High River Gold Mines Ltd.
TSX : HRG

High River Gold Mines Ltd.

May 15, 2006 12:49 ET

High River Gold Arranges Project Debt Financing for the Berezitovy Project In Russia

TORONTO, ONTARIO--(CCNMatthews - May 15, 2006) - High River Gold Mines Ltd. ("High River", the "Company") (TSX:HRG) is pleased to announce it has arranged project debt financing, totalling US $49 million (plus a $5 million standby contingency facility), to fund completion of the construction of the open pit gold mine and processing plant at its 99%-owned Berezitovy Project in the Amur Region of the Russian Federation.

The debt financing consists of two senior loan facilities provided by the European Bank for Reconstruction and Development ("EBRD") and two facilities provided by NOMOS Bank ("NOMOS"), a Russian bank focussed on bullion trading and financing Russia's natural resource sector. The facilities have received approval from the credit committees and boards of both banks and have been approved by High River's board, and are subject to, among other things, definitive documentation, completion of pre-closing requirements, and any required regulatory approvals. Included in the debt financing is a US $9 million interim project facility provided by NOMOS which was drawn down in March and April; closing and drawdown of the NOMOS project debt facility is anticipated to occur in mid-May; closing and drawdown of the EBRD project debt facility is expected in June.

High River is pleased to continue its successful relationship with the EBRD which previously provided two debt financings enabling the Company's Russian subsidiary, OJSC Buryatzoloto, to upgrade their underground operations, build a CIP plant and a power-line connecting the Zun-Holba Mine to the low-cost regional power grid.

High River is very pleased that NOMOS Bank has become a significant lender to the Berezitovy Project. Buryatzoloto has also developed an excellent working relationship with NOMOS Bank, who is the primary off-taker of Buryatzoloto's gold production.

The loan facilities will carry normal project debt terms and conditions and will be secured by a High River corporate guarantee, supported by appropriate collateral, until the project passes a completion test. High River will not be required to sell gold forward in any of the facilities; however, the Company has agreed to establish downside price protection for the lenders in the future through a "put programme" if the gold price were to remain below a trigger price of US $450 per ounce for a consecutive two week period.

Capital expenditures for the project are projected at US $88 million, inclusive of recoverable VAT and pre-production inventory expenses. To the end of March 2006, approximately US $53 million has been spent on the project, including US $41 million provided by High River as its equity component.



Project Cost Projection (US $ million)
------------------------------------------------------------
Capex: $76.2
VAT: 9.4
Pre-Production: 2.4
-----
Total $88.0
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Source of Funds (US $ million) Spent as of To Project Total
Mar 31/06 Completion Project
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High River 41 - 41
Debt Financing 12 37 49
-- -- --
Total 53 37 90

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The revised mine plan at the Berezitovy Project anticipates average annual gold production to exceed 120,000 ounces at an operating cash cost of approximately US $160 per ounce (excluding the 6% government royalty). The project has excellent payback and generates the following internal rates of return:



----------------------------
Gold Price IRR
----------------------------
$500 25%
$600 32%
$700 38%
----------------------------


Significant progress has been made to date on infrastructure, including completion of a 101 kilometre powerline connecting the site to the low-cost power grid and preparation for the mill site and tailings area. Pre-stripping of the pit started in April. Full scale construction of the plant and processing facilities will take place largely during 2006, with commissioning of the project scheduled for the second quarter of 2007.

About High River

High River is currently constructing two open pit gold mines, the Taparko-Bouroum Project in Burkina Faso and the Berezitovy Project in Russia. Upon successful commissioning of these two development projects, together with gold production from High River's 85%-owned Russian subsidiary, OJSC Buryatzoloto, High River's annualized gold production rate is expected to exceed 350,000 ounces by mid-year 2007, establishing the Company as a mid-tier gold producer.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements based on current expectations. These forward-looking statements entail various risks and uncertainties that could cause actual results to differ materially from those reflected. Risk and uncertainties about the Company's business are more fully discussed in the Management's Discussion and Analysis published in the Company's Annual Report and in the Annual Information Form.

Contact Information

  • High River Gold Mines Ltd.
    Don Whalen
    Executive Chairman
    (416) 947-1440
    (416) 360-0010 (FAX)
    or
    High River Gold Mines Ltd.
    David Mosher
    President & CEO
    (416) 947-1440
    (416) 360-0010 (FAX)
    info@hrg.ca
    www.hrg.ca