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TORONTO,
ONTARIO--(Marketwire - Aug. 14, 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 and six month periods ended June
30, 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 SECOND QUARTER 2009
Financial Results
- Net loss for Q2/2009 of $37.8 million ($0.06 per share), compared to
a net income of $0.9 million ($0.00 per share) in Q1/2009 and a net
loss of $4.7 million ($0.01 per share) in Q2/2008.
- Cash flow from operations was $22.8 million, down from $29.7 million
in the previous quarter, and up from $2.7 million last year.
- Cash and cash equivalents was $23.1 million down from $25.0 million
at the end of Q1/2009, and up from $19.1 million as at the end of 2008.
- Working capital increased to $2.8 million from a ($29.7) million
deficit at the end of Q1/2009, and a deficit of ($42.1) million as at
the end of 2008.
- Current and long term debt levels declined to $135.6 million from
$175.8 million at the end of Q1/2009, and $188.1 million as at the end
of 2008.
- Q2/2009 gold production and cash operating costs were as follows:
---------------------------------------------------------- Production Production Cash Total Cash Costs (100%) (attributable) Operating (US$/Oz) (ozs) (ozs) Costs (US$/oz) ---------------------------------------------------------------------------- Zun-Holba 17,123 14,544 443 497 ---------------------------------------------------------------------------- Irokinda 18,712 15,894 370 424 ---------------------------------------------------------------------------- Placer Operation(1) N/A N/A N/A N/A ---------------------------------------------------------------------------- Taparko-Bouroum 20,139 18,125 491 515 ---------------------------------------------------------------------------- Berezitovy 24,023 23,783 640 699 ---------------------------------------------------------------------------- Total 79,997 72,346 497 545 ---------------------------------------------------------------------------- (1) no production during the quarter
Q2/2009
operating and non-operating cash costs increased 14% to US $650 per
ounce, compared to US $572 per ounce in Q1/2009. 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:
-- Stable production with no material shortcomings.
- Taparko-Bouroum Open-pit Gold Mine:
-- Production decreased from Q1/2009, despite improvements in mill
throughput rate, due to processing of lower grade ore.
- Berezitovy Open-pit Gold Mine:
-- Production increased from Q1/2009, despite lower grades and
recoveries, due to higher throughput, and a reduction in
work-in-process at the end of the quarter. Production levels continue
to be constrained by maintenance shut-downs and disk filter plant
under-performance.
- Bissa Gold Exploration Project:
-- A revised NI 43-101 compliant Resource Estimate was reported,
supporting a feasibility study currently being completed.
- Prognoz Silver Exploration Project:
-- The project's value was written down by $58.6 million to $25.6
million, reflecting two independent estimates prepared for the Company
in connection with an offer by Severstal to
acquire all of the shares of High River.
Corporate
- On April 8, 2009, High River announced the resignation of John W.
Crow from the Company's board of directors, and the appointment of Alexey Khudyakov and Karl
Glackmeyer to the board of directors. Alexey Khudyakov assumed
the role of Chairman of the board of directors.
- On April 20, 2009, High River announced that two loans, with a total
amount outstanding of US$ 27 million, were assigned by Standard Bank
Plc to OAO Severstal ("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.
- On May 22, 2009, High River announced that on May 19, 2009 Severstal indicated to the Board of High River, by
way of non-binding expression of interest, that it proposed to make a
cash offer of $0.18 per share to minority shareholders of High River. On
June 9, 2009, High River announced that following receipt of an
improved proposal from Severstal, the Special
Committee of independent directors recommended to the Board of High
River that High River negotiate a support agreement with Severstal, pursuant to which Severstal
would offer to acquire all of the outstanding common shares of High
River for cash at a price of $0.22 per common share. High River and Severstal also agreed to complete a private
placement whereby Severstal would acquire
59,019,367 common shares at a price of $0.18 per common share for
proceeds of approximately $10.6 million. Following closing of the
private placement, Severstal would control
57.3% of the common shares of High River. On June 16, 2009, it was
announced that High River entered into the support agreement.
- On June 18, 2009 High River announced the closing of the private
placement previously announced on June 9, 2009. Proceeds of the
financing were to be used for repayment of the approximately US$5.2
million short term loan from Severstal to
OJSC Buryatzoloto ("Buryatzoloto"),
the Corporation's 84.94% -owned subsidiary, which Buryatzoloto
required for a US $10 million debt repayment on June 12, 2009, and for
general corporate purposes. High River also announced that it had been
advised by the Toronto Stock Exchange (the "TSX") that High
River's delisting review period has been extended to August 17, 2009
due to the pending take-over bid by Severstal
and that in the absence of such take-over bid, the TSX would have
determined to delist the Corporation's securities due to its current
financial condition. High River was also advised by the TSX that if the
take-over bid is not successful or is otherwise terminated, or the
take-over bid does not proceed on the expected timetable, the TSX
reserves the right to immediately call a meeting of the Listings
Committee to consider abridging the extension and whether to suspend
trading in and delist the securities of the Corporation.
- On June 19, 2009, High River reported the results of a revised NI
43-101 compliant Mineral Resource evaluation completed for the Bissa Gold Exploration Project ("Bissa"), by SRK Consulting (Canada) Inc. ("SRK"),
as of April 23, 2009. It was prepared to support conceptual mine design
work currently being completed by engineering consultants GENIVAR
("GENIVAR") to evaluate the feasibility of an open pit mining
and processing operation at Bissa. The
revised resource estimate ("in pit") was as follows: Measured
and Indicated: 15.9 million tonnes grading 1.81 g/t for 926,000
contained gold ounces, Inferred: 17.7 million tonnes grading 1.40 g/t
for 799,000 contained gold ounces. Relative to a previous Mineral
Resource estimate incorporating Mineral Resource evaluations dated
September 28, 2004 and May 23, 2006, Measured Mineral Resources
increased by 11%, Indicated Mineral Resources increased by 43%, and
Inferred Mineral Resources increased by 18%.
- On June 25, 2009, High River announced that a take-over bid circular
dated June 24, 2009, a directors' circular dated June 24, 2009 and
related documents were mailed to High River's shareholders. The mailing
was in connection with the offer, announced on June 9, 2009, by Severstal for all of the issued and outstanding
common shares of High River, not currently held by Severstal
and its affiliates, which was due to expire at 5:00 p.m. (Toronto time)
on July 31, 2009. Also, High River reported that if the TSX determines
to delist High River's securities, High River would have the
opportunity to appeal any such decision or it could seek an alternate
listing for its securities on another stock exchange, although the
outcome of either action is uncertain.
Events Subsequent to Quarter-end
- On July 16, 2009, High River announced that Steven Poad tendered his resignation from the position of
Chief Financial Officer effective July 31, 2009, to pursue other
business interests, and that replacing Mr. Poad
will be High River Treasurer Andrei Maslov. Mr.
Poad will continue to serve as a Director of
High River. On July 23, 2009 High River announced that High River's
board of directors appointed Andrei Maslov as
the Company's new Chief Financial Officer, effective July 31st, 2009.
- On July 28, 2009, Severstal announced that
it intends to increase its offer to $0.30 per common share in cash, an
increase of $0.08 or 36% per common share from the previous offer price
of $0.22 per common share. The Special Committee of independent
directors unanimously recommended that High River shareholders accept
the increased offer. Severstal confirmed that
its new offer is full and final and that it will not be extended beyond
the revised closing date of August 10, 2009.
- On August 11, 2009 Severstal announced that
it acquired 28,897,135 additional shares at $0.30 per share as a result
of the offer. Severstal ownership of the
Company subsequently increased to 61.7%.
DISCUSSION OF FINANCIAL RESULTS Selected Financial Results (in thousands of Canadian dollars except per share amounts) Q2/2009 Q1/2009 Q2/2008 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Gold revenue $ 84,561 $88,779 $ 43,427 Net income (loss) (37,777) 931 (4,725) Net income (loss) per share (basic) (0.06) 0.00 (0.01) Cashflow from operations 22,821 29,672 2,671 Weighted average number of shares outstanding (basic) 597,407,151 590,193,673 171,942,767 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
The
Company's consolidated net gold revenues for Q2 2009 decreased to $84.6
million from $88.8 million in Q1 2009. A lower foreign currency
translation rate was the main factor. Higher production by Berezitovy increased the number of ounces sold. Compared
to last year, ounces sold increased by 64% to 78,274 ounces from 47,905
ounces in Q2 of last year, with the increase due to higher production
from Berezitovy and Taparko-Bouroum.
The average gold price realized on sales was US $924 per ounce during
Q2/2009, down from US $926 during Q1/2009, and up 3% from US $897 per
ounce last year.
The Company had a net loss of $37.8 million in Q2/2009, compared to a
net income of $0.9 million in Q1/2009 and a loss of $4.7 million last
year. The net change in earnings of -$38.7 million compared to the
previous quarter and -$34.6 million compared to Q2/2008,
largely reflects the write-down of the Prognoz
Silver project of -$59 million. The decrease from Q2/2008, despite
higher revenues, was additionally caused by higher mining costs and
amortization and depletion costs largely related to higher production
levels, higher deduction of non-controlling interest in earnings of
subsidiaries reflecting higher earnings at 90% owned Taparko and 85% owned Zun-Holba
and Irokinda, and higher tax expense.
Cash flow from operations of $22.8 million decreased 23% from $29.7
million in Q1 this year, up from $2.7 million in Q2 last year. Cash
flow from operations increased from last year largely due to the higher
gold revenue as discussed above.
Working capital increased to $2.8 million from a $29.7 million deficit
at the end of Q1 2009, and a $42.1 million deficit at year-end.
OVERVIEW OF OPERATIONS
Underground Mines
Zun-Holba Mine (Russia)
In Q2/2009, Zun-Holba produced (100%) 17,123
ounces of gold, down from 18,236 ounces produced in Q1/2009 and
virtually unchanged from last year. Cash operating costs decreased to
US $443 per ounce from US $467 per ounce in Q1/2009 and US $617 per
ounce in Q2/2008. The decrease in cost per ounce compared to last year
was due largely to the impact of a weaker rouble on input costs, and
cost control measures.
Irokinda Mine (Russia)
Production (100%) at Irokinda during the
second quarter was 18,712 ounces, up from 16,554 ounces in Q1/2009 and
virtually unchanged from the second quarter last year. Higher mill
throughput offset slightly lower grades and recoveries. In Q2/2009,
cash operating costs decreased to US $370 per ounce compared to US $374
per ounce in Q1/2009 and US $468 per ounce in 2008. The decrease in
cost per ounce compared to last year was largely due to the impact of a
weaker rouble on input costs, and cost control measures.
Open Pit Mines
Taparko-Bouroum Mine (Burkina Faso)
In Q2/2009, gold poured at Taparko (100%)
totalled 20,139 ounces, down 10% from the first quarter, and up 95%
from last year's level due to higher mill throughput and grades. Approximately
182,000 tonnes of ore were processed during the quarter for an average
rate of 94 tonnes per operating hour (25% below the original design
capacity), significantly higher than the 136,000 tonnes processed in
Q1/2009 and 126,000 tonnes processed in Q2/2008 when several unplanned
mill shutdowns occurred. Mill head grades during the quarter of 4.2 g/t
were 10% lower than grades processed in the previous quarter, but still
50% higher than the Taparko-Bouroum average
grade. Recoveries averaged 91%, in line with planned levels. Cash
operating costs increased to US $491 per ounce compared to US $386 last
quarter due to lower grade. Total cash costs increased to US $515 per
ounce compared to US $413 in Q1/2009.
Several initiatives during the quarter, such as replacement of a trommel screen and two cyclone pumps, enabled the
plant to operate at slightly higher capacity than during the last
quarter. However, vibration levels at the pinion/girth gear interface
remain above acceptable levels, which limit the productivity of the
mill. The Company continues to study the problem with the goal of
implementing a long term solution.
Berezitovy Mine (Russia)
Production (100%) at Berezitovy during the
first quarter was 24,023 ounces of gold, compared to 19,596 ounces
produced in Q1 2009 and no ounces produced in the Q2/2008, as
commercial production was only declared on October 1, 2008. Production
increased from Q1/2009, despite lower grades and recoveries, due to
higher throughput, and a reduction in work-in-process at the end of the
quarter. Approximately 282,000 tonnes of ore were processed during the
quarter (28% below the design capacity) with an average grade of 2.5
g/t. Recoveries averaged approximately 86% during the quarter, just
below planned levels of 89%. Cash operating costs were US $640 per
ounce during Q2/2009, while total cash costs were US $699 per ounce.
Mill throughput during Q2/2009 was lower than planned due mostly to
planned shutdowns in April, May, and June during which repairs were
made to SAG mill lifters, pumps, conveyors, and the ball mill motor.
Additionally, in June, the flow of crushed ore to the mill was interrupted
due to a break-down of the crushed ore stockpile apron feeder. A new
motor and pumps have been ordered and the apron feeder is expected to
be restarted in the early part of Q3/2009. In the meantime, mill
production is being maintained with the feeding of uncrushed ore into
the ball mill. This is expected to result in lower mill throughput
until the problem is resolved.
While all three disk filter units are operational at the disk filter
plant, throughput is below design capacity requiring a by-pass of a
portion of the tailings slurry past the disk filter plant into a wet
tailings storage facility. As the wet tailings storage facility is
expected to be filled up in the third quarter, two new disk filter
units from a different supplier have been ordered to improve throughput
rates of the disk filter plant and eliminate the need for a wet
tailings by-pass.
Advanced Exploration Projects
Bissa Gold Project
A feasibility study was initiated early in 2008 by engineering
consultants GENIVAR ("GENIVAR") to evaluate the feasibility
of an open pit mining and processing operation at Bissa.
A significant amount of work has been completed on this study to date. A
key component supporting this conceptual design work was a NI 43-101
compliant revised Mineral Resource evaluation completed for Bissa which was contained within a Technical Report
prepared by SRK dated June 18, 2009. This new resource estimate
incorporated new assay results from drilling and trenching performed by
High River during 2007 and 2008. The following resource estimate was
reported by High River in a June 19, 2009 press release:
Bissa Mineral Resource Statement(i) (100% basis), SRK Consulting, April 23, 2009
--------------------------------------------------------------------------- Resource Measured and Indicated Resources Category -------------------------------------------------------- Tonnage (t) Gold Grade (g/t) Contained Gold (oz) --------------------------------------------------------------------------- Measured 906,000 3.13 91,000 --------------------------------------------------------------------------- Indicated 15,010,000 1.73 834,000 --------------------------------------------------------------------------- Total 15,917,000 1.81 926,000 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Resource Inferred Resources Category -------------------------------------------------------- Tonnage (t) Gold Grade (g/t) Contained Gold (oz) --------------------------------------------------------------------------- Total Inferred 17,730,000 1.40 799,000 --------------------------------------------------------------------------- (i) Note: - All figures rounded to reflect the relative accuracy of estimates. - Reported Resources are within optimized pit shells at a cut-off grade of 0.5 g/t gold. The results from the pit optimization work are used solely for the purpose of reporting Mineral Resources that have "reasonable prospects" for economic extraction by an open pit and do not represent an attempt to evaluate Mineral Reserves for this project. - Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any of the Mineral Resources will be converted into Mineral Reserves.
Prognoz Silver Project
No drilling or other exploration activity occurred at the Prognoz project site during the quarter and no work
is planned for the balance of 2009 and 2010. The project's value was
written down by $58.6 million to $25.6 million, reflecting two
independent estimates and Canadian GAAP (EIC - 174).
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) June 30, December 31, (unaudited) 2009 2008 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 23,130 $ 19,123 Accounts receivable 15,116 14,546 Inventory 71,695 79,369 Other assets 15,493 11,401 ---------------------------------------------------------------------------- 125,434 124,439 Investments 37,816 22,724 Property, plant and equipment 377,720 432,089 Exploration properties and deferred exploration 112,539 170,522 Other assets 1,558 3,335 ---------------------------------------------------------------------------- Total Assets $ 655,067 $ 753,109 ---------------------------------------------------------------------------- Liabilities Current Liabilities Accounts payable $ 23,377 $ 29,842 Loans and interest payable 99,255 136,699 ---------------------------------------------------------------------------- 122,632 166,541 Loans and interest payable 36,355 51,446 Reclamation 9,778 10,078 Non-hedge derivatives 8,760 13,651 Future income taxes 15,889 15,884 ---------------------------------------------------------------------------- 193,414 257,600 Non-controlling interest 22,866 18,467 ---------------------------------------------------------------------------- Total Liabilities 216,280 276,067 ---------------------------------------------------------------------------- Shareholders' Equity Share capital 553,867 543,244 Warrants 15,748 16,627 Contributed surplus 13,937 12,876 Debenture conversion option 538 538 Deficit (148,883) (112,037) Accumulated other comprehensive income 3,580 15,794 ---------------------------------------------------------------------------- Total Shareholders' Equity 438,787 477,042 ---------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $ 655,067 $ 753,109 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- High River Gold Mines Ltd. Consolidated Statements of Operations (Expressed in thousands of Canadian dollars except per share figures) Three months ended Six months ended June 30, June 30, (unaudited) 2009 2008 2009 2008 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Revenue Gold $ 84,561 $ 43,427 $ 173,340 $ 88,436 Silver 3,622 29 3,964 69 ---------------------------------------------------------------------------- 88,183 43,456 177,304 88,505 ---------------------------------------------------------------------------- Expenses Mining costs 43,332 33,936 86,579 59,399 Mine administrative costs 3,032 2,154 6,477 4,458 Mine amortization and depletion 14,782 5,403 28,768 11,264 Asset retirement obligation accretion 223 141 423 276 ---------------------------------------------------------------------------- 61,369 41,634 122,247 75,397 ---------------------------------------------------------------------------- Income before the undernoted 26,814 1,822 55,057 13,108 Administrative costs (2,135) (2,387) (6,320) (5,378) Amortization (11) (193) (31) (369) Exploration expense (1,195) (2,563) (2,001) (4,683) Financing costs and investment income, net (3,469) (1,845) (6,866) (8,567) Other income/(expense) (48,105) 2,869 (66,934) 5,699 ---------------------------------------------------------------------------- Income before tax and non- controlling interest (28,101) (2,297) (27,095) (190) Income tax expense (5,366) (2,066) (5,353) (4,580) ---------------------------------------------------------------------------- Loss before non-controlling interest (33,467) (4,363) (32,446) (4,770) Non-controlling interest in earnings of subsidiary (4,310) (362) (4,398) (2,263) ---------------------------------------------------------------------------- Net loss for the period $ (37,777) $ (4,725) $ (36,846) $ (7,033) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Net loss per share - basic and diluted $ (0.06) $ (0.01) $ (0.06) $ (0.02) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- High River Gold Mines Ltd. Consolidated Statements of Cash Flows (Expressed in thousands of Canadian dollars) Three months ended Six months ended June 30, June 30, (unaudited) 2009 2008 2009 2008 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating Activities Net loss for the period $ (37,777) $ (4,725) $ (36,846) $ (7,033) Non-cash items: Non-controlling interest in earnings of subsidiary 4,310 363 4,398 2,263 Amortization and depletion 14,792 5,922 28,798 12,284 Asset retirement obligation accretion 223 227 423 448 Financial instrument accretion 661 351 454 889 Fair value adjustments to derivatives (1,229) (418) (3,007) 3,794 Stock option benefit expense 130 (218) 180 981 Future income taxes 1,164 (145) (1,130) 370 Unrealized foreign exchange (8,453) (1,104) 3,514 (3,074) Writedown of carrying value and other 59,218 30 59,247 111 Other (930) 952 (1,024) 952 ---------------------------------------------------------------------------- Subtotal 32,109 1,235 55,007 11,985 Change in non-cash working capital (9,288) 1,436 (2,514) (9,566) ---------------------------------------------------------------------------- Net cash provided by operating activities 22,821 2,671 52,493 2,419 ---------------------------------------------------------------------------- Investing Activities Property, plant and equipment (5,164) (7,136) (7,640) (11,771) Exploration properties and deferred exploration (604) (10,026) (2,554) (18,501) Development properties - (13,337) - (29,384) Increase in investments - 1,000 - (10,801) Allocation of restricted cash - - - 69 (Increase) in other long-term assets 3,320 (1,029) 3,374 (850) ---------------------------------------------------------------------------- Net cash used by investing activities (2,448) (30,528) (6,820) (71,238) ---------------------------------------------------------------------------- Financing Activities Loans received 5,947 16,634 5,978 30,141 Loans repaid (37,812) (11,730) (57,568) (26,170) Common shares issued 10,623 - 10,623 30,334 ---------------------------------------------------------------------------- Net cash provided by (used by) financing activities (21,242) 4,904 (40,967) 34,305 ---------------------------------------------------------------------------- Effect of exchange rate changes on cash held in foreign currencies (1,021) (248) (699) 212 ---------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents during the period (1,890) (23,201) 4,007 (34,302) Cash and cash equivalents - Beginning of period 25,020 40,390 19,123 51,491 ---------------------------------------------------------------------------- Cash and cash equivalents - End of period $ 23,130 $ 17,189 $ 23,130 $ 17,189 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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