| October 31, 2008 |
| High River Gold Update on Corporate Liquidity and Review of Strategic Alternatives |
TORONTO, ONTARIO--(Marketwire - Oct. 31, 2008) - The Special Committee of High River Gold Mines Ltd. ("High River" or the "Company") (TSX:HRG) would like to update the market on its activities in its process of reviewing the Company's corporate liquidity and strategic alternatives, which could include a financing or the sale of all or some of the Company's assets.
Special Committee
On September 11, 2008, High River announced the formation of a Special Committee of the Board of Directors. On September 12, 2008, High River reported that the Special Committee had retained CIBC World Markets Inc. and Cormark Securities Inc. as financial advisors to assist in its efforts to examine strategic alternatives for maximizing shareholder value. The Special Committee has also retained Fraser Milner Casgrain LLP as legal counsel and Alvarez & Marsal Canada ULC to assist the Company in the review of corporate liquidity.
To date, with the assistance of its financial advisors, the Special Committee has advanced its review of strategic alternatives, including a sale process for all or some of the Company's assets. In addition, the Special Committee and the Company, with the assistance of Alvarez & Marsal Canada ULC, is engaging in discussions with lenders to the Company to seek sufficient time for the Company to consider alternatives that may be available to the Company for preserving and maximizing shareholder value.
Lending Arrangements
The Company is aware, and has been notified by the respective lenders, that certain covenants of its Somita (Taparko-Bouroum Mine) subsidiary with respect to two separate loan accommodations are in breach. However, no payment demands have been received by the Company and the Company is in discussions with certain lenders, trade creditors and possible strategic investors/purchasers with respect to the Company's financial situation. The Company is also providing the following update on its financial position and related developments (all figures in Canadian $ unless otherwise noted). The loan accommodations that are in breach are as follows:
(a) Royal Gold, Inc. - pursuant to the Amended and Restated Funding Agreement dated February 22, 2006 (the "Funding Agreement"), between Royal Gold, Inc. ("Royal Gold") and Somita SA ("Somita") (a 90%-owned subsidiary of the Company), Somita is in breach of the requirement to achieve "Project Completion" by October 1, 2008 in accordance with the parameters of the "Completion Test" as both of those terms are defined in the Funding Agreement. Until such Project Completion is achieved, Somita is required to ensure that additional indebtedness incurred in the ordinary course of business does not exceed US$1.0 million. Indebtedness incurred in the ordinary course of business is currently approximately $8.2 million. Royal Gold has been granted security interests that include, among other things, the Company's 90% equity interest in Somita to secure amounts dispersed by Royal Gold under the Funding Agreement. Royal Gold has not agreed to forbear from asserting breaches in addition to those described above or pursuing any of its remedies under the Funding Agreement or other agreements with High River and its affiliates, including Somita.
(b) Standard Bank Plc - pursuant to a Revolving Credit Facility dated April 19th, 2007 as amended between Standard Bank Plc and Somita, Somita is in breach of achieving "Economic Completion" which is defined as Project Completion in accordance with the Funding Agreement with Royal Gold described above.
In addition, the Company has received correspondence from Nomos Bank, a lender to the Company's 99%-owned subsidiary, Berezitovy Rudnik among others, requesting a meeting to discuss security arrangements and other matters. As of this date, no lender to the Company has commenced enforcement proceedings. On or about November 21, 2008, there is a scheduled loan repayment due from Berezitovy Rudnik to Nomos Bank of approximately US$15.2 million. Berezitovy Rudnik does not currently have the funds to make such payment. The Company and Berezitovy Rudnik are considering different options for addressing this loan repayment.
In addition, the Company's consolidated payables amount to $32.9 million, as of September 30, 2008. Consolidated accounts payable have ranged from $33.9 million at June 30, 2008 to $24.2 million at December 31, 2007. A normal level of accounts payable funded from operating activities is expected to fall within this range for a company the size of High River. Somita trade payables, of which approximately all are over 30 days outstanding, amount to approximately $8.2 million of the consolidated payables. As of September 30, 2008, the Company has consolidated cash on hand of approximately $4.1 million and 8,300 ounces of unsold gold worth approximately US$6.2 million at US $750 per ounce.
The ability of the Company to continue as a going concern is therefore dependent on the on-going discussions and/or forbearance with the lenders, accommodations from trade creditors, establishing steady production at the two new mines and obtaining additional financing. There is no assurance that the lenders will cooperate with the Company, that trade creditors will provide accommodations, that steady production can be established or that a financing or other transaction can be completed on terms acceptable to the Company.
Strategic Alternatives
The Special Committee and its financial advisors have canvassed a number of qualified potential parties with respect to a sale or financing transaction for some or all the assets of HRG. They have provided dataroom access pursuant to confidentiality agreements to a number of parties. They have received a number of indicative proposals to date, which are subject to further detailed due diligence, including site visits.
At the present time there is no certainty that any financing or sale of one or more of the Company's projects, or the Company itself, will be completed.
Changes to the Board of Directors and Special Committee
The Company was advised by Graham Farquharson that for personal reasons he has had to tender his resignation from the Special Committee and the Board of Directors effective immediately. The Company is grateful for Graham's contributions.
The Company has also been advised by Bob Buchan that he is resigning from the Special Committee and the Board of Directors. The Company is grateful for Bob's contributions.
About High River
High River is an unhedged gold company with an interest in producing mines, mines under development, and advanced exploration projects in Burkina Faso and Russia.
Forward Looking Statements - This release and subsequent oral statements made by and on behalf of the Company may contain forward-looking statements, which reflect management's expectations. Wherever possible, words such as "intends", "expects", "scheduled", "estimates", "anticipates", "believes", and similar expressions or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, have been used to identify these forward-looking statements. Although the forward-looking statements contained in this release reflect management's current beliefs based upon information currently available to management and based upon what management believes to be reasonable assumptions, High River cannot be certain that actual results will be consistent with these forward-looking statements. A number of factors could cause events and achievements to differ materially from the results expressed or implied in the forward-looking statements. Such factors include, but are not limited to, any inability of High River to obtain TSX approval for any transaction, or an inability of High River to issue Common Shares from treasury. These factors should be considered carefully and prospective investors should not place undue reliance on the forward-looking statements. Forward-looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause High River's actual results, event, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Although High River has attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that the forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, prospective investors should not place undue reliance on forward-looking statements. Any forward-looking statements are made as of the date of this release, and High River assumes no obligation to update or revise them to reflect new events or circumstances, unless otherwise required by law. | |