks and uncertainties, as well as
assumptions that, if they never materialize, prove incorrect or materialize
other than as currently contemplated, could cause the results of the Company
and its consolidated subsidiaries to differ materially from those expressed or
implied by such 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 the Company or the Company's consultants in conjunction with the
feasibility study concerning the Brisas Project prepared in 2005 (as updated or
modified from time to time) (the "Bankable Feasibility Study") significantly
differ or change as a result of actual results in the Company's 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); the Company's 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.

Statements concerning reserves and mineral resource estimates may also be
deemed to constitute forward-looking statements to the extent that they
involve estimates of the mineralization that is expected to be encountered if
the property is developed, and in the case of mineral reserves, such
statements reflect the conclusion based on certain assumptions that the
mineral deposit can be economically exploited.

The words "believe," "anticipate," "expect," "intend," "estimate," "plan,"
"assume," "positioned," "may," "could" and other similar expressions that are
predictions of or indicate future events and future trends that do not relate
to historical matters, identify forward-looking statements. Any such forward-
looking statements are not intended to give any assurances as to future
results.

Investors are cautioned not to put undue reliance on forward-looking
statements, and should not infer that there has been no change in the affairs
of the Company since the date of this short form prospectus or the documents
incorporated by reference herein that would warrant any modification of any
forward-looking statement made in this document, other documents filed
periodically with securities regulators or documents presented on the
Company's website. 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. Investors are urged
to read the Company's filings with U.S. and Canadian securities regulatory
agencies, which can be viewed on-line at www.sedar.com or www.sec.gov.
Additionally, investors can request a copy of any of these filings directly
from the Company as described elsewhere herein. See "Documents Incorporated by
Reference".

THE COMPANY

Overview

Name, Address and Incorporation

Gold Reserve is a mining company engaged in the exploration and development
of precious metal properties. The Company was incorporated in 1998 under the
laws of the Yukon Territory, Canada and is the successor issuer to Gold
Reserve Corporation, a Montana corporation formed in 1956. Gold Reserve's
registered agent is Austring, Fendrick, Fairman & Parkkari, The Drury
Building, 3801 Third Avenue, Whitehorse, Yukon Y1A 4Z7. Telephone and fax
numbers for Gold Reserve's registered office are (867) 668-4405 and (867) 668-
3710, respectively. Venezuelan administrative and technical offices are
located in Caracas and Puerto Ordaz, Venezuela. Telephone and fax numbers for
the Company's administrative office located in Spokane, Washington are (509)
623-1500 and (509) 623-1634, respectively. The Company also maintains
technical staff in Toronto, Canada and Denver, Colorado.

The Company is presently focused primarily on its most significant asset,
the "Brisas Project", an advanced stage development project, and to a lesser
extent on the exploration of its Choco 5 property, both located in Bolivar
State, Venezuela. The Company has no commercial production at this time.

The Brisas Project Bankable Feasibility Study was completed in early 2005.
Following receipt of the Bankable Feasibility Study, the Company's board of
directors approved a plan to proceed with financing and, if successful,
construction of the Brisas Project based on the results of the study. As a
prerequisite to the Company obtaining formal commitments to finance
construction of the Brisas Project, the Company must resolve pending non-
mining concession land issues and obtain the required permits for the
construction and operation of the Brisas Project described below. Initial
capital costs to construct and place the Brisas Project into production are
currently contemplated to be US$638 million (up from approximately US$552
million in the Bankable Feasibility Study) excluding value added taxes and
import duties, which management believes could total as much as US$69 million.
Management is in the process of preparing applications for all possible tax
exonerations in Venezuela for such amounts and expects to obtain such
exonerations prior to construction of the Brisas Project. There can be no
assurances that such exonerations will be obtained, the primary result of
which would be to increase initial capital costs.

Organizational Structure

References throughout this short form prospectus to the "Company" or the
terms "we," "us" and "our," except as otherwise indicated herein, refer
primarily to Gold Reserve Inc., Gold Reserve Corporation (incorporated in

Montana), Gold Reserve de Barbados Ltd. (domiciled in Canada, the U.S. and
Barbados, respectively), Gold Reserve de Venezuela, C.A., Compania Aurifera
Brisas del Cuyuni, C.A. ("BRISAS") (both domiciled in Venezuela), and Great
Basin Energies, Inc. ("Great Basin") and MGC Ventures Inc. ("MGC Ventures")
(both domiciled in the U.S.). Great Basin and MGC Ventures have no current
business activities. All of the consolidated companies noted above are wholly
owned except for Great Basin and MGC Ventures, each of which are approximately
47% owned.

Summary Description of the Business

The Company's primary mining asset, the Brisas Project, is a gold/copper
deposit located in the Kilometre 88 mining district of the State of Bolivar in
southeastern Venezuela. Approximately US$100 million has been expended
(including costs capitalized and costs expensed in the period incurred) on the
Brisas Project since its acquisition by the Company in 1992. In 2005, the
Company, with the assistance of a number of independent consultants, completed
a Bankable Feasibility Study for the Brisas Project. Based on the conclusions
contained in the Bankable Feasibility Study, the board of directors approved
proceeding with the financing and construction of the mine.

The Brisas Project consists of the following: 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 contain substantially all of the mineralization
identified in the Bankable Feasibility Study. The Brisas Project also includes
a number of other existing or pending applications for concessions,
alfarjetas, Corporacion Venezolana de Guayana ("CVG") work contracts, land use
permits and easements, adjacent to or near the Brisas concessions, totalling
another 13,000 hectares.

The Company's original Brisas Project operating plan was approved by the
Ministry of Energy and Mines (now the Ministry of Basic Industries and Mines
("MIBAM")) in 2003 and, since that approval, the Company has submitted to
MIBAM a number of modifications in order to minimize impact to the environment
and optimize economics of the Brisas Project. Contained within the approved
operating plan are the existing or pending applications for concessions,
alfarjetas, CVG work contracts, land use permits and easements, adjacent to or
near the Brisas concessions described above. These additional land parcels
comprise the bulk of the land required for the mining and milling facility and
related infrastructure contemplated in the Bankable Feasibility Study. A
number of these parcels are integral to the Company's proposed operating plan
and others may be necessary for future needs. Failure to obtain one or more of
these rights or properties could have a material adverse effect on the
Company.

In addition to the pending land use issues related to project
infrastructure needs, the Company has a number of permits relating to the
Brisas Project pending before MIBAM, the Venezuelan Ministry of the
Environment and Natural Resources ("MARN") and other regulatory or government
agencies. Most importantly, the Company must obtain the Administrative
Authorization to Affect Natural Resources for Construction of Infrastructure
and Exploitation of Alluvial and Vein Deposits of Gold and Copper from MARN,
which is issued in part based on MIBAM's approval of the project operating
plan as well as the Company's Venezuelan Environmental and Social Impact
Assessment (V-ESIA), which was submitted in August 2005. Receipt of this
material permit is required before the Company can commence construction and
operation at the Brisas Project. The Company requires significant financing to
commence such construction and any financing relating to the Brisas Project is
expected to be subject to the receipt of this material permit. The Company's
current financial plan is to seek the required financing after the receipt of
the material permit, although the financial plan is subject to change with
potential changes in the price of the Common Shares and gold and copper
prices.

The Company is dependent on the Venezuelan regulatory authorities issuing the
Company the required operational and land use permits before it may begin
construction on, and operate, the Brisas Project. Obtaining these required
permits is also necessary in order for the Company to adequately identify and
obtain suitable financing for the Brisas Project. Further, the Company
previously filed an administrative protest with MARN with respect to a water
diversionary plan that includes a structure to divert water proposed by a third
party for a property adjacent to the northern boundary of the Brisas Project,
construction of which could impair the Company's proposed set-back arrangement
for its northern boundary as described in the Company's original operating plan.
A number of these pending items have been outstanding for some time. The
resolution of these pending issues may be further delayed or withheld for
reasons within or outside of the Company's control or in response to the
Company's lawful actions, including policy decisions of the Venezuelan
government or its regulators or agents that have no legal basis, unexpected
changes in laws or regulations, arbitrary decisions by relevant officials,
corruption, requests for improper payments, favoritism towards other companies
or persons or any other actions that may result from the changing and uncertain
regulatory environment with respect to mining rights.

the sale of Common Shares or other equity securities. In the near-term,
management believes that cash and investment balances, together with the
proceeds of this Offering, are sufficient to enable the Company to fund its
pre-construction activities through 2007. These pre-construction activities
are expected to consist of detailed project engineering, development and
implementation of project related contracts such as engineering, procurement
and construction management, port facilities, concentrate sales contracts,
electricity and fuel supply contracts, and a number of other agreements
related to the construction and operation of the Brisas Project, pursuing the
required permits and identifying suitable funding sources for construction of
the Brisas Project. Management can provide no assurances that it will be able
to obtain the substantial additional financing that will be needed to
construct the Brisas Project. Failure to raise the required funds will mean
the Company is unable to construct and operate the Brisas Project, which would
have a material adverse effect on the Company.

In May 2005, Pincock, Allen & Holt of Denver, Colorado ("PAH") calculated
the updated mineral resource and reserve estimates summarized in the tables
below in accordance with NI 43-101 for the Brisas Project. The Bankable
Feasibility Study described earlier has not yet been updated with this new
data. A supplement to the Bankable Feasibility Study was completed in November
2005 based on the May 2005 reserves, new waste dump designs and a larger pit
volume. The results are very similar to the Bankable Feasibility Study
results.

BRISAS MINERAL RESERVE AS AT MAY 2005

The Brisas Project is estimated to contain a proven and probable mineral
reserve of approximately 10.1 million ounces of gold and 1.29 billion pounds
of copper as summarized in the following table:

Reserve Waste Total
tonnes Au Grade Cu Grade Au oz. Cu lb. tonnes tonnes Strip
Class (millions) (gpt) (%) (thousands) (millions) (millions) (millions) Ratio
----- ---------- -------- -------- ----------- ---------- ---------- ---------- -----

Proven...... 206.9 0.726 0.125 4,829 570
Probable.... 239.3 0.683 0.136 5,255 720
----- ----- ----- ------ ----- ----- ------- ----
Total....... 446.2 0.703 0.131 10,084 1,290 963.8 1,410.0 2.16
===== ===== ===== ====== ===== ===== ======= ====

The mineral reserve (within a pit design) has been estimated in accordance
with NI 43-101. The mineral reserve was estimated using average recovery rates
for gold and copper of approximately 83% and 87% respectively, metal prices of
US$350 per ounce gold and US$0.90 per pound copper and an internal revenue
cut-off of US$3.00 per tonne. The qualified persons involved in the property
evaluation and resource and reserve estimate were Raul Borrastero, C.P.G. and
Susan Poos, P.E. (both formerly of PAH) and Brad Yonaka, Exploration Manager
for Gold Reserve.

BRISAS MINERAL RESOURCE ESTIMATE AS AT MAY 2005

The Brisas Project is estimated to contain a measured and indicated mineral
resource of 12.4 million ounces of gold and approximately 1.6 billion pounds
of copper (based on 0.4 gram per tonne gold equivalent cut-off).

Cautionary Note to U.S. Investors concerning estimates of Measured and
Indicated Resources. This section uses the terms "measured" and "indicated
resource". The Company advises investors that while the terms "measured" and
"indicated resource" are recognized and required by Canadian regulations, the
SEC does not recognize them. Investors are cautioned not to assume that the
mineralization not already categorized as mineral reserves, will ever be
converted into reserves. Disclosure of contained ounces is permitted under
Canadian regulations, however, the SEC generally permits resources to be
reported only as in place tonnage and grade. See "Cautionary Note to United
States Investors".

The May 2005 estimated, measured and indicated mineral resource utilizing
an off-site smelter process is summarized in the following table:

(kt
=1,000 Measured and
tonnes) Measured Indicated Indicated
Au Eq ------------------- ------------------- --------------------
Cut-off Au Cu Au Cu Au Cu
Grade kt (gpt) (%) kt (gpt) (%) kt (gpt) (%)
------- ------- ----- ----- ------- ----- ----- ------- ------ -----

0.40 250,184 0.689 0.119 332,314 0.640 0.132 582,498 0.661 0.126

(In Measured and
Millions) Measured Indicated Indicated
Au Eq ------------------- ------------------- --------------------
Cut-off Au Cu Au Cu Au Cu
Grade oz. lb. oz. lb. oz. lb.
--------- ------- ----- ----- ------- ----- ----- ------- ------ -----

0.40 -- 5.541 656 -- 6.837 966 -- 12.378 1,622

The inferred mineral resource, based on an off-site smelter process (0.4
gram per tonne gold equivalent cut-off), is estimated at 129.0 million tonnes
containing 0.594 grams gold per tonne and 0.122 percent copper, or 2.46
million ounces of gold and 346 million pounds of copper. The mineral resource
estimate has been calculated in accordance with NI 43-101. The mineral
resource and gold equivalent (AuEq) cut-off is based on US$350 per gold ounce
and US$0.90 per pound copper. The qualified persons involved in the property
evaluation and resource and reserve estimate were Raul Borrastero, C.P.G. and
Susan Poos P.E. (both formerly of PAH) and Brad Yonaka, Exploration Manager
for Gold Reserve.

Cautionary Note to U.S. Investors concerning estimates of Inferred
Resources. This section uses the term "inferred" resources. The Company
advises investors that while the term "inferred resource" is recognized and
required by Canadian regulations, the SEC does not recognize such terms. An
"inferred resource" has a great amount of uncertainty as to its existence and
its economic and legal feasibility. Under Canadian disclosure rules, estimates
of inferred mineral resources may not form the basis of feasibility or
prefeasibility studies, except in rare cases. Investors are cautioned not to
assume that part or all of an inferred resource exists, is economically or
legally mineable or that all or any part of an inferred mineral resource will
ever be upgraded to a higher category. Disclosure of contained ounces is
permitted under Canadian regulations, however, the SEC generally permits
resources to be reported only as in place tonnage and grade. See "Cautionary
Note to United States Investors".

RECENT DEVELOPMENTS

Receipt of Permit for Detailed Engineering Activities on Brisas Project

On January 4, 2006, the Company announced that the Government of Venezuela
through MARN, granted the Company's subsidiary BRISAS, operator of the Brisas
Project, additional permits for the Company's continuing detailed engineering
activities related to the development of the Brisas Project.

The permits are for geotechnical drilling to support detailed engineering
work related to pit slope analysis, crusher design, process facility design,
tailing dam design, and overall site development for the Brisas Project, which
is anticipated to utilize conventional open pit mining methods with the
processing of ore at full production of 70,000 tonnes per day, yielding an
average annual production of 486,000 ounces of gold and 63 million pounds of
copper over an estimated mine life determined currently by the Company to be
approximately 18 years.

Receipt of Permit to Impact Natural Resources

On March 16, 2006, the Company announced that MARN had issued to the
Company's subsidiary BRISAS the "Permit to Impact Natural Resources" for the
quarry on the Barbarita property, which is expected to provide aggregate for
the Company's adjacent Brisas Project. Aggregate is required for the
construction and operating phase of the Brisas Project. The Barbarita property
is located approximately 5 kilometres from the Brisas Project site and near
the planned mill site.

Special Meeting of Shareholders

On March 22, 2006, shareholders of the Company passed resolutions
approving: (i) the continuation of and amendment to the Company's shareholder
rights plan; (ii) certain amendments to the Company's Equity Incentive

Plan; and (iii) the extension of the expiry date from June 8, 2006 to December
31, 2006 of certain outstanding options held by insiders of the Company, and
providing the board of directors discretion to further extend the expiry date
to no later than June 8, 2008.

Contracts with SNC-Lavalin Engineers & Constructors, Inc.

On April 24, 2006, the Company announced the completion of the initial
engineering definition phase of the Brisas Project and the signing of the
Engineering Procurement ("EP") and Construction Management ("CM") contracts
with SNC-Lavalin Engineers & Constructors, Inc. and its affiliates
(collectively, "SNC"). The scope of work for the contracts includes detailed
engineering, procurement and construction management for the process,
infrastructure, tailings and camp facilities as further defined in the EP&CM
contracts. Commencement of construction activities at the Brisas Project will
commence after receipt of the Administrative Authorization to Affect Natural
Resources for Construction of Infrastructure and Exploitation of Gold and
Copper Deposits from MARN and after obtaining the necessary financing for
construction. The estimated cost of the EP contract is approximately
US$22.8 million and for the CM contract approximately US$16.3 million for a
total of approximately US$39.1 million. The Company has the right to terminate
for convenience such contracts at any time with notice and upon payment to SNC
by the Company of any unpaid amounts that have accrued under the terms of the
contracts to the date of termination plus the demobilization costs and
expenses of SNC. Construction is estimated to take 24 to 30 months from date
of commencement.

Capital Costs

The Company has estimated initial capital costs for the Brisas Project to
now total approximately US$638 million compared to the Bankable Feasibility
Study capital costs of US$552 million. The primary components of the initial
capital cost increases are: US$29 million for flotation and grinding, US$16.1
million for primary crushing and conveying, US$14.6 million for camp and
temporary services, US$7.3 million for port facility for concentrate shipping
and US$10.4 million for contingency purposes. Value added tax of 14% on
approximately 80% of the capital costs is not included in the current or
previous capital cost estimates as it is expected to be exonerated and/or
recovered pursuant to Venezuelan tax regulations. The working capital, life of
mine capital, equipment capital costs, closure costs and environmental
management plans for the project are now being updated. This analysis is
expected to be completed in the next five to six weeks. Thereafter, the
Company is expected to provide an updated project economic model for the
Brisas Project.

RISK FACTORS

An investment in the Common Shares is speculative and involves a high
degree of risk due to the nature of the Company's business and the present
stage of exploration and development of its mineral properties. The following
risk factors, as well as risks not currently known to the Company, could
materially adversely affect the Company's future business, operations and
financial condition and could cause them to differ materially from the
estimates described in forward-looking statements relating to the Company.
Prospective investors should carefully consider the following risk factors
along with the other matters set out or incorporated by reference in this
short form prospectus, including under the heading "Risk Factors" in the AIF.

Risks Relating to Gold Reserve and its Industry

The Company's mining assets are concentrated in a foreign country and, as a
result, the Company's operations are subject to inherent local risks.

The Company's exploration and development activities in Venezuela are
affected by certain factors including those listed below, some of which are
beyond the Company's control, any one of which could have a material adverse
affect on the Company's financial position and results of operations.

Political and Economic Environment

The Company's foreign operations are subject to political and economic
risks, including:

. the effects of local political, labor and economic developments,
instability and unrest;

. significant or abrupt changes in the applicable regulatory or legal
climate;

. corruption, requests for improper payments, or other actions that may
violate Canadian and U.S. foreign corrupt practices acts, uncertain
legal enforcement and physical security;

. invalidation or rescission of governmental orders, permits, agreements
or property rights;

. exchange controls and export or sale restrictions;

. currency fluctuations and repatriation restrictions;

. disadvantages of competing against companies from countries that are not
subject to Canadian and U.S. laws and regulations; and

. laws or policies of foreign countries and Canada affecting trade,
investment and taxation.

Certain Permits are Required Prior to Obtaining Financing and Beginning
Construction on the Brisas Project

The Company is dependent on the Venezuelan regulatory authorities issuing
the Company the required operational and land use permits before it may begin
construction on, and operate, the Brisas Project. Most importantly, the
Company must obtain the Administrative Authorization to Affect Natural
Resources for Construction of Infrastructure and Exploitation of Alluvial and
Vein Deposits of Gold and Copper from MARN, which is typically issued
subsequent to a company obtaining approval of its operating plan by MIBAM.

The Company's original operating plan was approved by MEM (now MIBAM) in
2003. Since approval of the original operating plan, the Company has submitted
to MIBAM a number of modifications to the plan in order to minimize impact to
the environment and optimize economics of the Brisas Project, including an
increase in milling capacity up to 70,000 tons per day and relocation of
certain surface facilities and infrastructure.

Management can give no assurance that the issuance of items the Company
still requires for proceeding with the Brisas Project will not be delayed or
withheld, or any existing rights or approvals already issued or granted to the
Company for its operations in Venezuela will not be rescinded, or otherwise
challenged. The reasons for any such action could relate to a number of
factors noted herein, which are mostly outside of the Company's control or in
response to the Company's lawful actions and, as a result, management is
unable to provide any assurance as to if and when the remaining required
Venezuelan permits will be issued to the Company. Failure to obtain any of
these required permits will result in the Company not being able to construct
and operate the Brisas Project, which will result in a material adverse affect
on the Company's operations and investments in Venezuela and continued
operating losses.

Government Review of Contracts and Concessions for Compliance

In early 2005, Venezuela's Minister of MIBAM, Victor Alvarez, announced
that Venezuela would review all foreign investments in non-oil basic
industries, including gold projects. In September 2005, Venezuelan President
Hugo Chavez announced that the Venezuelan government planned to revoke gold
and diamond concessions and/or contracts and also that he planned to create a
new state mining company as part of an effort to increase government control
over the sector. President Chavez did not specify which concessions and/or
contracts would be revoked, but later Minister Alvarez said inactive and out
of compliance mines would be handed over to small mining cooperatives
supported by the government through a new government mining corporation. The
date for the completion of the review and the announcement of the results of
this review has been deferred several times and it is unclear when such
announcement will take place or whether the final policy when announced will
be consistent with prior public statements. The Company believes, based on
communications with the relevant regulatory agencies, that all of the
Company's properties are in compliance with applicable regulations, including
the Company's required and voluntary commitments to various social, cultural
and environmental programs in the immediate and surrounding areas near the
Brisas Project. However, due to the uncertainty regarding the creation of the
new state mining company and expected changes in the mining law, the Company
cannot provide any assurance that the creation of a state mining company will
not adversely affect the Company's ability to develop and operate the
Company's Venezuelan properties.

Currency and Exchange Controls

In 2003, the Central Bank of Venezuela enacted exchange control regulations
as a measure to protect international reserves. The exchange rate was fixed at
approximately 1,600 Bolivars per one U.S. dollar until February 2004 when it
was adjusted to 1,920 Bolivars per one U.S. dollar. In March 2005, the
exchange rate was increased to approximately 2,150 Bolivars per one U.S.
dollar, which is unchanged as of the date of this prospectus. In February
2005, the Venezuelan government announced new regulations concerning exports
from Venezuela, which required, effective April 1, 2005, all goods and
services to be invoiced in the currency of the country of destination or in
U.S. dollars. To

date these regulations have not adversely affected the Company's operations as
the Company primarily transfers funds into Venezuela for its operations.
However, this will change in the future to the extent that the Company begins
production and exports gold from Venezuela and the Company is unable to
predict future the impact, if any, at this time. Future fluctuations of the
Venezuelan Bolivar against the U.S. dollar and exchange controls could
negatively impact the Company's financial condition.

Small Miners

A significant number of unauthorized small miners have occupied various
properties near the Brisas Project. However, there are no unauthorized small
miners currently located on the Brisas Project. The methods used by the small
miners to extract gold from surface material are typically environmentally
unsound and in general their presence can be disruptive to the rational
development of a mining project such as the Brisas Project. The Company
maintains security guards and has implemented other procedures to mitigate the
risk that the small miners might try to occupy the Brisas Project, although
management can give no assurances that such activities will not occur in the
future.

Imataca Forest Reserve

The Brisas Project is located within the boundaries of the Imataca Forest
Reserve (the "Imataca") in an area presently approved by Presidential Decree
for mining activities. On September 22, 2004, after public consultation,
Presidential Decree 3110 ("Decree 3110") was published in the Official Gazette
identifying approximately 13% of the Imataca in the State of Bolivar to be
used for various activities, including mining. Decree 3110 was issued in
response to: (i) legal challenges to prior Presidential Decree 1850 ("Decree
1850") published in the Official Gazette on May 28, 1997 which opened an even
larger part of the Imataca to mining and other activities, and (ii) to a
Venezuelan Supreme Court prohibition issued on November 11, 1997 that
prohibited MEM (now MIBAM) from granting concessions, authorizations and any
other acts relating to mining activities, exploration, exploitation and
infrastructure in the Imataca pertaining to Decree 1850 until the Court rules
on the merits of the nullity action.

The Company has been advised that the legal proceeding before the
Venezuelan Supreme Court became moot upon the issuance of Decree 3110. Since
the issuance of Decree 3110, MIBAM and its predecessor MEM have, on a
selective basis, issued concessions, authorizations and other acts relating to
mining activities, exploration, exploitation and infrastructure in the
Imataca. However, the pending legal proceeding has not been formally concluded
in the Court and therefore management can give no assurances that MIBAM and
MARN's willingness to issue the required permits to construct and operate the
Brisas Project will not be adversely affected in the future by this pending
legal proceeding.

Venezuelan Environmental Laws and Regulations

Venezuela maintains environmental laws and regulations for the mining
industry that impose specific obligations on companies doing business in the
country. MARN, which administers Venezuelan environmental laws and
regulations, proscribes certain mining recovery methods deemed harmful to the
environment and monitors mining activities to ensure compliance. Venezuela's
environmental legislation provides for the submission and approval of
environmental impact statements for certain operations and provides for
restrictions and prohibitions on spills, releases, or emissions of various
substances produced in association with certain mining industry operations,
such as seepage from tailings disposal areas which could result in
environmental pollution. Insurance covering losses or obligations related to
environmental liabilities is not maintained and will only be maintained in the
future if available on a cost-effective basis. Although the Company has
adopted a high standard of environmental compliance, failure to comply with or
unanticipated changes in such laws and regulations in the future could have a
material adverse impact on the Company.

Challenges to Mineral Property Titles or Contract Rights

Acquisition of title or contract rights to mineral properties is a very
detailed and time-consuming process under Venezuelan law. Mining properties
sometimes contain claims or transfer histories that examiners cannot verify,
and transfers can often be complex. The Company believes it has the necessary
title and/or rights to all of the properties for which it holds concessions or
other contracts and leases. However, the Company does not know whether someone
will challenge or impugn title or contract rights to such properties in the
future or whether such challenges will be by third parties or a government
agency.

In addition to the Brisas Project alluvial and hardrock concessions,
management has also applied to the appropriate government agencies for various
concessions, alfarjetas, land use permits and easements allowing the use of
certain land parcels contiguous to and nearby the Brisas Project for
infrastructure needs. Although these applications for infrastructure needs
were contained in an operating plan that has already been approved by the
appropriate regulatory agencies, management can give no assurances when such
applications will be issued, if ever. From 1992 to late 1994 the Company was
involved in a lawsuit relating to ownership of the Brisas Project. The Company
successfully defended its ownership rights in the Venezuelan courts and
subsequently settled the lawsuit for a substantial sum. A claim that the
Company does not have title or contract rights to a property could have an
adverse impact on the Company's business in the short-term and a successful
claim or the failure of the Venezuelan government to approve the required
permits could have a material adverse impact on the future results of the
Company.

Compliance with Other Laws and Regulations

In addition to protection of the environment, the Company's activities are
subject to extensive laws and regulations governing health and worker safety,
employment standards, waste disposal, protection of historic and
archaeological sites, mine development and protection of endangered and
protected species and other matters. Obtaining the necessary permits is
critical to the Company's business. Obtaining and maintaining permits can be a
complex, time consuming process and as a result the Company cannot assess
whether necessary permits will be obtained or maintained on acceptable terms,
in a timely manner or at all. Any failure to comply with applicable laws and
regulations or failure to obtain or maintain permits, even if inadvertent,
could result in the interruption of the Company's operations or material
fines, penalties or other liabilities.

Obtaining funding for project planning, construction and development and
related operating activities is essential to the Company's future plans.

The board of directors approved a plan to proceed with financing and, if
successful, construction of the Brisas Project based on the results of the
Bankable Feasibility Study completed in early 2005. The Company has estimated
initial capital in costs for the Brisas Project to now total approximately
US$638 million compared to the capital cost estimate contained in the Bankable
Feasibility Study of US$552 million, excluding value added taxes and import
duties which could total as much as US$69 million. Although management is in
the process of preparing applications for tax exonerations or payment holidays
for certain taxes including value added tax and import duty tax on the initial
capital costs, which are provided by law, there can be no assurances that such
exonerations will be obtained, the primary result of which would be to
increase initial capital. The timing and extent of funding such investment
depends on a number of important factors, including the receipt of required
permits, actual timetable of the Company's development plan, the price of gold
and copper, results of the Company's efforts to obtain financing, the
political and economic conditions in Venezuela, the ultimate capital costs of
the project including the Company's ability to obtain tax exonerations or
payment holidays and the Company's share price.

As of April 28, 2006, the Company had approximately US$19.5 million in cash
and investments. The Company currently does not generate revenue from
operations and has historically financed operating activities primarily from
the sale of Common Shares or other equity securities. In the near-term,
management believes that cash and investment balances are sufficient to enable
the Company to fund its pre-construction activities through 2007 (excluding
any substantial Brisas Project construction activities). These pre-
construction activities are expected to consist of detailed project
engineering, development and implementation of project related contracts such
as engineering, procurement and construction management, port facilities,
concentrate sales contracts, electricity and fuel supply contracts, and a
number of other agreements related to the construction and operation of the
Brisas Project, obtaining the required permits and identifying suitable
funding sources.

Management provides no assurances that it will be able to obtain the
substantial additional financing that will be needed to construct the Brisas
Project. Failure to raise the required funds will mean the Company is unable
to construct and operate the Brisas Project, which would have a material
adverse effect on the Company.

The actual cost and time of placing the Brisas Project into production
could differ significantly from the Company's estimates.

Many factors are involved in the determination of the economic viability of
mining a mineralized deposit, including the delineation of satisfactory mineral
reserve estimates, the level of estimated metallurgical recoveries,

capital and operating cost estimates, construction, operation, permit and
environmental requirements, and the estimate of future gold prices. Capital
and operating cost estimates are based upon many factors, including
anticipated tonnage and grades of ore to be mined and processed, the
configuration of the ore body, ground and mining conditions and anticipated
environmental and regulatory compliance costs.

Each of these factors involves uncertainties and the making of assumptions
and, as a result, the Company cannot give any assurance that the overall
feasibility study will prove accurate in preparation, construction and
development of the Brisas Project or that any key finding or underlying
assumption will not prove to be inaccurate, including for reasons outside the
control of management, including changes in costs as a result of the passage of
time between the completion of the Bankable Feasibility Study and the Company's
estimates and the date construction commences. It is not unusual in new mining
operations to experience unexpected problems during development. As a result,
the actual cost and time of placing the Brisas Project into production could
differ significantly from estimates contained in the Bankable Feasibility Study
and other estimates by the Company. Likewise, if and after the Brisas Project is
developed, actual operating results may differ from those anticipated in the
feasibility study.

Future results depend on the Brisas Project.

The Company is dependent on the Brisas Project, which is a development
stage project and which may never be developed into a commercially viable ore
body. Any adverse event affecting this property, or the Company's ability to
finance and/or construct and operate this property, would have a material
adverse impact on the future results of the Company.

The Company's mineral resource and reserve estimates may vary from
estimates in the future.

As part of the completion of the Bankable Feasibility Study, the Company's
methods and procedures for gathering geological, geotechnical, and assaying
information were evaluated by independent consultants who concluded, along
with management, that the Company's methods and procedures met generally
accepted industry standards for a bankable feasibility level of study.
Notwithstanding the conclusions of management and its qualified consultants,
mineral reserve estimation is an interpretive process based on drilling
results and experience as well as estimates of mineralization characteristics
and mining dilution, metal prices, costs of mining and processing, capital
expenditures and many other factors. Grades of mineralization processed at any
time may also vary from mineral reserve estimates due to geologic variations
within areas mined. Actual quality and characteristics of deposits cannot be
fully assessed until mineralization is actually mined and, as a result,
mineral reserves change over time to reflect actual experience.

Risks inherent in the mining industry could have a significant impact on
the Company's future operations.

Gold and copper projects are subject to all of the risks inherent in the
mining industry, including environmental hazards, industrial accidents, fires,
labor disputes, legal regulations or restrictions, unusual or unexpected
geologic formations, cave-ins, flooding, and periodic interruptions due to
inclement weather. These risks could result in damage to, or destruction of,
mineral properties and production facilities, personal injury, environmental
damage, delays, monetary losses and legal liability. Insurance covering such
catastrophic liabilities is not maintained and will only be maintained in the
future if available on a cost-effective basis.

Operating losses are expected to continue until the Company constructs or
acquire an operating mine.

The Company has experienced losses from operations for each of the last
five years and expect this trend to continue until the Brisas Project is
operational as the result of, among other factors, expenditures associated
with the corporate activities on the Brisas Project, as well as other
unrelated non-property expenses, which are recorded in the consolidated
statement of operations. Such losses may increase in the short-term if the
Company obtains additional financing and subsequently begin construction of
the Brisas Project. This trend is expected to reverse if and when gold and
copper are produced at the Brisas Project in commercial quantities at a prices
equal to or in excess of the prices assumed in the feasibility study. However,
management can give no assurances that this trend will be reversed in the
future, as a result of the operation of the Brisas Project or if the Company
acquires a profitable operating mine.

The Company may incur costs in connection with future reclamation
activities that may have a material adverse effect on the Company's
earnings and financial condition.

The Company is required to obtain government approval of its plan to
reclaim the Brisas Project after the minerals have been mined from the site.
The Brisas Project reclamation plan has already been incorporated into the
environmental studies submitted to MARN. Reclaiming the Brisas Project will
take place during and after the active life of the mine. In accordance with
applicable laws, bonds or other forms of financial assurances have been and
will be provided by the Company for the reclamation of the mine. The Company
may incur costs in connection with these reclamation activities in excess of
such bonds or other financial assurances, which costs may have a material
adverse effect on the Company's earnings and financial condition. The Company
expects to establish a reserve for future site closure and mine reclamation
costs based on the estimated costs to comply with existing reclamation
standards. There can be no assurance that the Company's reclamation and
closure accruals will be sufficient or that the Company will have sufficient
financial resources to fund such reclamation and closure costs in the future.

The volatility of the price of gold and copper could have a negative impact
upon the Company's current and future operations.

The price of gold and copper has a significant influence on the market price
of the Common Shares and the Company's business activities. Fluctuation in gold
and copper prices directly affects, among other things, the overall economic
viability of the project, the Company's ability to obtain sufficient financing
required to construct the Brisas Project, including the terms of any such
financing, and the calculation of reserve estimates. The price of gold is
affected by numerous factors beyond the Company's control, such as the level of
inflation, fluctuation of the United States dollar and foreign currencies,
global and regional demand, sale of gold by central banks and the political and
economic conditions of major gold producing countries throughout the world.
Copper prices also fluctuate and are generally affected by global and regional
demand and existing inventories. As of May 2, 2006, the closing spot price for
gold in New York was US$668.80 per ounce and the closing spot price in
London for copper was US$3.30 per pound. The following table sets forth the
average of the daily closing price for gold and copper for the periods
indicated as reported by the London Metal Exchange:

Year Ended December 31,
--------------------------------------------------
5 Yr. Avg. 2005 2004 2003 2002 2001
---------- ------- ------- ------- ------- -------

Gold (US$ per ounce)......... US$ 360 US$ 445 US$ 410 US$ 363 US$ 310 US$ 271
Copper (US$ per pound)....... US$1.04 US$1.67 US$1.37 US$0.81 US$0.71 US$0.72

Future hedging activities could negatively impact future operating results.

The Company has not entered into forward contracts or other derivative
instruments to sell gold or copper that it might produce in the future.
Although the Company has no near term plans to enter such transactions, it may
do so in the future if required for project financing. Forward contracts
obligate the holder to sell hedged production at a price set when the holder
enters into the contract, regardless of what the price is when the product is
actually mined. Accordingly, there is a risk that the price of the product is
higher at the time it is mined than when the Company entered into the
contracts, so that the product must be sold at a price lower than could have
been received if the contract was not entered. The Company may enter into
option contracts for gold and copper to mitigate the effects of such hedging.

Changes in critical accounting estimates could adversely affect the
financial results of the Company.

The Company's most significant accounting estimate relates to the carrying
value of its Brisas Project, which is more fully discussed in the Company's
annual financial statements and related footnotes. Management regularly
reviews the net carrying value of its mineral properties. Estimates of mineral
prices, recoverable proven and probable reserves, and operating, capital and
reclamation costs are subject to certain risks and uncertainties which may
effect the recoverability of mineral property costs. Where estimates of future
net cash flows are not available and where other conditions suggest
impairment, management assesses if carrying value can be recovered. Although
management has made its best estimate of these factors as it relates its
mineral properties, it is possible that changes could occur in the near-term,
which could adversely affect the future net cash flows to be generated from
the properties.

Material weaknesses relating to the Company's internal controls over
financial reporting could adversely affect the Company's financial results
or condition and share price.

The Company must, for its fiscal year ending December 31, 2006, begin to
comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002
("Sarbanes-Oxley"), which among other things requires the Company's external
auditors to issue an opinion on the adequacy of management's assessment and
their own assessment of the effectiveness of internal controls over financial
reporting. Management believes that there are no reportable material
weaknesses in the Company's internal controls as defined by Section 404 of
Sarbanes-Oxley as of the date of this prospectus. However, there can be no
assurance that material weaknesses regarding the Company's internal controls
will not be discovered in the future, which could result in costs to remediate
such controls or inaccuracies in the Company's financial statements. A
material weakness in controls over financial reporting may result in increased
difficulty or expense in transactions such as financings, or a risk of adverse
reaction by the market generally that would result in a decrease of the
Company's stock prices.

Acquiring and retaining key personnel in the future could have a
significant impact on future operating results.

The Company is and will be dependent upon the abilities and continued
participation of key management personnel, as well as the significant number
of new personnel that will be necessary to manage any construction and
operations of the Brisas Project. If the services of the Company's key
employees were lost or the Company is unable to obtain the new personnel
necessary to construct, manage and operate the Brisas Project, it could have a
material adverse effect on future operations.

Management anticipates that if and when it constructs the Brisas Project
and puts it into production, the Company will experience significant growth in
its operations resulting in increased demands on its management, internal
controls and operating and financial systems. There can be no assurance that
management will successfully meet these demands and effectively attract and
retain additional qualified personnel to manage its anticipated growth. The
failure to manage growth effectively could have a material adverse impact on
the Company's business, financial condition and results of operations.

Risks Relating to the Common Shares

Gold Reserve may raise funds for future operations through the issuance of
Common Shares or securities convertible into Common Shares, including
warrants or debt instruments, and such financing may result in the dilution
of present and prospective shareholdings.

The Company will need to raise significant funds (currently estimated at
US$638 million) to finance the construction and the commencement of operations
at the Brisas Project. In order to finance future operations, the Company will
likely be required to raise funds through the issuance of Common Shares or
securities convertible into Common Shares such as warrants or debt
instruments. The Company may also seek third party financing. The Company
cannot predict the size of future issuances of Common Shares or securities
convertible into Common Shares such as warrants or debt instruments or the
effect, if any, that future issuances and sales of the these securities and
debt instruments will have on the market price of the Common Shares or if such
financing will be available on terms

acceptable to the Company, or at all. Any such transaction would result in
dilution, likely substantial, to present and prospective holders of Common
Shares.

The price of the Common Shares may be volatile.

The Common Shares are publicly traded and are subject to various factors
that have historically made their price volatile.

The market price of the Common Shares on the TSX and AMEX could fluctuate
significantly, in which case Common Shares purchased pursuant to this Offering
may not be able to be resold at or above the offering price. The market price
of the Common Shares may fluctuate based on a number of factors, including:

. the Company's operating performance, and financial condition and the
performance of competitors and other similar companies;

. the public's reaction to the Company's press releases, other public
announcements and the Company's filings with the various securities
regulatory authorities;

. the price of gold and copper and other metal prices, as well as metal
production volatility;

. the fact the Company's primary asset is located in Venezuela;

. changes in recommendations by research analysts who track the Common
Shares or the shares of other companies in the resource sector;

. changes in general economic conditions;

. the number of the Common Shares to be publicly traded after this
Offering;

. the arrival or departure of key personnel;

. acquisitions, strategic alliances or joint ventures involving the
Company or its competitors;

. other factors listed under "Cautionary Statement Regarding Forward-
Looking Statements";

. the public's reaction to press releases and other public announcements
of the Company's competitors regarding mining development or other
matters;

. economic and political developments in North America and Venezuela,
including any new regulatory rules or actions;

. general worldwide and overall market perceptions of the attractiveness
of particular industries; and

. the dilutive effect of the sale of significantly more Common Shares in
order to finance the Company's activities.

In addition, the market price of the Common Shares are affected by many
variables not directly related to the Company's performance and are therefore
not within the Company's control, including other developments that affect the
market for all resource sector shares, the breadth of the public market for
the Common Shares, and the attractiveness of alternative investments. The
effect of these and other factors on the market price of the Common Shares on
the TSX and the AMEX has historically made the Company's share price volatile
and suggests that the Company's share price will continue to be volatile in
the future.

The Company does not intend to pay any cash dividends in the foreseeable
future.

The Company has not declared or paid any dividends on its Common Shares
since the date the Company was incorporated. The Company intends to retain its
earnings, if any, to finance the growth and development of the business and
does not intend to pay cash dividends on the Common Shares in the foreseeable
future. Any return on an investment in the Common Shares will likely only come
from the appreciation, if any, in the value of the Common Shares. The Company
cannot assure you of any such appreciation. The payment of future cash
dividends, if any, will be reviewed periodically by the Company's board of
directors and will depend upon, among other things, conditions then existing
including earnings, financial condition and capital requirements, restrictions
in financing agreements, business opportunities and conditions and other
factors.

The Company determined that it is a "passive foreign investment company"
under the U.S. Internal Revenue Code and, as a result, there may be adverse
U.S. tax consequences for certain investors.

Potential investors that are U.S. Holders, as defined under "Certain United
States Federal Income Tax Considerations - U.S. Holders," should be aware that
the Company has determined that the Company was a "passive foreign investment
company" under Section 1297(a) of the U.S. Internal Revenue Code for taxable
year ended December 31, 2005 and expects to be a "passive foreign investment
company" for the taxable year ending December 31, 2006. As a result, a U.S.
Holder may be subject to adverse U.S. federal income tax consequences, such as
(i) being subject to U.S. federal income tax at the highest rates applicable
to ordinary income on at least a portion of any "excess distribution" and gain
on the sale of Common Shares, as well as incurring an interest charge on the
tax due thereon, or (ii) at the election of the U.S. Holder, current taxation
on either (A) certain income or gains of the Company, regardless of whether
any cash representing such income or gain has been distributed, or (B) any
increase in the fair market value of the Common Shares as of the taxable year
end, regardless of whether such gain has been realized on a disposition of
such Common Shares. These potential adverse U.S. federal income tax
consequences are described more fully under "Certain United States Federal
Income Tax Considerations - U.S. Federal Income Tax Consequences of the
Acquisition, Ownership, and Disposition of Common Shares".

The determination of whether the Company will be a "passive foreign
investment company" for a future taxable year depends on (i) the application
of complex U.S. federal income tax rules, which are subject to differing
interpretations, and (ii) the assets and income of the Company over the course
of each such taxable year. As a result, the Company's status as a "passive
foreign investment company" in any future taxable year cannot be predicted
with certainty as of the date of this prospectus. Accordingly, there can be no
assurance that the Company will not be a "passive foreign investment company"
for any future taxable year.

The "passive foreign investment company" rules are complex. A potential
investor should consult its own financial advisor, legal counsel, or
accountant regarding the application of the "passive foreign investment
company" rules on an investment in Common Shares.

Investors in Canada or in other jurisdictions outside of the United States
may have difficulty bringing actions and enforcing judgments against Gold
Reserve, its directors and some of the experts named in this prospectus
based on civil liability provisions of Canadian securities laws.

Investors in Canada or in other jurisdictions outside of the United States
may have difficulty bringing actions and enforcing judgments against Gold
Reserve, its directors that are not residents of Canada or who are residents
of other jurisdictions and some of the experts named in this prospectus based
on civil liability provisions of Canadian securities laws.

Despite being organized under the laws of the territory of the Yukon, a
majority of the directors and officers and the experts named in this
prospectus reside principally in the United States and all or a substantial
portion of their assets and all or a substantial portion of the Company's
assets are located outside of Canada. Consequently, it may be difficult for
holders of Common Shares to effect service of process within Canada upon the
Corporation's directors, officers or experts who are not residents of Canada.
Furthermore, it may not be possible to enforce against the Corporation or such
directors, officers or experts, in the United States, judgments obtained in
Canadian courts, including judgments based upon the civil liability provisions
of the Canadian securities law, because a substantial portion of the Company's
assets and the assets of these persons are located outside of Canada. The
Company believes that a monetary judgment of a Canadian court predicated
solely upon the civil liability provisions of Canadian securities laws would
likely be enforceable in the United States if the Canadian court in which the
judgment was obtained had a basis for jurisdiction in the matter that was
recognized by a U.S. court for such purposes. The Company cannot assure you
that this will be the case. It is unlikely that an action could be brought in
the United States in the first instance on the basis of liability predicated
solely upon the civil liability provisions of Canadian securities laws.

The Company has broad discretion in the use of the net proceeds from the
Offering and may not use the proceeds effectively.

The Company proposes to use the net proceeds from the Offering primarily to
fund ongoing development of the Brisas Project, to fund the Company's initial
obligations under the EP and CM contracts with SNC, and, to a lesser extent to
fund ongoing exploration of the Choco 5 project. See "Use of Proceeds". In doing
so, the Company will have broad discretion in the application of the proceeds
and could spend the proceeds in ways that do not improve the

Company's business prospects or enhance the value of the Common Shares. The
failure to apply these funds effectively could result in financial losses that
could have a material adverse effect on the Company's business, cause the price
of the Common Shares to decline and delay the development and productivity of
the Company's mining operations.

The Company is a "foreign private issuer" for purposes of U.S. securities
laws and is subject to different U.S. rules and regulations than a domestic
U.S. issuer, which may limit the information publicly available to the
Company's shareholders.

As a foreign private issuer, the Company is not required to comply with all
the periodic disclosure requirements of the U.S. Exchange Act and therefore
there may be less publicly available information about the Company than if the
Company was a U.S. domestic issuer. In addition, the Company's officers,
directors and principal shareholders are exempt from the reporting and "short
swing" profit recovery provisions of Section 16 of the U.S. Exchange Act and
the rules thereunder. Therefore, the Company's shareholders may not know on a
timely basis when the Company's officers, directors and principal shareholders
purchase or sell Common Shares.

USE OF PROCEEDS

The gross proceeds to the Company from the sale of the Common Shares will be
Cdn.$30,015,000. The net proceeds to the Company will be Cdn.$28,064,250 after
payment of the Underwriters' fee of Cdn.$1,500,750 and after deducting the
estimated expenses of the Offering, including expenses related to the
preparation and filing of this short form prospectus (Cdn.$32,341,387.50
assuming the exercise of the Over-Allotment Option in full). The Company
proposes to use the net proceeds from the Offering primarily to fund ongoing
development of the Brisas Project, to fund the Company's initial obligations
under the EP and CM contracts with SNC, and, to a lesser extent to fund ongoing
exploration of the Choco 5 project.

CONSOLIDATED CAPITALIZATION

Since December 31, 2005, the date of the financial statements for the
Company's most recently completed financial year, there have been no material
changes in the capitalization of the Company. The following table sets forth
the consolidated capitalization of the Company as at December 31, 2005 and at
December 31, 2005 after giving effect to the Offering, but not the exercise of
the Over-Allotment Option. This table should be read in conjunction with the
audited consolidated financial statements of the Company for the financial
year ended December 31, 2005, including the notes thereto and management's
discussion and analysis of results of operations and financial conditions for
such period, each incorporated by reference in this short form prospectus.

As at December 31,
As at 2005, after giving
December 31, effect to the
Designation 2005 Offering(1)
----------- -------------- ------------------

Common Shares and Equity Units............... US$140,512,063 US$ 165,865,306
(Authorized - Unlimited).................. (35,196,287 (38,531,287 Common
Common Shares and Shares and
1,110,020 Equity 1,110,020 Equity
Units Units
outstanding) outstanding)

Less Common Shares and Equity Units
held by affiliates............................ US$ (674,598) US$ (674,598)
Stock options.................................. US$ 1,867,537 US$ 1,867,537
Accumulated deficit............................ US$(61,983,016) US$(61,983,016)
KSOP debt...................................... US$ (84,220) US$ (84,220)
-------------- --------------
Total Shareholders' Equity..................... US$ 79,637,766 US$104,991,009
============== ==============

-------
(1) After deducting the Underwriters' fee and expenses of the Offering but not
giving effect to the exercise of the Over-Allotment Option.

DESCRIPTION OF SHARE CAPITAL

The Company is authorized to issue an unlimited number of Class A common
shares without par value of which 35,324,977 Class A common shares were issued
and outstanding at May 1, 2006. Shareholders are entitled to receive notice of
and attend all meetings of shareholders with each Class A common share held
entitling the holder to one

vote on any resolution to be passed at such shareholder meetings. Shareholders
are entitled to dividends if, as and when declared by the board of directors
of the Company. Shareholders are entitled upon liquidation, dissolution or
winding up of the Company to receive the remaining assets of the Company
available for distribution to shareholders. The Common Shares include
associated Common Share purchase rights under the Company's Shareholder Rights
Plan Agreement, as amended and restated as of January 29, 2006, which
agreement is attached to the AIF.

In February 1999, Gold Reserve Corporation became a subsidiary of the
Company, the successor issuer (the "Reorganization"). Generally, each
shareholder of Gold Reserve Corporation received one Class A common share of
the Company for each common share owned in Gold Reserve Corporation. Certain
U.S. holders elected, for tax reasons, to receive equity units in lieu of
Class A common shares. An equity unit, comprised of one Class B common share
of the Company and one Gold Reserve Corporation Class B common share, is
substantially equivalent to a Class A common share and is generally
immediately convertible into Class A common shares. Equity units, of which
1,085,099 were issued and outstanding at May 1, 2006, are not listed for
trading on any stock exchange, but subject to compliance with applicable
federal, provincial and state securities laws, may be transferred.

DESCRIPTION OF THE SECURITIES BEING DISTRIBUTED

The Offering consists of 3,335,000 Common Shares. The Company has also granted
to the Underwriters the Over-Allotment Option to purchase up to an additional
500,250 Common Shares. Refer to "Description of Share Capital" for a description
of the authorized share capital of the Company.

CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

Purchasers Resident in Canada

In the opinion of Fasken Martineau DuMoulin LLP, counsel to Gold Reserve,
and Heenan Blaikie LLP, counsel to the Underwriters, the following is, as of
the date hereof, a general summary of the principal Canadian federal income
tax considerations applicable to a prospective purchaser of Common Shares to
be issued pursuant to this Offering. This summary is applicable only to a
purchaser who, at all relevant times, is resident in Canada, deals at arm's
length and is not affiliated with Gold Reserve, and who will acquire and hold
such Common Shares as capital property (a "Holder"), all within the meaning of
the Tax Act. Any Common Shares will generally be considered to be capital
property to a Holder unless the Holder holds such securities in the course of
carrying on a business or has acquired them in a transaction or transactions
considered to be an adventure in the nature of trade. Certain Holders whose
Common Shares might not otherwise qualify as capital property may be entitled
to make the irrevocable election provided by subsection 39(4) of the Tax Act
to have the Common Shares and every other "Canadian security" (as defined by
the Tax Act) owned by such Holder in the taxation year of the election and in
all subsequent taxation years deemed to be capital property.

This summary does not apply to a Holder that is a "financial institution"
for purposes of the mark-to-market provisions of the Tax Act or a "specified
financial institution" for purposes of the Tax Act.

This summary is based upon the current provisions of the Tax Act and the
regulations thereunder, specific proposals to amend the Tax Act (the "Tax
Proposals") which have been announced by or on behalf the Minister of Finance
(Canada) prior to the date hereof, and counsel's understanding of the current
published administrative policies and assessing practices of the Canada
Revenue Agency (the "CRA"). This summary assumes that the Tax Proposals will
be enacted in the form proposed and does not take into account or anticipate
any other changes in law, whether by way of judicial, legislative or
governmental decision or action, nor does it take into account provincial,
territorial or foreign income tax legislation or considerations, which may
differ from the Canadian federal income tax considerations discussed herein.
No assurances can be given that such Tax Proposals will be enacted as proposed
or at all, or that legislative, judicial or administrative changes will not
modify or change the statements expressed herein.

This summary is not exhaustive of all possible Canadian federal income tax
considerations applicable to an investment in Common Shares, and does not
describe the income tax considerations relating to the deductibility of
interest on money borrowed by a Holder. The following description of income
tax matters is of a general nature only and is not intended to be, nor should
it be construed to be, legal or income tax advice to any particular Holder.
Holders are urged to consult their own income tax advisors with respect to the
tax consequences applicable to them based on their own particular
circumstances.

Disposition of Common Shares

A Holder who disposes of or is deemed to have disposed of a Common Share
will realize a capital gain (or incur a capital loss) equal to the amount by
which the proceeds of disposition in respect of the Common Share exceed (or
are exceeded by) the aggregate of the adjusted cost base of such Common Share
and any reasonable expenses associated with the disposition. The adjusted cost
base of Common Shares to a holder will be the average cost of all Common
Shares held by the holder at the time.

One-half of any capital gain (a "taxable capital gain") must be included in
income and one-half of any capital loss may be used to offset taxable capital
gains incurred in the year, in any of the three prior years or in any
subsequent year in the circumstances and to the extent provided in the Tax
Act. A capital loss realized from the disposition of a Common Share by a
Holder that is a corporation may in certain circumstances be reduced by the
amount of dividends that have been previously received or deemed to have been
received by the Holder on such shares. Similar rules may apply where a
corporation is, directly or through a trust or partnership, a member of a
partnership or a beneficiary of a trust that owns Common Shares.

Capital gains realized by an individual and certain trusts may result in
the individual or trust paying alternative minimum tax under the Tax Act.

A Holder that is, throughout the relevant taxation year, a "Canadian-
controlled private corporation" (as defined in the Tax Act) may be liable to
pay an additional refundable tax of 6 2/3% on its "aggregate investment
income" for the year, which is defined to include an amount in respect of
taxable capital gains.

Taxation of Dividends Received by Holders of Common Shares

A Holder of Common Shares will be subject to the normal treatment under the
Tax Act applicable to dividends received from a taxable Canadian corporation.

Dividends (including deemed dividends) received on Common Shares by a
Holder who is an individual (and certain trusts) will be included in income
and be subject to the gross-up and dividend tax credit rules normally
applicable to taxable dividends received by an individual from taxable
Canadian corporations. Taxable dividends received by such Holders may give
rise to alternative minimum tax under the Tax Act.

Dividends (including deemed dividends) received on Common Shares by a
Holder that is a corporation will be included in income and normally
deductible in computing such corporation's taxable income. However, the Tax
Act will generally impose a 33 1/3% refundable tax on such dividends received
by a corporation that is a private corporation or a subject corporation for
purposes of Part IV of the Tax Act to the extent that such dividends are
deductible in computing the corporation's taxable income.

On November 23, 2005, the Minister of Finance released proposals to amend
the Tax Act which would provide an enhanced gross-up and dividend tax credit
on eligible dividends paid to eligible shareholders. There can be no assurance
that the new federal government, which was elected on January 23, 2006, will
seek enactment of this proposal.

Purchasers Resident in the United States

The following is a general summary of the principal Canadian federal income
tax considerations under the Tax Act generally applicable to the holding and
disposition of Common Shares by a holder who, at all relevant times for
purposes of the Tax Act, is not resident or deemed to be resident in Canada,
deals at arm's length with the Company, holds the common shares as capital
property and does not use or hold, and is not deemed to use or hold the common
shares in the course of carrying on, or otherwise in connection with, a
business in Canada and who, for purposes of the Canada-United States Income
Tax Convention (the "Treaty"), is a resident of the United States. United
States limited liability companies (LLCs) generally are not considered
residents of the United States for the purposes of the Treaty. Generally,
Common Shares will be considered to be capital property to a holder thereof
provided that the holder does not use the Common Shares in the course of
carrying on a business and such holder has not acquired them in one or more
transactions considered to be an adventure or concern in the nature of trade.
This summary does not deal with special situations, such as particular
circumstances of traders or dealers in securities, limited liability
companies, tax-exempt entities, insurers, and financial institutions. For
purposes of the Tax Act, all amounts relevant in computing a

holder's liability under the Tax Act must be computed in Canadian dollars.
Amounts denominated in U.S. dollars including adjusted cost base and proceeds
of disposition must be converted into Canadian dollars based on the prevailing
exchange rate at the relevant time.

Dividends

Dividends on Common Shares paid or credited to a U.S. Holder (as defined
below) by the Company are subject to Canadian withholding tax. Under the
Treaty, the rate of withholding tax on dividends paid or credited to a
U.S. Holder is generally limited to 15% of the gross amount of the dividend
(or 5% in the case of a U.S. Holder that is a corporation beneficially owning
at least 10% of the Company's voting shares). Under the Treaty, dividends
paid by the Company to certain religious, scientific, charitable, certain
other tax-exempt organizations and certain pension organizations that are
resident in, and exempt from tax in, the United States are exempt from
Canadian withholding tax.

Dispositions

A U.S. Holder will generally not be subject to tax under the Tax Act in
respect of a capital gain realized on the disposition of a Common Share,
unless the Common Share constitutes "taxable Canadian property" as defined in
the Tax Act at the time of disposition. The Common Share will generally not be
taxable Canadian property to a U.S. Holder at the time of disposition provided
the Common Shares are listed on a prescribed stock exchange (which includes
the TSX and the AMEX) at that time and, during the 60 month period ending at
the time of disposition of the Common Share, the U.S. Holder, persons with
whom the U.S. Holder did not deal at arm's length, or the U.S. Holder together
with such persons, did not own 25% or more of the Company's issued shares of
any class or series of capital stock. Even if a Common Share constitutes
taxable Canadian property to a U.S. Holder, by reason of the Treaty, no tax
will generally be payable under the Tax Act on a capital gain realized by the
U.S. Holder on the disposition of such shares provided the value of such
shares at the time of disposition is not derived principally from real
property situated in Canada. The Company has advised counsel that, at the date
of this short form prospectus, the value of the Common Shares is not derived
principally from real property situated in Canada within the meaning of the
Treaty. Provided that the Common Shares are not taxable Canadian property to a
U.S. Holder, there are no clearance certificate requirements imposed by the
Tax Act on that U.S. Holder in respect of a disposition of Common Shares.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain material U.S. federal income tax
consequences to a U.S. Holder (as defined below) arising from and relating to
the acquisition, ownership, and disposition of Common Shares acquired pursuant
to this prospectus.

This summary is for general information purposes only and does not purport
to be a complete analysis or listing of all potential U.S. federal income tax
consequences that may apply to a U.S. Holder as a result of the acquisition,
ownership, and disposition of Common Shares. In addition, this summary does
not take into account the individual facts and circumstances of any particular
U.S. Holder that may affect the U.S. federal income tax consequences of the
acquisition, ownership, and disposition of Common Shares. Accordingly, this
summary is not intended to be, and should not be construed as, legal or U.S.
federal income tax advice with respect to any U.S. Holder. Each U.S. Holder
should consult its own financial advisor, legal counsel, or accountant
regarding the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of Common Shares.

Authorities

This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations promulgated thereunder (whether final or
temporary), published rulings of the Internal Revenue Service (the "IRS"),
published administrative positions of the IRS, the Convention Between Canada
and the United States of America with Respect to Taxes on Income and on
Capital, signed September 26, 1980, as amended (the "Canada-U.S. Tax
Convention"), and U.S. court decisions that are applicable and, in each case,
as in effect and available, as of the date of this prospectus. All of the
authorities on which this summary is based are subject to differing
interpretations and could be changed in a material and adverse manner at any
time, and any such change could be applied on a retroactive basis. In such
event, the U.S. federal income tax consequences applicable to a U.S. Holder of
the Common Shares

could differ from those described in this summary. This summary does not
discuss the potential effects, whether adverse or beneficial, of any proposed
legislation that, if enacted, could be applied on a retroactive basis.

U.S. Holders

For purposes of this summary, a "U.S. Holder" is a beneficial owner of
Common Shares that, for U.S. federal income tax purposes, is (a) an individual
who is a citizen or resident of the U.S. (including certain former citizens
and former long-term residents), (b) a corporation, or any other entity
classified as a corporation for U.S. federal income tax purposes, that is
created or organized in or under the laws of the U.S. or any political
subdivision thereof, including the District of Columbia, (c) an estate if the
income of such estate is subject to U.S. federal income tax regardless of the
source of such income, or (d) a trust if (i) such trust has validly elected to
be treated as a U.S. person for U.S. federal income tax purposes or (ii) a
U.S. court is able to exercise primary supervision over the administration of
such trust and one or more U.S. persons have the authority to control all
substantial decisions of such trust.

Non-U.S. Holders

For purposes of this summary, a "non-U.S. Holder" is a beneficial owner of
Common Shares other than a U.S. Holder. A non-U.S. Holder should consult its
own financial advisor, legal counsel, or accountant regarding the U.S. federal
income tax consequences (including the potential application of and operation
of any income tax treaties) of the acquisition, ownership, and disposition of
Common Shares.

U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed

This summary does not address the U.S. federal income tax consequences of
the acquisition, ownership, and disposition of Common Shares to U.S. Holders
that are subject to special provisions under the Code, including the following
U.S. Holders: (a) U.S. Holders that are tax-exempt organizations, qualified
retirement plans, individual retirement accounts, or other tax-deferred
accounts; (b) U.S. Holders that are financial institutions, insurance
companies, real estate investment trusts, or regulated investment companies;
(c) U.S. Holders that are dealers in securities, commodities or currencies, or
U.S. Holders that are traders in securities or commodities that elect to apply
a mark-to-market accounting method; (d) U.S. Holders that have a "functional
currency" other than the U.S. dollar; (e) U.S. Holders that are liable for the
alternative minimum tax under the Code; (f) U.S. Holders that own Common
Shares as part of a straddle, hedging transaction, conversion transaction,
constructive sale, or other arrangement involving more than one position;
(g) U.S. Holders that acquired Common Shares in connection with the exercise
of employee stock options or otherwise as compensation for services; (h) U.S.
Holders that hold Common Shares other than as a capital asset within the
meaning of Section 1221 of the Code; or (i) U.S. Holders that own (directly,
indirectly, or constructively) 10% or more, by voting power or value, of the
outstanding shares of the Company. U.S. Holders that are subject to special
provisions under the Code, including U.S. Holders described immediately above,
should consult their own financial advisor, legal counsel or accountant
regarding the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of Common Shares.

If an entity that is classified as a partnership (or "pass-through" entity)
for U.S. federal income tax purposes holds Common Shares, the U.S. federal
income tax consequences to such partnership (or "pass-through" entity) and the
partners of such partnership (or owners of such "pass-through" entity)
generally will depend on the activities of the partnership (or "pass-through"
entity) and the status of such partners (or owners). Partners of entities that
are classified as partnerships (or owners of "pass-through" entities) for U.S.
federal income tax purposes should consult their own financial advisor, legal
counsel or accountant regarding the U.S. federal income tax consequences of
the acquisition, ownership, and disposition of Common Shares.

Tax Consequences Other than U.S. Federal Income Tax Consequences Not Addressed

This summary does not address the consequences arising under U.S. federal
estate, gift or excise tax laws or the tax laws of any applicable foreign,
state, local or other jurisdiction to U.S. Holders of the acquisition,
ownership, and disposition of Common Shares. Each U.S. Holder should consult
its own financial advisor, legal counsel, or accountant regarding the
consequences of any of these laws on the acquisition, ownership, and
disposition of Common Shares.

U.S. Federal Income Tax Consequences of the Acquisition, Ownership, and
Disposition of Common Shares

Distributions

For U.S. federal income tax purposes, the amount of distributions made on
the Common Shares generally will equal the amount of cash and the fair market
value of any property distributed and also will include the amount of any
Canadian taxes withheld as described above under "Canadian Federal Income Tax
Considerations - Purchasers Resident in the United States". Except as
discussed below under "Passive Foreign Investment Company", an amount of the
distribution will be treated as a dividend, taxable to a U.S. Holder as
ordinary income, to the extent of the Company's current or accumulated
earnings and profits allocable to such U.S. Holder. To the extent that an
amount received by a U.S. Holder exceeds the allocable share of the Company's
current and accumulated earnings and profits, such excess will be treated as a
return of capital to the extent of the U.S. Holder's tax basis in its Common
Shares and then, to the extent in excess of such U.S. Holder's tax basis, as
gain from the sale or exchange of such Common Shares generally taxable as
capital gain. (See discussion below under "Disposition.") The amount treated
as a dividend will not be eligible for the dividends received deduction
generally allowed to U.S. corporate shareholders on dividends received from
U.S. corporations.

In the case of non-corporate U.S. Holders, the U.S. federal income tax rate
applicable to dividends received in taxable years beginning prior to 2009 may
be lower than the rate applicable to other categories of ordinary income if
certain conditions are met. Dividends will not qualify for the reduced rate,
however, if the Company is treated, for the tax year in which the dividends
are paid or the preceding tax year, as a "passive foreign investment company"
for U.S. federal income tax purposes. For the taxable year ended December 31,
2005, the Company was considered a "passive foreign investment company". (See
discussion below under "Passive Foreign Investment Company.") There can be no
assurance that the Company will not be a "passive foreign investment company"
in future taxable years. Accordingly, if the Company continues to be
considered a "passive foreign investment company," a dividend paid by the
Company to a U.S. Holder generally will not qualify for the lower U.S. federal
income tax rate. The U.S. federal income tax rules applicable to dividends are
complex and each U.S. Holder should consult it own financial advisor, legal
counsel or accountant regarding the dividend rules.

The amount of any distribution paid in foreign currency will be included in
a U.S. Holder's gross income in an amount equal to the U.S. dollar value of
the foreign currency calculated by reference to the spot rate in effect on the
date of receipt by the U.S. Holder, regardless of whether the foreign currency
is converted into U.S. dollars. If the foreign currency is converted into U.S.
dollars on the date of receipt, a U.S. Holder generally should not be required
to recognize foreign currency gain or loss in respect of the distribution. If
the foreign currency received in the distribution is not converted into U.S.
dollars on the date of receipt, a U.S. Holder will have a tax basis in the
foreign currency equal to its U.S. dollar value on the date of receipt. Any
gain or loss recognized upon a subsequent conversion or other disposition of
the foreign currency will be treated as U.S. source ordinary income or loss.

A non-U.S. Holder generally will not be subject to U.S. federal income tax
or withholding tax on distributions with respect to the Common Shares that are
treated as a dividend for U.S. federal income tax purposes unless such
dividends are effectively connected with the conduct of a trade or business
within the U.S. by the non-U.S. Holder (and are attributable to a permanent
establishment maintained in the U.S. by such non-U.S. Holder if an applicable
income tax treaty so requires as a condition for such non-U.S. Holder to be
subject to U.S. federal taxation on a net income basis in respect of income
from the Common Shares), in which case the non-U.S. Holder generally will be
subject to U.S. federal income tax in respect of such dividends in the same
manner as a U.S. Holder. Any such effectively connected dividends received by
a corporate non-U.S. Holder also may, under certain circumstances, be subject
to an additional "branch profits tax" at a 30% rate or such lower rate as may
be specified by an applicable income tax treaty. A non-U.S. Holder generally
will not be subject to U.S. federal income tax or withholding tax on
distributions that are treated as capital gain for U.S. federal income tax
purposes unless such non-U.S. Holder would be subject to U.S. federal income
tax on gain realized on the sale or other disposition of the Common Shares.
See discussion below under "Dispositions".

Subject to certain limitations, a U.S. Holder may elect to claim a credit
against its U.S. federal income tax liability for any Canadian tax paid with
respect to, or withheld from, any dividends paid on the Common Shares. A U.S.
Holder who does not make such an election instead may deduct the Canadian tax
paid or withheld, but only for a year in which such U.S. Holder elects to do
so with respect to all creditable foreign taxes paid by such U.S. Holder. The
availability of the foreign tax credit is subject to complex limitations that
depend on the proportionate share that a U.S. Holder's "foreign source"
taxable income bears to such U.S. Holder's worldwide taxable income with
respect to each separate category of income described below.

For U.S. foreign tax credit purposes, for taxable years beginning before
January 1, 2007, dividends on the Common Shares will generally constitute
foreign source "passive income" or, in the case of certain U.S. Holders,
"financial services income." However, for taxable years beginning after
December 31, 2006, dividends paid on the Common Shares generally will be
treated as "passive income" (or "general income" for certain U.S. Holders).
If, and for so long as, the Company is a United States-owned foreign
corporation (as defined below), dividends paid by the Company on the Common
Shares may, subject to certain exceptions and elections, instead be treated
for U.S. foreign tax credit purposes as partly foreign source "passive income"
(or "financial services income" for certain U.S. Holders) for taxable years
beginning before January 1, 2007 or "passive income" (or "general income" for
certain U.S. Holders) for taxable years beginning after December 31, 2006, and
partly U.S.-source income, in proportion to the earnings and profits of the
Company in the year of such distribution allocable to foreign and U.S.
sources, respectively. The Company will be treated as a United States-owned
foreign corporation if stock representing 50% or more of the voting power or
value of the stock of the Company is held, directly or indirectly, by U.S.
Holders. No assurance can be given as to whether the Company is or will become
a United States-owned foreign corporation.

The rules relating to the U.S. foreign tax credit are complex, and each
U.S. Holder should consult its own financial advisor, legal counsel or
accountant to determine whether and to what extent it would be entitled to a
foreign tax credit.

Dispositions

Subject to the discussion below under "Passive Foreign Investment Company,"
a U.S. Holder's sale, exchange or other disposition of the Common Shares
generally will result in the recognition by the U.S. Holder of U.S. source
taxable capital gain or loss in an amount equal to the difference between the
U.S. dollar value of the amount of cash and fair market value of any property
received upon the sale, exchange or other disposition and such U.S. Holder's
adjusted tax basis in the Common Shares. Such capital gain or loss will be
long-term if the U.S. Holder's holding period in the Common Shares is more
than one year at the time of the sale, exchange or other disposition. Long-
term capital gain recognized by certain non-corporate U.S. Holders generally
will be subject to U.S. federal income tax rates lower than the rates
applicable to ordinary income. The deductibility of capital losses is subject
to limitations. Each U.S. Holder should consult its own financial advisor,
legal counsel or accountant regarding the treatment of capital gains and
losses.

A non-U.S. Holder will not be subject to U.S. federal income tax or
withholding tax on gain realized on the sale or other disposition of the
Common Shares unless (i) the gain is effectively connected with the conduct of
a trade or business by the non-U.S. Holder in the U.S. (and is attributable to
a permanent establishment maintained in the U.S. by such non-U.S. Holder if an
applicable income tax treaty so requires as a condition for such non-U.S.
Holder to be subject to U.S. federal income taxation on a net income basis in
respect of income from the Common Shares), or (ii) such non-U.S. Holder is an
individual who is present in the U.S. for 183 days or more in the taxable year
of the sale, and certain other conditions are met. Effectively connected gains
realized by a corporate non-U.S. Holder may also, under certain circumstances,
be subject to an additional "branch profits tax" at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty.

Controlled Foreign Corporation Status

Under Section 951(a) of the Code, each "United States shareholder" of a
"controlled foreign corporation" ("CFC") must include in its gross income for
U.S. federal income tax purposes its pro rata share of the CFC's "subpart F
income," even if the subpart F income is not actually distributed to the
"United States shareholder." In addition, gain on the sale of stock in a CFC
realized by a "United States shareholder" is treated as ordinary income,
potentially eligible for the reduced tax rate applicable to certain dividends,
to the extent of such shareholder's proportionate share of the CFC's
undistributed earnings and profits accumulated during such shareholder's
holding period for the stock. Section 951(b) of the Code defines a "United
States shareholder" as any U.S. corporation, citizen, resident or other U.S.
person who owns (directly or through certain deemed ownership rules) 10% or
more of the total combined voting power of all classes of stock of a foreign
corporation. In general, a foreign corporation is treated as a CFC only if
such "United States shareholders" collectively own more than 50% of the total
combined voting power or total value of the foreign corporation's stock. Under
these rules, the Company does not expect to be a CFC but there can be no
assurance that the Company will not become a CFC. If the Company is treated as
a CFC, the Company's status as a CFC should have no adverse effect on any
shareholder of the Company that is not a "United States shareholder."

Passive Foreign Investment Company

If the Company is a "passive foreign investment company" (as defined
below), the preceding sections of this summary may not describe the U.S.
federal income tax consequences to U.S. Holders of the acquisition, ownership,
and disposition of Common Shares.

Sections 1291 through 1298 of the Code contain special rules applicable
with respect to foreign corporations that are "passive foreign investment
companies" ("PFICs"). A company will be considered a PFIC if 75% or more of
its gross income (including a pro rata share of the gross income of any
company (United States or foreign) in which the company is considered to own
25% or more of the shares by value) in a taxable year is passive income (the
"Income Test"). Alternatively, a foreign company will be considered a PFIC if
at least 50% of the assets (averaged over the four quarter ends for the year)
of the company (including a pro rata share of the assets of any company of
which the company is considered to own 25% or more of the shares by value) in
a taxable year are held for the production of, or produce, passive income (the
"Asset Test").

For the taxable year ended December 31, 2005, the Company determined that
it was a PFIC because it met the Income Test. In addition, the Company expects
that it will meet the Income Test for the taxable year ending December 31,
2006, and, as a result, will be treated as a PFIC for such taxable year. The
determination of whether the Company will be a PFIC for a subsequent taxable
year depends on (i) the application of complex U.S. federal income tax rules,
which are subject to differing interpretations, and (ii) the assets and income
of the Company over the course of each such taxable year. As a result, whether
the Company will be a PFIC for any subsequent taxable year cannot be predicted
with certainty as of the date of this prospectus. Accordingly, there can be no
assurance that the Company will not be a PFIC for any taxable year.

For taxable years in which the Company is a PFIC, each U.S. Holder, in
absence of an election by such holder to treat the Company as a "qualified
electing fund" (a "QEF" election), as discussed below, will, upon certain
distributions by the Company or upon disposition of the Common Shares at a
gain, be liable to pay U.S. federal income tax at the highest tax rate on
ordinary income in effect for each period to which the income is allocated
plus interest on the tax, as if the distribution or gain had been recognized
ratably over the U.S. Holder's holding period for the Common Shares while the
Company was a PFIC. Additionally, the Common Shares of a decedent U.S. Holder
who failed to make a QEF election will generally be denied the normally
available step-up of the tax basis for such Common Shares to fair market value
at the date of death and, instead, would have a tax basis equal to the
decedent's tax basis, if lower, in the Common Shares.

A U.S. Holder who owns the Common Shares during a period when the Company
is a PFIC will be subject to the foregoing PFIC rules, even if the Company
ceases to be a PFIC, unless such U.S. Holder makes a QEF election in the first
year in which the U.S. Holder owned the Common Shares and the Company was
considered a PFIC. A U.S. Holder who makes such a QEF election will be
entitled to treat any future gain on the sale of the Common Shares as capital
gain and will not be denied the tax basis step-up at death described above.
Additionally, a U.S. Holder who makes a QEF election will, for each taxable
year the Company is a PFIC, include in income a pro rata share of the ordinary
earnings of the Company as ordinary income and a pro rata share of any net
capital gain of the Company as long-term capital gain, subject to a separate
election to defer payment of taxes (such deferral is subject to an interest
charge.) The Company will comply with the applicable information reporting
requirements under the QEF rules.

A U.S. Holder who makes a QEF election for the first taxable year in which
the U.S. Holder owns Common Shares and in which the Company is a PFIC (and
complies with certain U.S. federal income tax reporting requirements) should
not have any material adverse U.S. federal income tax consequences if the
Company has no ordinary earnings or net capital gains during such taxable
year. The Company currently expects that it will not have any ordinary
earnings or net capital gains in future years in which it may be a PFIC.
However, no assurance can be given as to this expectation. Each U.S. Holder is
urged to consult its own financial advisor, legal counsel, or accountant
concerning the application of the U.S. federal income tax rules governing
PFICs in its particular circumstances.

Each U.S. Holder choosing to make a QEF election would be required annually
to file an IRS Form 8621 (Return by a shareholder of a Passive Foreign
Investment Company or Qualified Electing Fund) with such U.S. Holder's timely
filed U.S. federal income tax return (or directly with the IRS if the U.S.
Holder is not required to file an income tax return). A U.S. Holder choosing
to make a QEF election also must include with its income tax return a
shareholder election statement and the PFIC annual information statement that
the Company will provide. If the Company determines that it was a PFIC during
the taxable year, within two months after the end of each such taxable year
the

Company will supply the PFIC annual information statement necessary to make
the QEF election for such taxable year.

As an alternative to the QEF election, a U.S. Holder of certain publicly
traded PFIC stock can elect to mark the stock to market, recognizing as
ordinary income or loss each year an amount equal to the difference as of the
close of the taxable year between the fair market value of the PFIC stock and
the adjusted tax basis in the PFIC stock. Losses would be allowed only to the
extent of net mark-to-market gain previously included in income by the U.S.
Holder under the election for prior taxable years. If a mark-to-market
election is in effect on the date of a U.S. Holder's death, the otherwise
available step-up in tax basis to fair market value will not be available.
Instead, the tax basis of the Common Shares in the hands of a person who
acquires such Common Shares from the decedent will be the lesser of the
decedent's tax basis or the fair market value of the Common Shares.

Due to the complexity of the PFIC rules, a U.S. Holder should consult its
own financial advisor, legal counsel, or accountant regarding the Company's
status as PFIC and the eligibility, manner and advisability of making a QEF
election or a mark-to-market election and how the PFIC rules may affect the
U.S. federal income tax consequences of a U.S. Holder's acquisition,
ownership, and disposition of Common Shares.

Information Reporting; Backup Withholding Tax

In general, dividend payments or other taxable distributions on the
Company's Common Shares or proceeds from the disposition of Common Shares paid
by a U.S. paying agent or other U.S. intermediary to a non-corporate U.S.
Holder may be subject to information reporting to the IRS and possible U.S.
backup withholding at a current rate of 28%. Backup withholding generally
would not apply to a U.S. Holder that furnishes a correct taxpayer
identification number and makes any other required certifications or if the
U.S. Holder is otherwise exempt from backup withholding. U.S. Holders that are
required to establish their exempt status generally must provide such
certification on IRS Form W-9 (Request for Taxpayer Identification Number and
Certification). Certain non-U.S. Holders receiving payments in the U.S or
through certain U.S. financial intermediaries should establish their exemption
from information reporting or backup withholding by providing certification of
non-U.S. status on IRS Form W-8 BEN, as applicable.

Amounts withheld as backup withholding may be credited against the U.S.
Holder's U.S. federal income tax liability. Additionally, a U.S. Holder or
non-U.S. Holder may obtain a refund of any excess amounts withheld under the
backup withholding regime by timely filing the appropriate claim for refund
with the IRS and furnishing any required information. Copies of any
information returns filed with the IRS may be made available by the IRS, under
the provisions of a specific treaty or agreement, to the taxing authorities of
the country in which the non-U.S. Holder resides or is organized.

Each U.S. Holder and non-U.S. Holder should consult its own financial
advisor, legal counsel, or accountant regarding the information reporting and
backup withholding tax rules.

PLAN OF DISTRIBUTION

Pursuant to an underwriting agreement dated May 3, 2006 (the "Underwriting
Agreement") between Gold Reserve and the Underwriters, Gold Reserve has agreed
to issue and sell 3,335,000 Common Shares and the Underwriters have severally
agreed to purchase on the closing date of the Offering in the proportions set
out in the Underwriting Agreement, which is expected to be on or about May 15,
2006 or any other date as may be agreed upon by Gold Reserve and the
Underwriters, but in any event not later than May 30, 2006, subject to the
conditions stipulated in the Underwriting Agreement, all but not less than all
such Common Shares at a price of Cdn.$9.00 per Common Share, payable in cash
against delivery of certificates representing the Common Shares, in the number
of Common Shares set forth opposite the Underwriter's name:

Underwriter Number of Common Shares
----------- -----------------------

Sprott Securities Inc................................... 1,667,500
RBC Dominion Securities Inc............................. 1,667,500
---------
Total................................................... 3,335,500
=========

The offering price of the Common Shares was determined by negotiation
between Gold Reserve and the Underwriters. The Underwriting Agreement provides
that Gold Reserve will pay to the Underwriters, in consideration for their
services in connection with the Offering, a fee of Cdn.$0.45 per Common
Share, for an aggregate fee of Cdn.$1,500,750 or 5% of the gross proceeds of
the Offering.

Gold Reserve has also granted to the Underwriters an Over-Allotment Option,
exercisable for a period of 30 days from the date of the closing of the
Offering, to purchase up to an aggregate of 500,250 additional Common Shares, at
a price of Cdn.$9.00 per Common Share, payable in cash against delivery of
such additional shares. The Over-Allotment Option is exercisable in whole or
in any part only for the purpose of covering over-allotments, if any, made by
the Underwriters in connection with the Offering and for market stabilization
purposes. This prospectus qualifies the grant of the Over-Allotment Option and
the distribution of any Common Shares issued and sold upon the exercise of the
Over-Allotment Option.

The following table summarizes the compensation of the Offering payable by
the Company to the Underwriters:

Per Common Share Total
------------------------------------------ --------------------------------------------
Without Over-Allotment With Over-Allotment Without Over-Allotment With Over-Allotment
Option Option Option Option
---------------------- ------------------- ---------------------- ---------------------

Underwriters' Fee... Cdn.$0.45 Cdn.$0.45 Cdn.$1,500,750 Cdn.$1,725,862.50

The Company estimates that its total expenses of the Offering will be
Cdn.$450,000. The Company has agreed to reimburse the Underwriters for certain
of its expenses relating to the Offering.

The Common Shares are being offered to the public concurrently in all of the
provinces of Canada, other than Quebec, and in the United States pursuant to the
multi-jurisdictional disclosure system implemented by the securities regulatory
authorities in the United States and Canada. The Common Shares will be offered
in Canada and the United States by the Underwriters either directly or through
their U.S. registered broker-dealer affiliates or agents, as applicable. The
Underwriters may offer the Common Shares for sale in jurisdictions outside of
Canada and the United States provided such offer and sale will not require the
Company to comply with the registration, prospectus, filing, continuous
disclosure or other similar requirements under the applicable securities laws of
such other jurisdictions or pay any additional governmental filing fees which
relate to such other jurisdictions.

The Common Shares are listed on both the TSX and AMEX under the symbol
"GRZ". Applications have been made to have the Common Shares qualified for
distribution by this short form prospectus listed on the TSX and AMEX. Listing
will be subject to the Company fulfilling all of the listing requirements of
the TSX and AMEX.

The obligations of the Underwriters under the Underwriting Agreement may be
terminated upon the occurrence of certain stated events. Subject to the above,
the Underwriters are severally obligated to take up and pay for all Common
Shares they have obliged themselves to purchase if any of the Common Shares
are purchased under the Underwriting Agreement. The Underwriting Agreement
also provides that Gold Reserve will indemnify the Underwriters against
certain liabilities and expenses, including liability under applicable
securities laws, or contribute to payments the Underwriters may be required to
make in respect thereof. The closing of the Offering is conditional upon the
receipt of an opinion from the National Association of Securities Dealers,
Inc. that it has no objection to the proposed underwriting terms among the
Company, and the Underwriters, set forth in the Underwriting Agreement.

The public offering price for the Common Shares offered in Canada and in
the United States is payable in Canadian dollars only.

The Company has agreed that it will not, offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the SEC,
a registration statement under the Securities Act or a prospectus under
applicable Canadian securities legislation relating to, any of the Common
Shares or securities convertible into or exchangeable for any of the Common
Shares without the prior written consent of Sprott Securities Inc. for a
period of 90 days after the date of the Underwriting Agreement, except for
grants of employee stock options by the Company or issuances of the Common
Shares pursuant to the exercise of employee stock options previously granted
by the Company and outstanding on the date hereof.

Pursuant to rules and policy statements of certain Canadian provincial
securities commissions, the Underwriters may not, throughout the period of
distribution, bid for or purchase Common Shares for their own account or for
accounts over which they exercise control or direction. The foregoing
restriction is subject to exceptions, on the condition that the bid or
purchase is not engaged in for the purpose of creating actual or apparent
active trading in, or

raising the price of, the Common Shares. These exceptions include bids or
purchases permitted under the Universal Market Integrity Rules for Canadian
Marketplaces administered by Market Regulation Services Inc. relating to
market stabilization and passive market making activities and a bid or
purchase made for and on behalf of a customer where the order was not
solicited during the period of distribution. Subject to the foregoing, the
Underwriters may over-allot or effect transactions that stabilize or maintain
the market price of the Common Shares at levels other than those that might
otherwise prevail on the open market. Such transactions, if commenced, may be
discontinued at any time.

The rules of the SEC may limit the ability of the Underwriters to bid for
or purchase Common Shares before the distribution of the Common Shares in the
Offering is completed. However, the Underwriters may engage in the following
activities in accordance with the rules:

. Stabilizing transactions permit bids to purchase the Common Shares so
long as the stabilizing bids do not exceed a specified maximum.

. Over-allotment transactions involve sales by the Underwriters of Common
Shares in excess of the number of Common Shares the Underwriters are
obligated to purchase, which creates a syndicate short position. The
Underwriters may close out any short position by purchasing Common
Shares in the open market.

. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common shares originally sold by the
syndicate member are purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty
bids may have the effect of preventing or mitigating a decline in the market
price of the Common Shares, and may cause the price of the Common Shares to be
higher than would otherwise exist in the open market absent such stabilizing
activities. As a result, the price of the Common Shares may be higher than the
price that might otherwise exist in the open market. These transactions may be
effected on the AMEX, the TSX or otherwise and, if commenced, may be
discontinued at any time.

Subscriptions for Common Shares will be received subject to rejection or
allotment in whole or in part and the right is reserved to close the
subscription books at any time without notice. Certificates evidencing the
Common Shares will be available for delivery on the closing date of the
Offering.

LEGAL MATTERS

Certain legal matters relating to the Offering and to the Common Shares to
be distributed pursuant to this short form prospectus will be passed upon on
behalf of the Company by Fasken Martineau DuMoulin LLP, with respect to
Canadian legal matters, and by Baker & McKenzie LLP, with respect to U.S.
legal matters, and on behalf of the Underwriters by Heenan Blaikie LLP, with
respect to Canadian legal matters, and by Dorsey & Whitney LLP, with respect
to U.S. legal matters.

INTEREST OF EXPERTS

As of the date hereof, none of the partners and associates of Fasken
Martineau DuMoulin LLP and Heenan Blaikie LLP, or Pincock, Allen & Holt, Raul
Borrastero, C.P.G, Susan Poos, P.E., and Richard Addison, P.E., C Eng,
Eur.Ing, Richard J. Lambert, P.E., and Brad Yonaka, each being companies or
persons who have prepared reports relating to the Company's mineral
properties, or any director, officer, employee or partner thereof, as
applicable, received or has received a direct or indirect interest in the
property of the Company or of any associate or affiliate of the Company. As at
the date hereof, the aforementioned persons, and the directors, officers,
employees and partners in the aggregate, as applicable, of each of the
aforementioned companies and partnerships beneficially own, directly or
indirectly, less than one percent of the securities of the Company.

Neither the aforementioned persons, nor any director, officer, employee or
partner, as applicable, of the aforementioned companies or partnerships is
currently expected to be elected, appointed or employed as a director, officer
or employee of the Company or of any associate or affiliate of the Company.

AUDITORS, TRANSFER AGENT AND REGISTRAR

The auditors of the Company are PricewaterhouseCoopers LLP, Chartered
Accountants, of 250 Howe Street, Suite 700, Vancouver, British Columbia
V6C 3S7 who advise that they are independent of the Company within the Rules
of Professional Conduct of the Institute of Chartered Accountants of British
Columbia. The auditors are registered with the U.S. Public Accounting
Oversight Board.

The transfer agent and registrar for the common shares of the Company is
Computershare Investor Services Inc. at its principal offices in Toronto,
Ontario.

DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT

The following documents have been or will be filed with the SEC as part of
the registration statement of which this prospectus forms a part: (i) the
documents referred to under the heading "Documents Incorporated by Reference";
(ii) the form of Underwriting Agreement; (iii) consent of PricewaterhouseCoopers
LLP; (iv) consent of Fasken Martineau DuMoulin LLP; (v) consent of Heenan
Blaikie LLP; (vi) consent of Pincock Allen & Holt; (vii) consent of Raul
Borrastero, C.P.G; (viii) consent of Susan Poos, P.E.; (ix) consent of Richard
Addison, P.E., C Eng, Eur.Ing; (x) consent of Richard J. Lambert, P.E.; (xi)
consent of Brad Yonaka, Exploration Manager for Gold Reserve; and (xi) powers of
attorney from directors and officers of Gold Reserve.

ADDITIONAL INFORMATION

The Company has filed with the SEC a registration statement on Form F-10
relating to the Common Shares. This short form prospectus, which constitutes a
part of the registration statement, does not contain all of the information
contained in the registration statement, certain items of which are contained
in the exhibits to the registration statement as permitted by the rules and
regulations of the SEC. Statements included or incorporated by reference in
this prospectus about the contents of any contract, agreement or other
document referred to are not complete, and in each instance you should refer
to the exhibits for a more complete description of the matter involved. Each
such statement is qualified in its entirety by such reference.

The Company is subject to the information requirements of the U.S. Exchange
Act and applicable Canadian securities legislation, and in accordance
therewith files reports and other information with the SEC and with the
securities regulators in Canada. Under a multi-jurisdictional disclosure
system adopted by the United States, documents and other information that the
Company files with the SEC may be prepared in accordance with the disclosure
requirements of Canada, which are different from those of the United States
(materially different in some circumstances). As a foreign private issuer, the
Company is exempt from the rules under the U.S. Exchange Act prescribing the
furnishing and content of proxy statements, and its officers, directors and
principal shareholders are exempt from the reporting and short swing profit
recovery provisions contained in Section 16 of the U.S. Exchange Act. In
addition, the Company is not required to publish financial statements as
promptly as U.S. companies.

You may read any document that the Company has filed with the SEC at the
SEC's public reference room in Washington, D.C. You may also obtain copies of
those documents from the public reference room of the SEC at 100 F Street,
N.E., Washington, D.C. 20549 by paying a fee. You should call the SEC at 1-
800-SEC-0330 or access its website at www.sec.gov for further information
about the public reference rooms. You may read and download documents the
Company has publicly filed with the SEC's Electronic Data Gathering and
Retrieval system at www.sec.gov. You may read and download any public document
that the Company has filed with the Canadian securities regulatory authorities
at www.sedar.com.

ENFORCEABILITY OF CIVIL LIABILITIES

The Company is a corporation existing under the Business Corporations Act
(Yukon). Some of the Company's directors and some of the experts named in this
prospectus, are residents of Canada or otherwise reside outside the United
States, and all or a substantial portion of their assets, and a substantial
portion of the Company's assets, are located outside the United States. The
Company has appointed an agent for service of process in the United States,
but it may be difficult for holders of Common Shares who reside in the United
States to effect service within the United States upon those directors and
experts who are not residents of the United States. It may also be difficult
for holders

of Common Shares who reside in the United States to realize in the United
States upon judgments of courts of the United States predicated upon the
Company's civil liability and the civil liability of its directors, officers
and experts under the United States federal securities laws. The Company has
been advised by its Canadian counsel, Fasken Martineau DuMoulin LLP, that a
judgment of a United States court predicated solely upon civil liability under
United States federal securities laws would probably be enforceable in Canada
if the United States court in which the judgment was obtained had a basis for
jurisdiction in the matter that would be recognized by a Canadian court for
the same purposes. The Company has also been advised by Fasken Martineau
DuMoulin LLP, however, that there is substantial doubt whether an action could
be brought in Canada in the first instance on the basis of liability
predicated solely upon United States federal securities laws.

The Company filed with the SEC, concurrently with its registration
statement on Form F-10 of which this prospectus is a part, an appointment of
agent for service of process on Form F-X. Under the Form F-X, the Company
appointed Gold Reserve Corporation, its Montana subsidiary, as its agent for
service of process in the United States in connection with any investigation
or administrative proceeding conducted by the SEC, and any civil suit or
action brought against or involving the Company in a United States court
arising out of or related to or concerning the offering of the Common Shares
under this prospectus.

INTERNATIONAL ISSUER

Although the Company resides in Canada, a substantial portion of its assets
are located outside of Canada. Although Gold Reserve has appointed Austring,
Fendrick, Fairman & Pakkari, The Drury Building, 3801 Third Avenue,
Whitehorse, Yukon Y1A 4Z7, as its agent for service of process in Canada, it
may not be possible for investors to collect from Gold Reserve judgements
obtained in Canadian courts predicated on the civil liability provisions of
securities legislation.

STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION

Securities legislation in certain of the provinces of Canada provides
purchasers with the right to withdraw from an agreement to purchase
securities. This right may be exercised within two business days after receipt
or deemed receipt of a prospectus and any amendment. In several of the
provinces, the securities legislation further provides a purchaser with
remedies for rescission or, in some jurisdictions, damages if the prospectus
and any amendment contains a misrepresentation or is not delivered to the
purchaser, provided that such remedies for rescission or damages are exercised
by the purchaser within the time limit prescribed by the securities
legislation of the purchaser's province. The purchaser should refer to
applicable provisions of the securities legislation of such purchaser's
province for the particulars of these rights or consult with a legal adviser.

AUDITORS' REPORT WITH RESPECT TO SUPPLEMENTARY INFORMATION

To the Board of Directors of
Gold Reserve Inc.

Our audit of the consolidated financial statements of Gold Reserve Inc.
referred to in our report to the Shareholders dated February 17, 2006 included
consideration of note 11, Differences Between Canadian and U.S. GAAP as at
December 31, 2005 and 2004 and for each of the years in the three-year period
ended December 31, 2005.

Management has also prepared supplementary disclosure under U.S. GAAP as at
December 31, 2005 and 2004 and for each of the years in the three-year period
ended December 31, 2005 ("Supplementary Information on Differences Between
Canadian and U.S. GAAP"). In our opinion, this Supplementary Information on
Differences Between Canadian and U.S. GAAP presents fairly, in all material
respects, the disclosures set forth therein when read in conjunction with the
related consolidated financial statements of the Company.

Vancouver, British Columbia, Canada /s/ PricewaterhouseCoopers
February 17, 2006 Chartered Accountants

F-1

U.S. GAAP RECONCILIATION TO FINANCIAL STATEMENTS

The Company prepares its consolidated financial statements in U.S. dollars
in accordance with Canadian GAAP, which principles differ in certain respects
from United States GAAP. The Company has previously reported its financial
statements in accordance with Item 17 under Form 20-F, including the U.S. GAAP
reconciliation requirements thereunder. In order to be eligible for use of the
SEC's registration statement on Form F-10, of which this short form prospectus
constitute a part, the Company must reconcile its financial statements
pursuant to Item 18 under Form 20-F, which requires more detailed
reconciliation with U.S. GAAP and the rules and regulations promulgated by the
SEC. This "U.S. GAAP Reconciliation to Financial Statements" section
supplements the Company's financial statements set forth in its AIF in order
to comply with Item 18 under Form 20-F. This section should be read in
conjunction with the financial statements of the Company set forth in the AIF.

The effect of the principal differences between U.S. and Canadian GAAP as
required by Item 18 of Form 20-F (and the rules and regulations of the SEC)
are summarized below.

Consolidated Summarized Balance Sheets

Canadian GAAP Change U.S. GAAP
------------- ------------ -------------

2005
Assets
Current assets(A)................... $ 22,797,616 $ 4,112,904 $ 26,910,520
Mineral property costs(C)........... 46,381,380 (41,034,321) 5,347,059
Other assets........................ 12,775,876 -- 12,775,876
------------ ------------ -------------
$ 81,954,872 $(36,921,417) $ 45,033,455
============ ============ =============
Liabilities......................... $ 2,317,106 $ -- $ 2,317,106
Shareholders' equity
Common shares & equity units(B)..... 140,512,063 (5,185,930) 135,326,133
Less, common shares & equity units
held by affiliates................. (674,598) -- (674,598)
Contributed surplus................. -- 1,489,156 1,489,156
Stock options(B).................... 1,867,537 3,922,652 5,790,189
Value assigned to warrants.......... -- 3,682,447 3,682,447
Accumulated deficit(B),(C).......... (61,983,016) (44,942,646) (106,925,662)
Accumulated other comprehensive
income(A).......................... -- 4,112,904 4,112,904
KSOP debt........................... (84,220) -- (84,220)
------------ ------------ -------------
79,637,766 (36,921,417) 42,716,349
------------ ------------ -------------
$ 81,954,872 $(36,921,417) $ 45,033,455
============ ============ =============

Canadian GAAP Change U.S. GAAP
------------- ------------ -------------

2004
Assets
Current assets(A)................... $ 33,057,053 3,043,978 $ 36,101,031
Mineral property costs(C)........... 41,034,321 (41,034,321) --
Other assets........................ 12,514,157 -- 12,514,157
------------ ------------ -------------
$ 86,605,531 $(37,990,343) $ 48,615,188
============ ============ =============
Liabilities......................... $ 2,429,473 $ -- $ 2,429,473
Shareholders' equity
Common shares & equity units(B)..... 136,907,516 (5,409,346) 131,498,170
Less, common shares & equity units
held by affiliates................. (674,598) -- (674,598)
Stock options(B).................... 1,004,197 7,071,690 8,075,887
Value assigned to warrants.......... -- 5,395,019 5,395,019
Accumulated deficit(B),(C).......... (52,955,734) (48,091,684) (101,047,418)
Accumulated other comprehensive
income(A).......................... -- 3,043,978 3,043,978
KSOP debt........................... (105,323) -- (105,323)
------------ ------------ -------------
84,176,058 (37,990,343) 46,185,715
------------ ------------ -------------
$ 86,605,531 $(37,990,343) $ 48,615,188
============ ============ =============

F-2

Consolidated Summarized Statements of Operations

2005 2004 2003
----------- ------------ ------------

Net Loss under Canadian GAAP.......... $(9,027,282) $ (5,482,629) $ (3,707,336)
Stock based compensation(B).......... 3,149,038 1,391,066 (7,704,726)
Mineral property costs(C)............ -- (6,268,328) --
----------- ------------ ------------
Net loss under U.S. GAAP.............. (5,878,244) (10,359,891) (11,412,062)
Other comprehensive income (loss)
Unrealized gain (loss) on available-
for-sale securities(A).............. 1,068,926 (70,147) 3,072,941
Reclassification adjustment for
(gain) loss included in net loss.... 55,957 -- (176,375)
Total comprehensive loss under U.S.
GAAP................................ $(4,753,361) $(10,430,038) $ (8,515,496)
----------- ------------ ------------
Basic and diluted net loss per share
under U.S. GAAP..................... $(.17) $(.35) $(.46)
=========== ============ ============

Consolidated Summarized Statements of Cash Flows

2005 2004 2003
----------- ------------ ------------

Cash flow used by operating activities
under Canadian GAAP.................. $(7,729,508) $ (3,958,108) $ (2,898,151)
Mineral property costs(C)............ -- (6,268,328) --
----------- ------------ ------------
Cash flow used by operating activities
under U.S. GAAP...................... $(7,729,508) $(10,226,436) $ (2,898,151)
=========== ============ ============
Cash flow (used) provided by investing
activities under Canadian GAAP....... $(2,691,289) $ (3,661,785) $ 2,731,267
Mineral property costs(C)............ -- 6,268,328 --
----------- ------------ ------------
Cash flow (used) provided by investing
activities under U.S. GAAP........... $(2,691,289) $ 2,606,543 $ 2,731,267
=========== ============ ============

--------
(A) Under U.S. GAAP, marketable securities would be divided between held-to-
maturity securities and available-for-sale securities. Those securities
classified as available-for-sale would be recorded at market value and the
unrealized gain or loss would be recorded as part of comprehensive income.
(B) For U.S. GAAP purposes, the Company accounts for stock-based employee
compensation arrangements using the intrinsic value method prescribed in
Accounting Principles Board (APB) Opinion No.25, "Accounting for Stock
Issued to Employees." Under U.S. GAAP, when the exercise price of certain
stock options is amended (the "Repricing"), these options are accounted
for as variable compensation from the date of the effective Repricing.
Under this method, following the Repricing date, compensation expense is
recognized when the quoted market value of the Company's common shares
exceeds the amended exercise price. Should the quoted market value
subsequently decrease, a recovery of a portion, or all of the previously
recognized compensation expense will be recognized. For U.S. GAAP purposes,
the Company will adopt SFAS 123R, "Accounting for Stock Based Compensation"
effective January 1, 2006. SFAS 123R requires the use of the fair value
method of accounting for stock based compensation. This standard is
substantially consistent with the revised provisions of CICA 3870, which
was adopted by the Company for Canadian GAAP effective January 1, 2004. For
U.S.GAAP, the Company has not yet determined which acceptable method of
adoption it will apply.

(C) Under Canadian GAAP, the Company capitalizes mineral property exploration
and development costs after proven and probable reserves have been
established. The Company also capitalizes costs on properties where it has
found non-reserve material that does not meet all the criteria required for
classification as proven or probable reserves. Under U.S. GAAP, exploration
and development expenditures incurred on properties where mineralization has
not been classified as a proven and probable reserve under SEC rules, are
expensed as incurred. Accordingly, certain expenditures are capitalized for
Canadian GAAP purposes but expensed under U.S. GAAP.

Pro-forma stock based compensation

For U.S. GAAP purposes, the Company accounts for stock-based employee
compensation arrangements using the intrinsic value method. Had the fair value
method of accounting been used under U.S. GAAP, the net loss and net loss per
share would have been as follows:

2005 2004 2003
------------ ------------ ------------

Net loss under U.S. GAAP............. $ (5,878,244) $(10,359,891) $(11,412,062)
Variable plan accounting adjustment
included in net loss................ (2,285,698) (791,643) 7,704,726
Stock based compensation under the
fair value method................... (863,340) (599,423) (406,108)
------------ ------------ ------------
Pro-forma net loss under U.S. GAAP... $ (9,027,282) $(11,750,957) $ (4,113,444)
============ ============ ============
Pro-forma basic and diluted net loss
per share under U.S. GAAP........... $(.26) $(.40) $(.17)
============ ============ ============

F-3

Development Stage Enterprise

In August of 1992, the Company acquired the Brisas Project. Beginning in
1993 the Company decided to focus its efforts on the development of Brisas
thereby meeting the definition of a development stage enterprise under
Statement of Financial Accounting Standards No. 7 (FAS 7), Accounting and
Reporting by Development Stage Enterprises. The following additional
information is required under FAS 7.

Consolidated Summarized Statements of Operations - U.S. GAAP
For the period from January 1, 1993 to December 31, 2005

Other income..................................................... $(14,935,581)
Mineral property exploration and development..................... 39,505,080
General & administrative expense................................. 27,345,826
Other expense.................................................... 49,085,509
------------
Deficit accumulated during the development stage
from January 1, 1993 to December 31, 2005....................... 101,000,834
Accumulated deficit, December 31, 1992........................... 5,924,828
------------
Accumulated deficit, December 31, 2005........................... $106,925,662
============

Consolidated Summarized Statements of Cash Flows - U.S. GAAP
For the period from January 1, 1993 to December 31, 2005

Cash used by operating activities................................ $(73,097,165)
Cash used by investing activities................................ (12,432,736)
Cash provided by financing activities............................ 103,271,301
------------
Increase in cash and cash equivalents for the period
from January 1, 1993 to December 31, 2005....................... 17,741,400
Cash and cash equivalents at December 31, 1992................... 1,628,852
------------
Cash and cash equivalents at December 31, 2005................... $ 19,370,252
============

F-4

Additional Shareholders' Equity disclosure - U.S. GAAP
For the period from January 1, 1993 to December 31, 2005

Common Shares and Equity Units
Issued
----------------------------------
Shares
and units Value Value Comprehensive
Issue Common Equity held by Contributed assigned assigned Accumulated income
Price Shares Units Amount affiliates surplus to options to warrants Deficit (loss)
----- ---------- ------ ---------- ---------- ----------- ---------- ----------- ----------- -------------

Balance,
December 31,
1992........... 8,875,862 $ 8,290,819 $ (70,944) $ (5,924,828)
Stock issued for
cash
Private
placement...... 4.12 2,530,000 10,413,976
Exercise of
options........ 1.34 300,000 401,000
Exercise of
warrants....... 3.52 5,037 17,749
Stock issued for
services....... 3.89 12,552 48,851
Net loss........ (5,495,061)
Change in KSOP
debt...........
Reduction of
shareholders'
equity due to
change in
subsidiaries'
minority
interest....... (25,050)
--------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1993........... 11,723,451 $19,147,345 (70,944) (11,419,889)
Stock issued for
cash
Private
placement...... 9.82 2,000,000 19,630,530
Exercise of
options........ 2.32 295,967 687,494
Exercise of
warrants....... 6.07 2,134,250 12,962,750
Stock issued for
services....... 5.50 6,000 33,000
Stock issued to
KSOP........... 6.19 20,000 123,760
Stock issued for
litigation
settlement..... 6.15 2,750,000 16,912,500
Value attributed
to warrants
issued in
litigation
settlement..... 800,000
Net loss........ (26,297,415)
Increase in
common stock
held by
affiliates..... (433,332)
Effect of change
in accounting
For
investments.... 108,425
Decrease in
unrealized gain
on available-
for-sale
securities..... (29,408)
Change in KSOP
debt...........
Reduction of
shareholders'
equity due to
change in
subsidiaries'
minority
interest....... (843,986)
--------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1994........... 18,929,668 69,453,393 (504,276) (37,717,304) 79,017
Stock issued for
cash
Exercise of
options........ 2.74 167,835 460,162
Stock issued to
KSOP........... 5.60 50,000 280,195
Stock issued for
minority
interest in
subsidiaries... 7.43 1,329,185 9,882,028
Net loss........ (3,847,605)
Increase in
common stock
held by
affiliates..... (924,289)
Increase in
unrealized gain
on available-
for-sale
securities..... 6,943
Change in KSOP
debt...........
Reduction of
shareholders'
equity due to
change in
subsidiaries'
minority
interest....... (6,924)
--------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1995........... 20,476,688 80,068,854 (1,428,565) (41,564,909) 85,960
Stock issued for
cash
Exercise of
options........ 5.37 497,623 2,673,988
Exercise of
warrants....... 10.52 1,729,500 18,202,500
Net loss........ (7,908,701)
Decrease in
unrealized gain
on available-
for-sale
securities..... (83,210)
Change in KSOP
debt...........
Addition to
shareholders'
equity due to
change in
subsidiaries'
minority
interest....... 7,436
--------------------------------------------------------------------------------------------------------------------------------

KSOP
debt
---------

Balance,
December 31,
1992........... $(50,000)
Stock issued for
cash
Private
placement......
Exercise of
options........
Exercise of
warrants.......
Stock issued for
services.......
Net loss........
Change in KSOP
debt........... 5,000
Reduction of
shareholders'
equity due to
change in
subsidiaries'
minority
interest.......
--------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1993........... $(45,000)
Stock issued for
cash
Private
placement......
Exercise of
options........
Exercise of
warrants.......
Stock issued for
services.......
Stock issued to
KSOP...........
Stock issued for
litigation
settlement.....
Value attributed
to warrants
issued in
litigation
settlement.....
Net loss........
Increase in
common stock
held by
affiliates.....
Effect of change
in accounting
For
investments....
Decrease in
unrealized gain
on available-
for-sale
securities.....
Change in KSOP
debt........... (103,760)
Reduction of
shareholders'
equity due to
change in
subsidiaries'
minority
interest.......
--------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1994........... (148,760)
Stock issued for
cash
Exercise of
options........
Stock issued to
KSOP...........
Stock issued for
minority
interest in
subsidiaries...
Net loss........
Increase in
common stock
held by
affiliates.....
Increase in
unrealized gain
on available-
for-sale
securities.....
Change in KSOP
debt........... (187,949)
Reduction of
shareholders'
equity due to
change in
subsidiaries'
minority
interest.......
--------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1995........... (336,709)
Stock issued for
cash
Exercise of
options........
Exercise of
warrants.......
Net loss........
Decrease in
unrealized gain
on available-
for-sale
securities.....
Change in KSOP
debt........... 150,001
Addition to
shareholders'
equity due to
change in
subsidiaries'
minority
interest.......
--------------------------------------------------------------------------------------------------------------------------------

F-5

Common Shares and Equity Units Issued
-----------------------------------------------
Shares
and units Value Value
Issue Common Equity held by Contributed assigned assigned Accumulated
Price Shares Units Amount affiliates surplus to options to warrants Deficit
---------- ---------- ----------- ----------- ---------- ----------- ---------- ----------- -----------

Balance,
December 31,
1996........... 22,703,811 $100,952,778 $(1,428,565) (49,473,610)
Stock issued for
cash
Exercise of
options........ 5.75 124,649 716,716
Stock issued to
KSOP........... 5.02 89,683 450,000
Net loss........ (10,918,111)
Increase in
unrealized gain
on available-
for-sale
securities.....
Change in KSOP
debt...........
-------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1997........... 22,918,143 102,119,494 (1,428,565) (60,391,721)
Stock issued for
cash
Exercise of
options........ 1.90 223,624 425,883
Stock issued to
KSOP........... 3.00 50,000 150,000
Net loss........ (5,147,658)
Change in shares
held by
affiliates..... (1,034,323) 1,025,234
Decrease in
unrealized gain
(loss) on
available-for-
sale
securities.....
Change in KSOP
debt...........
-------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1998........... 23,191,767 101,661,054 (403,331) (65,539,379)
Stock issued for
cash
Exercise of
options........ 1.19 12,500 14,899
Stock issued for
services....... 0.84 70,000 58,760
Stock issued to
KSOP........... 1.13 300,000 337,500
Stock retired... 3.02 (1,629) (4,915)
Net loss........ (4,499,321)
Net common
shares
exchanged for
equity units... (1,584,966) 1,584,966
Decrease in
unrealized loss
on available-
for-sale
securities.....
Change in KSOP
debt...........
-------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1999........... 21,987,672 1,584,966 102,067,298 (403,331) (70,038,700)
Stock issued for
services....... 0.55 70,000 38,688
Net loss........ (2,807,648)
Equity units
exchanged for
common shares.. 138,570 (138,570)
Increase in
unrealized gain
on available-
for-sale
securities.....
Change in KSOP
debt...........
-------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
2000........... 22,196,242 1,446,396 102,105,986 (403,331) (72,846,348)
Stock issued for
cash
Exercise of
options........ 0.78 5,500 4,285
Stock issued for
services....... 0.75 20,000 15,000
Stock issued to
KSOP........... 0.47 300,000 140,640
Net loss........ (2,258,191)
Change in common
stock held by
affiliates..... (271,267)
Equity units
exchanged for
common shares.. 133,380 (133,380)
Increase in
unrealized gain
on available-
for-sale
securities.....
Change in KSOP
debt...........
-------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
2001........... 22,655,122 1,313,016 102,265,911 (674,598) (75,104,539)
Stock issued for
cash
Exercise of
options........ 0.72 18,000 12,960
Stock issued for
services....... 0.85 100,000 85,200
Stock issued to
KSOP........... 0.67 200,000 134,000
Variable plan
accounting for
options........ 1,162,804
Net loss........ (4,170,926)
Equity units
exchanged for
common shares.. 23,036 (23,036)
Decrease in
unrealized gain
on available-
for-sale
securities.....
Change in KSOP
debt...........
-------------------------------------------------------------------------------------------------------------------------------

Comprehensive
income KSOP
(loss) debt
------------- ----------

Balance,
December 31,
1996........... 2,750 (186,708)
Stock issued for
cash
Exercise of
options........
Stock issued to
KSOP...........
Net loss........
Increase in
unrealized gain
on available-
for-sale
securities..... 8,250
Change in KSOP
debt........... (436,152)
-------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1997........... 11,000 (622,860)
Stock issued for
cash
Exercise of
options........
Stock issued to
KSOP...........
Net loss........
Change in shares
held by
affiliates.....
Decrease in
unrealized gain
(loss) on
available-for-
sale
securities..... (22,625)
Change in KSOP
debt........... 208,089
-------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1998........... (11,625) (414,771)
Stock issued for
cash
Exercise of
options........
Stock issued for
services.......
Stock issued to
KSOP...........
Stock retired...
Net loss........
Net common
shares
exchanged for
equity units...
Decrease in
unrealized loss
on available-
for-sale
securities..... (328,618)
Change in KSOP
debt........... 230,352
-------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1999........... (340,243) (184,419)
Stock issued for
services.......
Net loss........
Equity units
exchanged for
common shares..
Increase in
unrealized gain
on available-
for-sale
securities..... 437,875
Change in KSOP
debt........... 99,310
-------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
2000........... 97,632 (85,109)
Stock issued for
cash
Exercise of
options........
Stock issued for
services.......
Stock issued to
KSOP...........
Net loss........
Change in common
stock held by
affiliates.....
Equity units
exchanged for
common shares..
Increase in
unrealized gain
on available-
for-sale
securities..... 62,368
Change in KSOP
debt........... 1,322
-------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
2001........... 160,000 (83,787)
Stock issued for
cash
Exercise of
options........
Stock issued for
services.......
Stock issued to
KSOP...........
Variable plan
accounting for
options........
Net loss........
Equity units
exchanged for
common shares..
Decrease in
unrealized gain
on available-
for-sale
securities..... (118,816)
Change in KSOP
debt........... 19,003
-------------------------------------------------------------------------------------------------------------------------------

F-6

Common Shares and Equity Units Issued
---------------------------------------
Shares
and units Value Value
Issue Common Equity held by Contributed assigned assigned Accumulated
Price Shares Units Amount affiliates surplus to options to warrants Deficit
----- ---------- --------- ----------- ---------- ----------- ---------- ----------- ------------

Balance,
December 31,
2002........... 22,996,158 1,289,980 102,498,071 (674,598) 1,162,804 (79,275,465)
Stock issued for
cash
Private
placement...... 1.95 4,042,000 7,888,508
Exercise of
options........ 0.74 400,000 294,605
Stock issued for
services....... 5.06 60,000 303,600
Stock issued to
KSOP........... 1.28 200,000 256,000
Value assigned
to warrants
issued......... 1,730,641
Variable plan
accounting for
options........ 7,704,726
Net loss........ (11,412,062)
Equity units
exchanged for
common shares.. 52,100 (52,100)
Increase in
unrealized gain
on available-
for-sale
securities.....
Change in KSOP
debt...........
------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
2003........... 27,750,258 1,237,880 111,240,784 (674,598) 8,867,530 1,730,641 (90,687,527)
Stock issued for
cash
Private
placement...... 3.61 5,361,000 19,337,034
Exercise of
warrants....... 4.28 21,100 90,211
Exercise of
options........ 0.89 373,954 333,310
Stock issued for
services....... 4.13 54,000 223,012
Stock issued to
KSOP........... 3.41 75,000 255,750
Value assigned
to warrants
issued......... 3,682,447
Variable plan
accounting for
options........ (791,643)
Assigned value
of exercised
warrants....... 18,069 (18,069)
Net loss........ (10,359,891)
Equity units
exchanged for
common shares.. 80,483 (80,483)
Decrease in
unrealized gain
on available-
for-sale
securities.....
Change in KSOP
debt...........
------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
2004........... 33,715,795 1,157,397 131,498,170 (674,598) 8,075,887 5,395,019 (101,047,418)
Stock issued for
cash
Exercise of
warrants....... 4.33 260,900 1,129,905
Exercise of
underwriter
compensation
options........ 3.00 202,100 605,468
Exercise of
underwriter
compensation
warrants....... 4.32 70,735 305,646
Exercise of
options........ 1.00 573,030 571,326
Stock issued for
services....... 2.92 251,350 733,231
Stock issued to
KSOP........... 3.45 75,000 258,971
Net loss........ (5,878,244)
Variable plan
accounting for
options........ (2,285,698)
Assigned value
of exercised
warrants...... 223,416 (223,416)
Assigned value
of expired
warrants....... 1,489,156 (1,489,156)
Equity units
exchanged for
common shares.. 47,377 (47,377)
Increase in
unrealized gain
on available-
for-sale
securities.....
Change in KSOP
debt...........
------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
2005........... $35,196,287 1,110,020 $135,326,133 (674,598) $1,489,156 $5,790,189 $3,682,447 $(106,925,662)
========================================================================================================================

Comprehensive
income KSOP
(loss) debt
------------- ---------

Balance,
December 31,
2002........... 41,184 (64,784)
------------------------------------------------------------------------------------------------------------------------
Stock issued for
cash
------------------------------------------------------------------------------------------------------------------------
Private
placement......
Exercise of
options........
Stock issued for
services.......
Stock issued to
KSOP...........
Value assigned
to warrants
issued.........
Variable plan
accounting for
options........
Net loss........
Equity units
exchanged for
common shares..
Increase in
unrealized gain
on available-
for-sale
securities..... 3,072,941
Change in KSOP
debt........... (39,568)
------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
2003........... 3,114,125 (104,352)
------------------------------------------------------------------------------------------------------------------------
Stock issued for
cash
------------------------------------------------------------------------------------------------------------------------
Private
placement......
Exercise of
warrants.......
Exercise of
options........
Stock issued for
services.......
Stock issued to
KSOP...........
Value assigned
to warrants
issued.........
Variable plan
accounting for
options........
Assigned value
of exercised
warrants.......
Net loss........
Equity units
exchanged for
common shares..
Decrease in
unrealized gain
on available-
for-sale
securities..... (70,147)
Change in KSOP
debt........... (971)
------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
2004........... 3,043,978 (105,323)
------------------------------------------------------------------------------------------------------------------------
Stock issued for
cash
------------------------------------------------------------------------------------------------------------------------
Exercise of
warrants.......
Exercise of
underwriter
compensation
options........
Exercise of
underwriter
compensation
warrants.......
Exercise of
options........
Stock issued for
services.......
Stock issued to
KSOP...........
Net loss........
Variable plan
accounting for
options........
Assigned value
of exercised
warrants.......
Assigned value
of expired
warrants.......
Equity units
exchanged for
common shares..
Increase in
unrealized gain
on available-
for-sale
securities..... 1,068,926
Change in KSOP
debt........... 21,103
------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
2005........... 4,112,904 (84,220)

F-7

[GOLD RESERVE LOGO]

PART II

INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

Indemnification of Directors and Officers.

The only statutes, charter provisions, bylaws, contracts or other
arrangements under which a director or officer of the Registrant is insured or
indemnified in any manner against liability which such officer of director may
incur in such capacity is Section 126 of the Yukon Business Corporations Act
and Sections 7.02 through 7.04 of the Registrant's Bylaws. Taken together, the
statutory and bylaw provisions generally allow the Registrant to indemnify its
directors or officers against liability and expenses provided the officer or
director seeking indemnity (1) was substantially successful on the merits in
the defense of the action or proceeding, (2) (a) acted honestly and in good
faith with a view to the best interest of the Registrant and (b) in the case
of a criminal or administrative action or proceeding that is enforced by a
monetary penalty, the officer or director had reasonable grounds for believing
the conduct was lawful, and (3) is fairly and reasonably entitled to
indemnity.

YUKON LAW

Section 126 of the Yukon Business Corporations Act is set forth in its
entirety as follows. All capitalized terms used herein but not otherwise
defined shall have the meanings as set forth in the Yukon Business
Corporations Act.

126. (1) Except in respect of an action by or on behalf of the corporation or
body corporate to procure a judgment in its favor, a corporation may
indemnify a director or officer of the corporation, a former director
or officer of the corporation or a person who acts or acted at the
corporation's request as a director or officer of a body corporate of
which the corporation is or was a shareholder or creditor, and his
heirs and legal representatives, against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him in respect of any civil,
criminal or administrative action or proceeding to which he is made a
party by reason of being or having been a director or officer of that
corporation or body corporate, if:

(a) he acted honestly and in good faith with a view to the best
interests of the corporation; and

(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he had reasonable grounds
for believing that his conduct was lawful.

(2) A corporation may with the approval of the Supreme Court indemnify a
person referred to in subsection (1) in respect of an action by or on
behalf of the corporation or body corporate to procure a judgment in
its favor, to which he is made a party by reason of being or having
been a director or an officer of the corporation or body corporate,
against all costs, charges and expenses reasonably incurred by him in
connection with the action if he fulfils the conditions set out in
paragraphs (1)(a) and (b).

(3) Notwithstanding anything in this section, a person referred to in
subsection (1) is entitled to indemnity from the corporation in respect
of all costs, charges and expenses reasonably incurred by him in
connection with the defense of any civil, criminal or administrative
action or proceeding to which he is made a party by reason of being or
having been a director or officer of the corporation or body corporate,
if the person seeking indemnity:

(a) was substantially successful on the merits in his defense of the
action or proceeding;

(b) fulfills the conditions set out in paragraphs (1)(a) and (b); and

(4) A corporation may purchase and maintain insurance for the benefit of
any person referred to in subsection (1) against any liability incurred
by him:

(a) in his capacity as a director or officer of the corporation, except
when the liability relates to his failure to act honestly and in
good faith with a view to the best interests of the corporation, or

(b) in his capacity as a director or officer of another body corporate
if he acts or acted in that capacity at the corporation's request,
except when the liability relates to his failure to act honestly
and in good faith with a view to the best interests of the body
corporate.

II-1

(5) A corporation or a person referred to in subsection (1) may apply to
the Supreme Court for an order approving an indemnity under this
section and the Supreme Court may so order and make any further order
it thinks fit.

(6) On an application under subsection (5), the Supreme Court may order
notice to be given to any interested person and that person is entitled
to appear and be heard in person or by counsel.

Sections 7.02 through 7.04 of the Registrant's bylaws are set forth in
their entirety as follows. All capitalized terms used herein but not otherwise
defined shall have the meanings as set forth in the Registrant's bylaws.

7.02 Limitation of Liability

Subject to the Act, no director or officer, or former director or officer,
of the Corporation shall be liable for the acts, receipts, neglects or
defaults of any other director or officer or employee, or for the joining
in any receipt or act for conformity, or for any loss or damage or expense
happening to the Corporation through the insufficiency or deficiency of
title to any property acquired by the Corporation or for or on behalf of
the Corporation or for the insufficiency or deficiency of any security in
or upon which any of the money of or belonging to the Corporation shall be
placed or invested, or for any loss or damage arising from the bankruptcy,
insolvency or tortuous act of any person, firm or corporation including any
person, firm or corporation with whom or with which any moneys, securities
or effects shall be lodged or deposited, or for any loss, conversion,
misapplication or misappropriation of or any damage resulting from any
dealing with any moneys, securities or other assets of or belonging to the
Corporation or for any other loss, damage or misfortune whatsoever which
may happen in the execution of the duties of his respective office or trust
or in relation thereto unless the same shall happen by or through his
failure to exercise the powers and to discharge the duties of his office
honestly and in good faith with a view to the best interest of the
Corporation and to exercise the care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances. Any repeal or
modification of the foregoing provisions of this paragraph 7.02 shall not
adversely affect any limitation on the personal liability of a director or
officer of the Corporation arising from an act or omission occurring prior
to the time of such repeal or amendment. In addition to the circumstances
in which a director or officer of the Corporation is not personally liable
as set forth in the foregoing provisions of this paragraph 7.02, a director
or officer shall not be liable to the Corporation or its shareholders to
such further extent as permitted by any law hereafter enacted, including,
without limitation, any subsequent amendment to the Act.

7.03 Indemnity

Subject to the Act, the Corporation shall indemnify a director or officer,
a former director or officer, and a person who acts or acted at the
Corporation's request as a director or officer of a body corporate of which
the Corporation is or was a shareholder or creditor, and his heirs and
legal representatives, against all costs, charges and expenses, including
any amount paid to settle an action or satisfy a judgment, reasonably
incurred by him in respect of any civil, criminal or administrative action
or proceeding to which he is made a party by reason of being or having been
a director or officer of the Corporation or such body corporate, if:

(a) he acted honestly and in good faith with a view to the best interests
of the Corporation; and

(b) in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, he had reasonable grounds for
believing his conduct was lawful.

The Corporation shall indemnify the directors and officers of the
Corporation to the fullest extent permitted by law. The Corporation may
indemnify any employee or agent of the Corporation to the fullest extent
permitted by law. In addition to the circumstances in which a director or
officer of the Corporation is indemnified as set forth in the foregoing
provisions of this paragraph 7.03, a director or officer shall be
indemnified by the Corporation to such further extent as permitted by any
law hereafter enacted, including, without limitation, any subsequent
amendment to the Act.

7.04 Insurance

The Corporation may, subject to and in accordance with the Act, purchase
and maintain insurance for the benefit of any director or officer, or
former director or officer, of the Corporation as such against any
liability incurred

II-2

by him. The Corporation may provide such insurance to directors and
officers regardless of whether such directors and officers are indemnified
pursuant to paragraph 7.03 above.

The Underwriting Agreement contains provisions by which the Underwriters
agree to indemnify the Registrant, each of the directors and officers of the
Registrant and each person who controls the Registrant within the meaning of
the Securities Act of 1933, as amended, with respect to information furnished
by the Underwriters for use in this Registration Statement.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, and is, therefore, unenforceable.

II-3

EXHIBITS

Exhibit Description
------- -----------

3.1 Form of Underwriting Agreement
4.1 Annual information form of the Registrant in the form of Form
20-F for the year ended December 31, 2005 (incorporated by
reference to the Registrant's annual report on Form 20-F filed
with the Commission on April 3, 2006)
4.2 Audited annual consolidated comparative financial statements of
the Registrant for the year ended December 31, 2005 and the
auditors' report thereon, together with management's discussion
and analysis for the year ended December 31, 2005 (incorporated
by reference to the Registrant's annual report on Form 20-F
filed with the Commission on April 3, 2006)
4.3 Management information circular dated April 14, 2005 prepared in
connection with the Registrant's annual and special meeting of
shareholders held on June 2, 2005 (incorporated by reference to
the Registrant's Form 6-K furnished to the Commission May 2,
2006)
4.4 Management information circular dated January 31, 2006 prepared
in connection with the Registrant's special meeting of
shareholders held on March 22, 2006 (incorporated by reference
to the Registrant's Form 6-K furnished to the Commission May 2,
2006)
4.5 Summary, being pages 1.1 to 1.13 inclusive of NT 43-101 Technical
Report on the Brisas Project dated February 24, 2005 as prepared by
Pincock Allen of Holt (incorporated by reference to the Registrant's
Form 6-K furnished to the Commission May 2, 2006)
5.1 Consent of PricewaterhouseCoopers LLP
5.2* Consent of Fasken Martineau DuMoulin LLP
5.3* Consent of Heenan Blaikie LLP
5.4* Consent of Pincock Allen & Holt
5.5* Consent of Raul Borrastero, C.P.G.
5.6* Consent of Susan Poos, P.E.
5.7* Consent of Richard Addison, P.E., C Eng, Eur.Ing
5.8* Consent of Richard J. Lambert, P.E.
5.9# Consent of Brad Yonaka
6.1* Power of Attorney

--------
* Previously filed.
# To be filed by amendment.

II-4

PART III

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

ITEM 1. UNDERTAKING.

The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and to
furnish promptly, when requested to do so by the Commission staff, information
relating to the securities registered pursuant to Form F-10 or to transactions
in said securities.

ITEM 2. CONSENT TO SERVICE OF PROCESS.

(a) Prior to the filing of this Amendment No. 1 to Form F-10, the Registrant
filed with the Commission a written irrevocable consent and power of
attorney on Form F-X.

(b) Any change to the name or address of the agent for service of the
Registrant will be communicated promptly to the Commission by amendment
to Form F-X referencing the file number of the relevant registration
statement.

III-1

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form F-10 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Spokane, State of
Washington, on May 3, 2006.

GOLD RESERVE INC.

By: /s/ Rockne J. Timm
------------------------------------
Rockne J. Timm
Chief Executive Officer and
Director

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Rockne J. Timm Chief Executive Officer (Principal May 3, 2006
------------------------------------ Executive Officer) and Director
Rockne J. Timm

* Vice President Finance and Chief Financial May 3, 2006
------------------------------------ Officer (Principal Financial and Accounting
Robert A. McGuinness Officer)

* President and Director May 3, 2006
------------------------------------
A. Douglas Belanger

* Senior Vice President and Director May 3, 2006
------------------------------------
James P. Geyer

* Chairman of the Board May 3, 2006
------------------------------------
James H. Coleman

* Director May 3, 2006
------------------------------------
Patrick D. McChesney

* Director May 3, 2006
------------------------------------
Chris D. Mikkelsen

* Director May 3, 2006
------------------------------------
Jean Charles Potvin

*By: /s/ Rockne J. Timm May 3, 2006
------------------------------------
Name: Rockne J. Timm
Attorney-in-Fact

III-2

AUTHORIZED REPRESENTATIVE

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Authorized Representative has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, solely in
his capacity as the duly authorized representative of the Registrant in the
United States, in the City of Spokane, in the State of Washington, on this 3rd
day of May, 2006.

GOLD RESERVE CORPORATION

By: /s/ Rockne J. Timm
------------------------------------
Rockne J. Timm
President

III-3

EXHIBIT INDEX

Exhibit Description
------- -----------

--------
* Previously filed.
# To be filed by amendment.