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Message: Third Quarter 2008 Results
| December 18, 2008 | |
| High River Gold Reports Third Quarter 2008 Results | |
|
TORONTO, ONTARIO--(Marketwire - Dec. 18, 2008) - (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 nine month period ended September 30, 2008. The 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 OF 2008 Financial Results - Gold Revenue of $34.9 million, an increase of 31% from Q3 2007. - Cashflow from Operations of $4.7 million, up from $1.3 million last year. - Net loss of $15.3 million ($.05 per share) compared to a net loss of $4.7 million ($.02 per share) in Q3 2007. - Attributable gold production declined 2.5% to 33,460 ounces. Cash cost per ounce increased 42% to US $546 per ounce (excluding cash costs from Berezitovy which was commissioned after the quarter end). - Cash and cash equivalents declined to $4.1 million from $51.5 million last year. - Working capital declined to a deficit of ($86.5) million from $38.0 million as at December 31, 2007. - Current and long term debt levels rose to $ 193.4 million from $ 175.3 million as at December 31, 2007. Operations - Zun-Holba and Irokinda Gold Mines -- Gold production of 38,787 ounces (100%) at a cash operating cost of US$541 per ounce. - Taparko-Bouroum Gold Mine -- Gold production realized in the third quarter was from material in process at the end of the second quarter as ongoing mechanical problems with the ball mill drive-train resulted in a continuing mill shutdown. A new custom-made gear box was installed early in November and the mill was re-started. - Berezitovy Gold Mine -- Gold production during the quarter totalled 14,293 ounces (100%), with an average plant capacity utilization rate of 72%. - Bissa Gold Exploration Project -- Substantial work for the Bissa preliminary feasibility study was completed during the quarter, including an infill drilling programme designed to expand and upgrade existing National Instrument ("NI") 43-101 compliant resources. - Prognoz Silver Project -- Drilling, designed to define/expand existing resources and to discover/develop potential new resources, continued on some of the 30 vein systems identified to date at Prognoz. Corporate - High River entered into an agreement to acquire the remaining 50% interest in the Prognoz Silver Project for 34.1 million common shares of the Company. The closing of the transaction was extended to October 31, 2008 pending regulatory approval. - The Company entered into an agreement to issue up to 160 million shares at $1.79 per share through a non-brokered private placement for proceeds of up to $286.4 million, to the Alfa Group Consortium, one of Russia's largest privately-owned financial/industrial organizations. This strategic investment agreement was subsequently terminated due to market conditions. - Four new directors (Murray Sinclair, Robert Buchan, Terrence Lyons, and Stephen Polakoff) joined the Company's board, replacing Michael Chieng, Laurence Curtis, David Davidson and Donald Whalen who resigned. A Special Committee of the Board of Directors was established to increase shareholder value through the evaluation of strategic alternatives for the Company. Financial advisors were retained by the Special Committee to assist in this matter. - High River was deleted from the S&P/TSX Composite, Global Gold, Global Mining, and SmallCap Indices. Events Subsequent to the Quarter - On October 6, 2008 High River announced that the Berezitovy Gold Mine achieved commercial production effective October 1, 2008. - On October 31, 2008, the Company announced that the closing of the agreement to acquire the remaining 50% of the Prognoz Silver Project was extended to November 30, 2008. On December 4, 2008, the Company announced the termination of the agreement to acquire the remaining 50% of the Prognoz Silver Project. - On October 31, 2008, High River reported that debt covenants with Royal Gold Inc. and Standard Bank Plc were in breach since October 1, 2008, and that the Company was experiencing liquidity problems. High River indicated that its ability to continue as a going concern remained dependent upon discussions and/or forbearance from its lenders, accommodations from trade creditors, establishing steady production at its two new mines and obtaining additional financings. The Company also reported the resignation of two directors, Graham Farquharson and Robert Buchan. - On November 10, 2008, the Company announced the re-start of the Taparko mill. High River also announced the resignation of two directors, Murray Sinclair and Mark Rachovides. - On November 16, 2008, the Company announced that it will be late in filing its interim financial statements for the nine month period ended September 30, 2008 due to concerns raised by the board of directors regarding the reliability of financial information that High River had received from its 85% owned subsidiary, OJSC Buryatzoloto. Those concerns have been subsequently addressed to the satisfaction of the board of directors. - On November 20, 2008, High River announced a non-brokered private placement of 282 million shares at $0.20/share, for proceeds of $56 million, to an affiliate of Severstal Resources. Four new directors (Roman Deniskin, Nikolay Zelenskiy, Evgeny Tulubensky and Oleg Pelevin) were appointed to the board of directors of the Company on behalf of Severstal Resources in place of resigning directors David Mosher and Valery Dmitriev. As well, David Mosher resigned as President and Chief Executive Officer and Nikolay Zelenskiy was appointed Chief Executive Officer. Post-transaction, Severstal Resources held 53% of the outstanding shares of High River. 2008 GOLD PRODUCTION GUIDANCE
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Mine 2008 (100%) 2008 (Attributable)
(000's of ozs) (000's of ozs)
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Irokinda 72 61
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Zun-Holba 73 62
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Taparko-Bouroum 32 29
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Berezitovy 41 40
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Total 218 192
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DISCUSSION OF FINANCIAL RESULTS
Selected Financial Results
(in thousands of Canadian Three Months Ended Nine Months Ended
dollars except per share September 30, September 30,
amounts) 2008 2007 2008 2007
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Gold revenue $ 34,939 $ 26,572 $ 123,375 $ 84,819
Net income
(loss) (15,348) (4,657) (22,382) (3,495)
Net income
(loss) per
share (basic) (0.05) (0.02) (0.07) (0.01)
Cashflow from
operations 4,673 1,333 7,092 3,183
Weighted
average number
of shares
outstanding
(basic) 307,905,158 260,709,088 307,865,853 253,941,944
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The net loss reflects higher revenues offset by higher mining costs (wage, material and energy inflation in Russia), costs at Taparko-Bouroum not offset by production revenue (standby costs), and an increase in other expenses related to an unrealized foreign exchange loss resulting from a weaker Burkina Faso currency (CFA) effect on US dollar denominated debt at Taparko-Bouroum. Cashflow from operations increased from the third quarter last year due to changes in non-cash working capital. Gold production (100%) was 39,358 ounces for the quarter at a cash operating cost of US $546 per ounce (excluding cash costs Berezitovy, which was commissioned just after the end of the quarter), compared to 40,403 ounces at a cash operating cost of US $398 per ounce a year ago. Working Capital decreased to a deficit of ($86.5) million from $38.0 million as at September 30, 2007 largely due to a decline in cash and cash equivalents ($47.4 million) and an increase in current loans and interest payable ($74.8 million). The increase in current loans and interest payable was largely due to increased drawdowns on working capital facilities, and the re-classification of the Royal Gold debt facility as current since certain loan covenants are in breach and restructuring negotiations are underway. OVERVIEW OF OPERATIONS Operating Mines Zun-Holba Gold Mine (Russia) Zun-Holba produced 17,651 ounces of gold (100%) in the third quarter, up slightly from 17,440 ounces last year. Cash operating costs for the quarter increased to US $616 per ounce from US $453 per ounce last year due to wage and material cost inflation and lower grades mined. Irokinda Gold Mine (Russia) Gold production at the Irokinda Mine totalled 19,957 ounces (100%) during the quarter, down slightly from 20,806 last year. Cash operating costs increased to US $413 per ounce compared to US $323 per ounce last year, for the same reasons cited for the Zun-Holba Mine. Taparko-Bouroum Gold Mine (Burkina Faso) The Taparko mill was re-started early in November 2008, after the installation of a new gearbox. Excessive vibration in the Taparko mill drive train resulted in the mill remaining idle during the third quarter. The re-started mill is being closely monitored to ensure that the vibration problem has indeed been resolved. In the event vibration reoccurs, the mill may need to be shut down for further remedial actions. In 2009, at the latest, the Company will study whether a further shutdown and further work are required to ensure that the mill continues to be in good operating condition. Gold production during the quarter totalled 571 ounces and was entirely from gold already in the circuit at the beginning of Q3. Cash operating costs were US $920 per ounce and reflected the low production volume. An ore stockpile of approximately 200,000 tonnes will be used to feed the process plant. Mining operations are scheduled to resume by January 2009. During the nine months ending September 30, 2008, Taparko-Bouroum produced 23,538 gold ounces on a 100% basis. Whole year 2008 attributable gold production for Taparko-Bouroum is expected to total approximately 29,000 ounces. Berezitovy Gold Mine (Russia) Numerous plant upgrades and repairs prior to and during the third quarter resulted in increasing mill throughput rates and the achievement of criteria established for commercial production (i.e. mill throughput equal to or exceeding 60% of design capacity over a 30 day period). Commercial production was declared effective October 1, 2008. Gold production, on a 100% basis, totalled 14,293 ounces during the third quarter and 28,202 ounces during the nine month period ending September 30, 2008. Attributable gold production at Berezitovy for 2008 is expected to be approximately 40,000 ounces. At the end of the quarter, 390,000 tonnes of ore have been stockpiled, which approximates 3.5 months of production. Exploration Projects Bissa Project A significant amount of work related to the Bissa preliminary feasibility study was completed during the quarter. An infill drilling and trenching programme, consisting of 33 diamond drill holes (5,256 metres), 176 reverse circulation holes (14,715 metres), and 45 trenches (5,009 metres), to define and upgrade existing resources, ended during the quarter. Other work conducted during the quarter included three dimensional modeling, resource estimation, geotechnical mapping, metallurgical sampling (10 samples totalling approximately 2,000 kg), heap leach testwork, topographical surveying, and environmental baseline work. Prognoz Project Exploration Drilling continued during the third quarter with 44 diamond drill holes completed totalling 6,621 metres. During the nine months ending September 30, 2008, 117 holes were completed (15,465 metres). Strategic Investment Transaction with Alfa Group Terminated On August 1, 2008 High River announced a strategic investment transaction with an indirect wholly-owned subsidiary of the Alfa Group Consortium, one of Russia's largest privately owned financial/industrial organizations. High River was to issue up to 160 million common shares at $1.79 per share by means of a non-brokered private placement for proceeds of up to approximately $286.4 million. Proceeds of the financing were to be used for development of the Prognoz Silver Project, to acquire and consolidate advanced projects in Russia and Africa, and to reduce debt. On August 26, 2008 the Company announced that the transaction was terminated after the Alfa Group reassessed its overall investment strategy and plans in light of the severe decline in precious metals producer equity values and the market in general. Acquisition of the Remaining 50% of the Prognoz Silver Project Terminated On July 31, 2008, High River announced that it had entered into an arm's-length agreement to acquire the remaining 50% interest in the Prognoz Silver Project not already owned by High River. Under the agreement, High River was to issue 34.1 million common shares, representing 9.9% of the issued capital of the Company, and assume debt obligations totalling approximately US $16 million related to past exploration expenditures on the Prognoz property. Approximately US $13.5 million of these debt obligations are owed to High River's 84.9%-owned subsidiary Buryatzoloto. The closing date of this transaction was extended twice during the quarter, first to October 31, 2008 and then to November 30, 2008, pending regulatory approval. As at November 30, 2008, the required approval of the Ministry of the Russian Federation for Anti-Monopoly Policy and Support of Businesses had not yet been received. However, a further extension to the closing date of the transaction was not negotiated as the parties to the transaction were unable to agree to mutually satisfactory terms for the extension of the transaction agreement. As a result, on December 4, 2008 the Company announced the termination of the agreement to acquire the remaining 50% of the Prognoz Silver Project. About High River High River is a gold company with interests in producing mines, mines under development, and advanced exploration projects in Burkina Faso and Russia. |
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