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TORONTO,
ONTARIO--(Marketwire - Nov. 13, 2009) - High River Gold Mines Ltd. ("High
River" or the "Company") (TSX:HRG) today reported its
financial results and operational highlights for the three and nine
month periods ended September 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 THIRD QUARTER 2009
Financial Results
- Net gold revenue of $89.6 million, an increase of 6% from Q2 2009, an
increase of 2.6 times from Q3 2008.
- Net loss of $4.6 million ($0.01 per share) compared to a net loss of
$37.8 million ($0.06 per share) in Q2 2009 and a net loss of $15.3
million ($0.05 per share) in Q3 2008.
- Cash flow from operations of $33.0 million, up from $22.8 million in
Q2 this year, and up from $4.7 million in Q3 last year.
- Cash and cash equivalents increased to $38.7 million from $23.1
million at the end of Q2 2009, and up from $19.1 million at year-end.
- Current and long term debt levels decreased to $121.1 million from
$135.6 million at the end of Q2 2009, compared to $188.1 million at
year-end.
Operations ---------- ------------------------------------------------------------------------- Production (100%) Cash Operating Total Cash Costs Oz Costs US$/Oz US$/Oz ------------------------------------------------------------------------- Buryatzoloto 37,430 379 443 ------------------------------------------------------------------------- Berezitovy 22,487 607 667 ------------------------------------------------------------------------- Somita 25,073 467 496 ------------------------------------------------------------------------- Total 84,990 465 518 -------------------------------------------------------------------------
Q3
2009 total operating and non-operating cash costs reached US $570 per
ounce. Non-operating cash costs per ounce mainly represent corporate
administration, exploration, and other expense such as realized foreign
exchange losses.
- Zun-Holba and Irokinda Underground Gold Mines:
-- Stable production with no material shortcomings.
-- On September 11, 2009 the Company announced the death of two of its
miners at the Irokinda mine.
- Berezitovy Open-pit Gold Mine:
-- Production decreased from Q2 2009 due to lower throughput. Production
levels continue to be constrained by maintenance shut-downs and disk
filter plant under-performance as well as crusher problems during Q3.
- Taparko-Bouroum Open-pit Gold Mine:
-- Production increased compared to the previous quarter mainly because
of better mill availability.
Corporate
- On July 28, 2009, Severstal increased its tender offer to $0.30 per
share.
- On July 31, 2009, Steven Poad resigned as CFO. Treasurer Andrei
Maslov was appointed CFO.
- On August 6, 2009, the Company announced that the Toronto Stock
Exchange determined that High River satisfies the TSX's continued
listing requirements.
- Severstal acquired 28,897,135 additional shares at $0.30 per share as
a result of unconditional tender offer which expired on August 10,
2009. Severstal's ownership of the company increased to 61.7%.
- On September 1, 2009, Driffield Cameron resigned as Vice President,
Exploration.
- On September 3, 2009, Igor Klimanov, Manager Corporate Development,
was appointed to the board of directors.
- On September 15, 2009, Dan Hrushewsky resigned as Vice President,
Investor Relations. Igor Klimanov assumed responsibility for investor
relations.
- On September 21, 2009, Nikolai Zelenskiy resigned as director and
Chief Executive Officer.
- On September 21, 2009, PricewaterhouseCoopers resigned as the
Company's auditors at the request of the Company.
- On September 23, 2009, Stephen Polakoff resigned as director.
- On September 28, 2009, Andrei Maslov, CFO, was appointed to the board
of directors.
Events Subsequent to the Quarter-End
- On October 7, 2009, Steven Poad resigned as director.
- On October 8, 2009, Andrew Matthews was appointed to the board of
directors.
- On October 20, 2009, Igor Klimanov was appointed Chief Executive
Officer.
- On October 27, 2009, High River announced a proposed private
placement of up to 150,000,000 common shares of the Company to Polenica
Investments Limited ("Polenica"), an affiliate of Troika
Dialog Group ("Troika"). Subject to negotiation of final
agreements and due diligence, Polenica will acquire 150,000,000 common
shares, representing approximately 23.1% of the 649,219,422 currently
outstanding common shares, at a price of $0.38 per share. As previously announced on
October 27, 2009, TSX has conditionally approved the private placement
subject to receipt and clearance of a Personal Information Form in
respect of Polenica. The proceeds of the private placement will be used
by High River to repay the approximately US$27 million plus accrued
interest outstanding under the two credit agreements that were assigned
by Standard Bank Plc to OAO Severstal ("Severstal") as of
April 20, 2009, with the balance being used to fund the exploration
program at Buryatzoloto and for general corporate purposes. The private
placement was unanimously approved by the Board of Directors of High
River, with nominees of Severstal abstaining.
The TSX has received the Personal Information Form in respect of
Polenica and it is expected that closing of the private placement will
occur as soon as practicable following clearance of such Personal
Information Form. It is also expected that concurrently with the
closing of the private placement, a nominee of Troika will be appointed
to the Board of Directors of High River and to the Audit Committee,
provided such nominee qualifies for such appointment under applicable
securities legislation.
Corporate Restructuring
- The Company was subject to a delisting review and had to satisfy the
TSX that it continues to meet the listing requirements of the TSX. On
August 6, 2009, the Company announced that the TSX determined that High
River satisfies the TSX's continued listing requirements and was
lifting its delisting review.
- As a result of the unconditional tender offer announced on June 9,
2009 which was increased and extended on July 28, 2009, Severstal
acquired 28,897,135 additional shares at $0.30 per share. Severstal's
ownership of the Company subsequently increased to 61.7%.
- During the third quarter, Nikolai Zelenskiy CEO, Steven Poad CFO,
Driffield Cameron vice president exploration and Dan Hrushewsky vice
president investor relations resigned. Nikolai Zelenskiy also resigned
as a director. Stephen Polakoff resigned as a director. Subsequent to
the quarter end, Steven Poad resigned as director and Igor Klimanov was
appointed CEO. Andrew Matthews joined the board in October.
DISCUSSION OF FINANCIAL RESULTS Selected Financial Results -------------------------- ---------------------------------------------------------------------------- Three months ended Nine months ended (thousands of ----------------------------------------------------------- Canadian dollars except per share September, June 30, September, September, September, amounts) 30, 2009 2009 30, 2008 30, 2009 30, 2008 ---------------------------------------------------------------------------- Gold revenue $ 89,557 $ 84,561 $ 34,939 $262,917 $ 123,375 ---------------------------------------------------------------------------- Net loss (4,567) (37,777) (15,348) (41,413) (22,382) ---------------------------------------------------------------------------- Net loss per share (basic) $ (0.01) $ (0.06) $ (0.05) $ (0.07) $ (0.07) ---------------------------------------------------------------------------- Cash provided by operating activities 33,011 22,821 4,673 85,504 7,092 ---------------------------------------------------------------------------- Weighted average number of shares outstanding (basic) 649,217,295 597,407,151 307,905,158 612,272,706 307,865,853 ----------------------------------------------------------------------------
The Company's consolidated net gold
revenues for Q3 2009 increased to $89.6 million from $84.6 million in
Q2 2009. Higher production by Taparko increased the number of ounces
sold. The average gold price realized on sales was US $964 per ounce
during Q3 2009, up from US $924 during Q2 2009 and up from US $864
during Q3 2008.
The Company had a net loss of $4.6 million in Q3 2009, compared to a
net loss of $37.8 million in Q2 2009 and a loss of $4.7 million last
year. The net change in earnings of $36.8 million compared to the
previous quarter largely reflects the write-down of the Prognoz Silver
project of $59 million in Q2 2009.
Cash flow from operations of $33.0 million increased from $22.8 million
in Q2 this year, up from $4.7 million in Q3 last year. Cash flow from
operations increased from last year largely due to the higher gold
revenue as discussed above.
OVERVIEW OF OPERATIONS
Underground Mines
The Zun-Holba and Irokinda underground gold mines located in Russia
reported no material challenges or shortcomings in their operations
during the quarter and continue to operate according to plan.
Buryatzoloto continues to be profitable and achieved its production
objectives for Q3 2009 with 37,430 ounces (100%) of gold produced at an
estimated total cash cost of US$443 per ounce as compared to 35,835
ounces at US$459 per ounce in the previous quarter and 38,787 ounces of
gold produced at a total cash cost of US$596 per ounce in the
corresponding period of 2008. The weakening of the Russian Rouble in
comparison to the US$ for the period Q3 2009 compared to Q3 2008 has
offset Rouble cost increases due to inflation and increases in output.
Replacing reserves at these mines is a priority of local management. A
$23 million budget for mine-site exploration is planned for 2010 to
replace mined out reserves and extend the mine life at Irokinda and
Zun-Holba. In addition, a substantial capital program will be allocated
in the first half of 2010 for capital mining works to prepare the
existing reserves for extraction.
Open Pit Mines
Berezitovy Mine (Russia)
Berezitovy continues to underperform with year-to-date mill utilization
of 72%. Production (100%) at Berezitovy during the third quarter was
22,487 ounces of gold, compared to 24,023 ounces produced in Q2 2009. Production
decreased from Q2 2009, due to lower throughput. Production levels
continue to be constrained by maintenance shut-downs and disk filter
plant under-performance as well as crusher problems during Q3.
Approximately 300,000 tonnes of ore were processed during the quarter
(22% below the design capacity) with an average grade of 2.6 g/t.
Recoveries averaged approximately 87% during the quarter, just below
design levels of 89%. Total cash costs were US$667 per ounce during Q3
2009 compared to US$699 in Q2 2009.
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. Two of the three existing filters were
upgraded during the quarter. However, it did not eliminate the need for
a wet tailings by-pass. Recently, two new disk filter units from a
different supplier have been ordered to improve throughput rates of the
disk filter plant in attempt to eliminate the need for a wet tailings
by-pass. Installation is planned for Q4 and should decrease risk of
stoppage of the plant due to tailings dam overflow.
Taparko-Bouroum Mine (Burkina Faso)
In Q3 2009, gold poured at Taparko (100%) totalled 25,073 ounces, up
24% from the second quarter, up from last year's level when the mill
was on standby during the quarter. The production increased compared to
the previous quarter mainly because of better mill availability.
Approximately 200,000 tonnes of ore were processed during the quarter
higher than in Q2 2009 when several unplanned mill shutdowns occurred.
Mill head grades during the quarter of 4.0 g/t were 40% higher than
Taparko-Bouroum average grade of 2.8 g/t. Total cash costs decreased to
US$496 per ounce compared to US$515 last quarter due to the increase in
production: fixed costs were spread over more ounces of production.
High River believes that while some of the technical start-up problems
at the Taparko-Bouroum mill have been resolved, the continuing
vibration problems at the ball mill remain a concern.
Advanced Exploration Projects
Bissa Gold Project
In September a US$1.6 million exploration program was started. Most of
the funds will be spent on drilling the Zandkom property. An additional
US$1.1 million project is planned to start in Q4 which will be mainly
in-fill drilling designed to upgrade the Bissa resources from inferred
to indicated category in order to advance the bankable feasibility
study.
Prognoz Silver Project
The Company suspended all exploration activity on the property as a
cash conservation measure. There is no exploration budgeted for Q4 2009
or in 2010.
Novophirsovskoye Gold Project, Russia
The Company determined that the Novophirsovskoye project is no longer a
key exploration property. A buyer has been found for the property and
the project was written down in the third quarter to the sales value of
US$1.0 million. The property is being sold subsequent to the quarter
end.
About High River
High River is unhedged gold company with interests in producing mines
and advanced exploration projects in Russia and Burkina Faso. Two
producing mines, Zun-Holba and Irokinda, are situated in the Lake
Baikal region of Russia. Two new open pit gold mines, Berezitovy in Russia
and Taparko-Bouroum in Burkina Faso, are also in production. Finally,
High River has two advanced exploration projects with NI 43-101
compliant resource estimates, the Bissa gold project in Burkina Faso
and 50% interest in the Prognoz silver project in 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, including those risk factors discussed in the
Company's 2008 Annual Information Form. 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) September December 30, 31, (unaudited) 2009 2008 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 38,663 $ 19,123 Accounts receivable 12,163 14,546 Inventory 65,142 79,369 Other assets 15,443 11,401 -------------------------------------------------------------------------- 131,411 124,439 Investments 47,188 22,724 Property, plant and equipment 353,803 432,089 Exploration properties and deferred exploration 103,208 170,522 Other assets 749 3,335 -------------------------------------------------------------------------- Total Assets $ 636,359 $ 753,109 -------------------------------------------------------------------------- Liabilities Current Liabilities Accounts payable $ 22,593 $ 29,842 Loans and interest payable 90,304 136,699 -------------------------------------------------------------------------- 112,897 166,541 Loans and interest payable 30,843 51,446 Reclamation 9,594 10,078 Non-hedge derivatives 12,767 13,651 Future income taxes 17,296 15,884 -------------------------------------------------------------------------- 183,397 257,600 Non-controlling interest 22,880 18,467 -------------------------------------------------------------------------- Total Liabilities 206,277 276,067 -------------------------------------------------------------------------- Shareholders' Equity Share capital 553,882 543,244 Warrants 13,265 16,627 Contributed surplus 16,489 12,876 Debenture conversion option 538 538 Deficit (153,450) (112,037) Accumulated other comprehensive income (642) 15,794 -------------------------------------------------------------------------- Total Shareholders' Equity 430,082 477,042 -------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $ 636,359 $ 753,109 -------------------------------------------------------------------------- High River Gold Mines Ltd. CONSOLIDATED STATEMENTS OF OPERATIONS (Expressed in thousands of Canadian dollars except per share figures) Three months ended Nine months ended September 30, September 30, (unaudited) 2009 2008 2009 2008 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Revenue Gold $ 89,577 $ 34,939 $ 262,917 $ 123,375 Silver 950 1 4,914 70 --------------------------------------------------------------------------- 90,527 34,940 267,831 123,445 --------------------------------------------------------------------------- Expenses Mining costs 47,736 21,812 134,315 81,211 Mine administrative costs 1,676 1,816 8,153 6,274 Mine amortization and depletion 13,145 5,576 41,913 16,840 Asset retirement obligation 264 accretion 216 (12) 639 Standby costs - 5,805 - 5,805 --------------------------------------------------------------------------- 62,773 34,997 185,020 110,394 --------------------------------------------------------------------------- Income before the undernoted 27,754 (57) 82,811 13,051 Administrative costs (5,205) (3,089) (11,525) (8,467) Amortization (15) (177) (46) (546) Exploration expense (999) (3,269) (3,000) (7,952) Financing costs and investment income, net (8,490) 330 (15,356) (8,237) Other income/(expense) (13,513) (9,578) (80,447) (3,879) --------------------------------------------------------------------------- Income before tax and non- controlling interest (468) (15,840) (27,563) (16,030) Income tax expense (4,085) (322) (9,438) (4,902) --------------------------------------------------------------------------- Loss before non-controlling interest (4,553) (16,162) (37,001) (20,932) Non-controlling interest in earnings of subsidiary (14) (814) (4,412) (1,450) --------------------------------------------------------------------------- Net loss for the period $ (4,567) $ (15,348) $ (41,413) $ (22,382) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Net loss per share -- basic and diluted $ (0.01) $ (0.05) $ (0.07) $ (0.07) --------------------------------------------------------------------------- --------------------------------------------------------------------------- High River Gold Mines Ltd. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of Canadian dollars) Three months ended Nine months ended September 30, September 30, (unaudited) 2009 2008 2009 2008 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Operating Activities Net loss for the period $ (4,567) $ (15,348) $ (41,413) $ (22,382) Non-cash items: Non-controlling interest in earnings of subsidiary 14 (814) 4,412 1,450 Change in inventory 1,593 - 470 - Amortization and depletion 13,161 5,101 41,959 17,385 Asset retirement obligation accretion 216 (184) 639 264 Financial instrument accretion 114 85 568 974 Fair value adjustments to derivatives 4,007 (2,108) 1,000 1,686 Stock option benefit expense 70 959 250 1,940 Future income taxes 1,898 (188) 768 182 Unrealized foreign exchange (6,204) 7,668 (2,690) 4,594 Write-down of carrying value 11,383 289 70,167 296 Loss on disposal of assets and other 6,429 1,629 6,991 2,685 --------------------------------------------------------------------------- Subtotal 28,114 (2,911) 83,121 9,074 Change in non-cash working capital 4,897 7,584 2,383 (1,982) --------------------------------------------------------------------------- Net cash provided by operating activities 33,011 4,673 85,504 7,092 --------------------------------------------------------------------------- Investing Activities Property, plant and equipment (6,081) (9,897) (13,721) (21,668) Proceeds on disposal 1,636 6 1,636 6 Exploration properties and deferred exploration (1,560) (9,947) (4,114) (28,448) Development properties - 975 - (28,409) Increase in investments - - - (10,802) Allocation of restricted cash - 3 - 72 (Increase) in other long-term assets (4,927) 145 (1,553) (704) --------------------------------------------------------------------------- Net cash used by investing activities (10,932) (18,715) (17,752) (89,953) --------------------------------------------------------------------------- Financing Activities Loans received 13 13,246 5,991 43,387 Loans repaid (5,722) (12,251) (63,290) (38,421) Common shares issued - - 10,623 30,334 --------------------------------------------------------------------------- Net cash provided by (used by) financing activities (5,709) 995 (46,676) 35,300 --------------------------------------------------------------------------- Effect of exchange rate changes on cash held in foreign currencies (837) (69) (1,536) 143 --------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents during the period 15,533 (13,116) 19,540 (47,418) Cash and cash equivalents - Beginning of period 23,130 17,189 19,123 51,491 --------------------------------------------------------------------------- Cash and cash equivalents - End of period $ 38,663 $ 4,073 $ 38,663 $ 4,073 --------------------------------------------------------------------------- ---------------------------------------------------------------------------
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