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TORONTO,
ONTARIO--(Marketwire - May 15, 2009) -
(All currency figures are in Canadian dollars unless otherwise noted)
High River Gold Mines Ltd. ("High River" or the
"Company") (TSX:HRG) today reported its financial results and
operational highlights for the three month period ended March 31, 2009.
The Unaudited Interim Consolidated Financial Statements and related
Notes along with the Management's Discussion and Analysis have been
filed with SEDAR (www.sedar.com) and can be viewed on the Company's website at www.hrg.ca.
HIGHLIGHTS FOR THE FIRST QUARTER 2009
Financial Results
- Net income for Q1/2009 of $0.9 million ($0.00 per share).
- Cash flow from operations was $29.7 million, up from ($0.3) million last
year.
- Cash and cash equivalents increased to $25.0 million from $19.1
million as at 2008 year-end.
- The working capital deficit improved to ($29.7) million from ($42.1)
million as at 2008 year-end.
- Current and long term debt levels declined to $175.8 million from
$188.1 million as at 2008 year-end.
- Q1/2009 gold production and cash operating costs were as follows:
------------------------------------------------- Production Production Cash Operating Costs (100%) (attributable) (US$/oz) (ozs) (ozs) ---------------------------------------------------------------------- Zun-Holba 18,236 15,490 467 ---------------------------------------------------------------------- Irokinda 16,554 14,061 374 ---------------------------------------------------------------------- Placer Operation (1) N/A N/A N/A ---------------------------------------------------------------------- Taparko-Bouroum 22,408 20,167 386 ---------------------------------------------------------------------- Berezitovy 19,596 19,400 430 ---------------------------------------------------------------------- Total 76,794 69,118 414 ---------------------------------------------------------------------- (1) non-operational in winter months
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Q1/2009 operating and non-operating cash costs combined totalled US
$572 per ounce, compared to US $670 per ounce in Q1/2008. Non-operating
cash costs per ounce mainly represent corporate administration,
exploration, and other expense such as realized foreign exchange
losses.
Operations
- Zun-Holba and Irokinda
Underground Gold Mines:
-- Production and cash costs on budget.
- Taparko-Bouroum Open-pit Gold Mine:
-- Lower than expected gold production due to mill shutdowns during the
quarter.
- Berezitovy Open-pit Gold Mine:
-- Production levels continue to be constrained by disk filter plant
under-performance.
- Bissa Gold Exploration Project:
-- Work related to feasibility study continued during the quarter.
- Prognoz Silver Exploration Project:
-- Due to capital constraints, no exploration activity occurred on the
project.
Corporate
- On January 2, 2009, High River announced that it had advised Somita trade creditors that it will slow down
payments for accounts payable for a brief period in light of lower than
expected cashflows from the group's
operations, and that it planned to pay suppliers for current purchases
of goods and services. High River also indicated that it was continuing
to pursue discussions relating to additional debt and equity financing
required to ensure that it is able to meet its financial obligations.
- On March 17, 2009, High River announced the results of a NI 43-101
compliant gold reserve and resource estimate, as of December 31, 2007,
on the Zun-Holba and Irokinda
Gold mines.
- On March 25, 2009 High River reported that the acquisition of the Chaya Nickel Deposit will not be completed. An
initial payment of approximately US $4.15 million made in February
2008, which represents all acquisition costs incurred to-date, has been
written off as at the 2008 year end.
- On March 30, 2009, High River announced that OAO Severstal
("Severstal") and a Special
Committee comprised of High River independent directors have been
unable to agree on terms of any transaction whereby Severstal
would acquire the remaining outstanding common shares of High River
and/or provide debt or equity financing to High River. It was also
announced that Terrence Lyons, Chairman of the Board of High River and
a member of the Company's Special and Audit Committees, had tendered
his resignation, effective March 31, 2009, due to the demands of his
other business interests.
- On March 31, 2009, High River announced that it would be late in
filing its audited financial statements, management's discussion and
analysis, annual information form and related CEO and CFO
certifications for the year ended December 31, 2008 due to concerns
raised by the board of directors regarding production numbers received
by the Company from the Berezitovy Gold mine.
The concerns were subsequently addressed to the satisfaction of the
board of directors and the financial statements and other filings were
released on April 29, 2009.
Events Subsequent to Quarter-end
- On April 8, 2009, High River announced the resignation of John W.
Crow from the Company's board of directors, and the appointment of Alexey Khudyakov and Karl
Glackmeyer to the board of directors. Alexey Khudyakov assumed
the role of Chairman of the board of directors.
- On April 20, 2009, High River announced that two loans, with a total
amount outstanding of US$ 27 million, were assigned by Standard Bank
Plc to Severstal, and continue
to be in default. It was also announced that Steven Poad,
CFO of High River, was appointed to the board of directors on an
interim basis until the next annual meeting of shareholders of High
River.
- On May 1, 2009, High River announced the resignation of Roman Deniskin from the Company's board of directors.
DISCUSSION OF FINANCIAL RESULTS Selected Financial Results -------------------------- (in thousands of Canadian dollars except per share amounts) Q1/2009 Q1/2008 ------------------------------------------------------------ ------------------------------------------------------------ Gold revenue $ 88,779 $ 45,009 Net income (loss) 931 (2,308) Net income (loss) per share (basic) 0.00 (0.01) Cashflow from operations 29,672 (252) Weighted average number of shares outstanding (basic) 590,193,673 307,787,242 ------------------------------------------------------------ ------------------------------------------------------------
Gold
revenue for the quarter was almost twice that of last year mostly due
to a higher amount of gold ounces sold and a weaker Canadian dollar. Ounces
sold increased by 54% to 77,091 ounces from 49,991 ounces in Q1 of last
year, with the increase due to higher production from Taparko-Bouroum and Berezitovy.
The average US$/C$ exchange rate declined 19% to .81 during the quarter
versus 1.00 in Q1/2008. The average gold price realized on sales was US
$926 per ounce during Q1/2009, up 3% from US $898 per ounce last year.
The change to net income ($3 million) from a net loss last year
reflects higher revenues ($44 million), as discussed above, a reduction
in financing costs ($3 million), and a change to an income tax recovery
from an expense last year ($3 million), partially offset by: (a) proportionately
higher mining costs ($18 million); (b) higher amortization and
depletion ($8 million) related to higher production levels; and (c) an
increase in other expenses ($22 million) related to higher unrealized
foreign exchange losses.
Cashflow from operations increased from last
year as higher production levels resulted in increased sales volumes.
Working capital improved to a deficit of ($29.7) million, from a
deficit of ($42.1) million last year, due to decreases in accounts
payable and current loans and interest payable as the Company repaid
certain amounts owing to trade creditors and made scheduled repayments
on loans.
OVERVIEW OF OPERATIONS
Underground Mines
Zun-Holba Mine (Buryatia,
Russia)
In Q1/2009, Zun-Holba produced (100%) 18,236
ounces of gold, up 5% from last year's level, due mostly to an increase
in mill throughput. Cash operating costs decreased to US $467 per ounce
from US $554 per ounce in Q1/2008. The decrease in cost per ounce was
due largely to the impact of a weaker rouble on input costs, and cost
control measures.
Irokinda Mine (Buryatia,
Russia)
Production (100%) at Irokinda during the
first quarter was 16,554 ounces, virtually unchanged from the first
quarter last year. Higher mill throughput and slightly higher recoveries
offset marginally lower grades. In Q1/2009, cash operating costs
decreased to US $374 per ounce compared to US $471 per ounce in 2008. The
decrease in cost per ounce was largely due to the impact of a weaker
rouble on input costs, and cost control measures.
New Open Pit Mines
Taparko-Bouroum Mine (Burkina Faso)
In Q1/2009, Taparko-Bouroum produced (100%)
22,408 ounces of gold, up 77% from last year's level, due to higher
grade ore from the Bouroum pit processed
during the quarter. Cash operating costs decreased to US $386 per ounce
compared to US $679 per ounce largely due to this increase in
production. The mill utilization rate during the quarter averaged
approximately 68% as the mill experienced continuing problems related
to excessive vibrations in the ball mill drive train. Various remedial
actions, recommended by specialized mill and vibrations consultants,
were undertaken to correct this issue during two scheduled mill
shutdowns totalling 25 days. However these actions resulted in only
temporary reductions of vibrations to normal levels, and failed to
achieve stable operation of the mill. In fact, the mill performance
deteriorated during the quarter with throughput rates estimated at
about 95, 94 and 87 tonnes of ore per operating hour in January,
February and March, respectively. As reported in an earlier press
release, the maximum production capacity of the mill is now estimated
at about 100 tonnes per hour, which is 20% less than the original
design capacity of 125 tonnes. While vibrations are currently at levels
that allow operation of the mill at throughput rates of 80-90 tonnes,
to ensure proper long term functioning of the mill and the achievement
of the maximum production capacity, a reduction to lower levels of
vibrations is required. Analysis of the problem and a plan of further
action are currently being undertaken by the operating team in
conjunction with consultants.
Berezitovy Mine (Amur Oblast, Russia)
Production (100%) at Berezitovy during the
first quarter was 19,596 ounces of gold, compared to no ounces produced
in the Q1/2008, as commercial production was only declared on October
1, 2008. Cash operating costs were US $430 per ounce during the
quarter. The mill utilization rate during the quarter averaged 65% due
to two mill shutdowns (totalling 16 days) and continuing disk filter
plant underperformance. The first mill shutdown, which began on January
28th and lasted for 7 days, was unplanned and was undertaken to correct
damage incurred to clutch disks. The second mill shutdown, largely a
scheduled maintenance operation, ran for 9 days in mid-March. During
this time, SAG mill liner replacement and additional work was
completed. The disk filter plant continues to perform poorly, limiting
mill throughput rates. The Company continues to undertake action to
permanently resolve this problem.
Advanced Exploration Projects
Bissa Gold Project
A feasibility study was initiated early in 2008 to evaluate the
economic viability of a mining and processing facility based on the
current Bissa resource area. Substantial
progress was made on this study during the quarter. Work included
resource block modelling, pit design, ore reserve estimation, etc.
Other Burkina Faso Exploration
During the quarter, a 3,000 metre (68 hole)
rotary air blast drilling programme was completed on the Nongo-Fayere permit which adjoins the Taparko mining license on its eastern boundary. The
purpose of the programme was to test for a potential eastern extension,
onto the Nongo-Fayere permit, of
mineralization identified on the Taparko
mining license (the Kangarse target). Assay
results yielded no significant intersections.
Prognoz Silver Project
Due to capital constraints, no drilling or other exploration activity
occurred at the Prognoz project site during
the quarter. Prognoz drill hole
data compilation and analysis, as well as work programme planning, were
undertaken at the Buryatzoloto exploration
offices in Ulan Ude.
About High River
High River is a gold company with interests in producing mines and
advanced exploration projects in Burkina Faso and Russia.
FORWARD LOOKING INFORMATION
This release and subsequent oral statements made by and on behalf of
the Company may contain forward-looking statements. 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. 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
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.
High River Gold Mines Ltd. Consolidated Balance Sheets (Expressed in thousands of Canadian dollars) March 31, December 31, (unaudited) 2009 2008 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 25,020 $ 19,123 Accounts receivable 13,868 14,546 Inventory 73,057 79,369 Other assets 12,502 11,401 ---------------------------------------------------------------------------- 124,447 124,439 Investments 37,913 22,724 Property, plant and equipment 395,202 432,089 Exploration properties and deferred exploration 173,668 170,522 Other assets 3,370 3,335 ---------------------------------------------------------------------------- Total Assets $ 734,600 $ 753,109 ---------------------------------------------------------------------------- Liabilities Current Liabilities Accounts payable $ 24,151 $ 29,842 Loans and interest payable 130,042 136,699 ---------------------------------------------------------------------------- 154,193 166,541 Loans and interest payable 45,731 51,446 Reclamation 9,917 10,078 Non-hedge derivatives 11,805 13,651 Future income taxes 14,982 15,884 ---------------------------------------------------------------------------- 236,628 257,600 Non-controlling interest 18,556 18,467 ---------------------------------------------------------------------------- Total Liabilities 255,184 276,067 ---------------------------------------------------------------------------- Shareholders' Equity Share capital 543,244 543,244 Warrants 16,121 16,627 Contributed surplus 13,433 12,876 Debenture conversion option 538 538 Deficit (111,106) (112,037) Accumulated other comprehensive income (loss) 17,186 15,794 ---------------------------------------------------------------------------- Total Shareholders' Equity 479,416 477,042 ---------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $ 734,600 $ 753,109 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- High River Gold Mines Ltd. Consolidated Statements of Operations (Expressed in thousands of Canadian dollars except per share figures) Three months ended March 31, (unaudited) 2009 2008 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Revenue Gold $ 88,779 $ 45,009 Silver 342 40 ---------------------------------------------------------------------------- 89,121 45,049 ---------------------------------------------------------------------------- Expenses Mining costs 43,247 25,463 Mine administrative costs 3,445 2,304 Mine amortization and depletion 13,986 5,861 Asset retirement obligation accretion 200 135 ---------------------------------------------------------------------------- 60,878 33,763 ---------------------------------------------------------------------------- Income before the undernoted 28,243 11,286 Administrative costs (4,185) (2,991) Amortization (20) (176) Exploration expense (806) (2,120) Financing costs and investment income, net (3,397) (6,722) Other income/(expense) (18,829) 2,830 ---------------------------------------------------------------------------- Income before tax and non-controlling interest 1,006 2,107 Income tax recovery (expense) 13 (2,514) ---------------------------------------------------------------------------- Income (loss) before non-controlling interest 1,019 (407) Non-controlling interest in earnings of subsidiary (88) (1,901) ---------------------------------------------------------------------------- Net income (loss) for the period $ 931 $ (2,308) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Net income (loss) per share - basic and diluted $ 0.00 $ (0.01) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- High River Gold Mines Ltd. Consolidated Statements of Cash Flows (Expressed in thousands of Canadian dollars) Three months ended March 31, (unaudited) 2009 2008 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating Activities Net income (loss) for the period $ 931 $ (2,308) Non-cash items: Non-controlling interest in earnings of subsidiary 88 1,900 Amortization and depletion expense 14,006 6,362 Asset retirement obligation accretion 200 221 Financial instrument accretion (207) 538 Fair value adjustments to financial instruments (1,778) 4,212 Stock-based compensation expense 50 1,199 Future income taxes (2,294) 515 Unrealized foreign exchange loss (gain) 11,967 (1,970) Other (65) 81 ---------------------------------------------------------------------------- Subtotal 22,898 10,750 Change in non-cash working capital 6,774 (11,002) ---------------------------------------------------------------------------- Net cash provided (used) by operating activities 29,672 (252) ---------------------------------------------------------------------------- Investing Activities Property, plant and equipment (2,589) (4,635) Exploration properties and deferred exploration (1,950) (8,475) Development properties - (16,047) Purchase of investments - (11,801) Increase in other long-term assets 167 248 ---------------------------------------------------------------------------- Net cash used by investing activities (4,372) (40,710) ---------------------------------------------------------------------------- Financing Activities Loans received 31 13,507 Loans repaid (19,756) (14,440) Common shares issued - 30,334 ---------------------------------------------------------------------------- Net cash (used in) provided by financing activities (19,725) 29,401 ---------------------------------------------------------------------------- Effect of exchange rate changes on cash held in foreign currencies 322 460 ---------------------------------------------------------------------------- Increase/(decrease) in cash and cash equivalents during the period 5,897 (11,101) Cash and cash equivalents - Beginning of period 19,123 51,491 ---------------------------------------------------------------------------- Cash and cash equivalents - End of period $ 25,020 $ 40,390 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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