High River Gold Mines Ltd.
TSX : HRG

High River Gold Mines Ltd.

November 13, 2009 17:52 ET

High River Gold Reports Third Quarter 2009 Results

(All currency figures are in Canadian dollars unless otherwise noted)

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
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Production (100%) Cash Operating Total Cash Costs
Oz Costs US$/Oz
US$/Oz
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Buryatzoloto 37,430 379 443
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Berezitovy 22,487 607 667
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Somita 25,073 467 496
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Total 84,990 465 518
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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
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Net loss (4,567) (37,777) (15,348) (41,413) (22,382)
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Net loss per
share (basic) $ (0.01) $ (0.06) $ (0.05) $ (0.07) $ (0.07)
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Cash provided by
operating
activities 33,011 22,821 4,673 85,504 7,092
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Weighted average
number of
shares
outstanding
(basic) 649,217,295 597,407,151 307,905,158 612,272,706 307,865,853
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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
--------------------------------------------------------------------------
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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
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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
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Total Assets $ 636,359 $ 753,109
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Liabilities
Current Liabilities
Accounts payable $ 22,593 $ 29,842
Loans and interest payable 90,304 136,699
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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
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183,397 257,600
Non-controlling interest 22,880 18,467
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Total Liabilities 206,277 276,067
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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
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Total Shareholders' Equity 430,082 477,042
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Total Liabilities and Shareholders' Equity $ 636,359 $ 753,109
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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
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Revenue
Gold $ 89,577 $ 34,939 $ 262,917 $ 123,375
Silver 950 1 4,914 70
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90,527 34,940 267,831 123,445
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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
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62,773 34,997 185,020 110,394
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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)
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Income before tax and non-
controlling interest (468) (15,840) (27,563) (16,030)
Income tax expense (4,085) (322) (9,438) (4,902)
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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)
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Net loss for the period $ (4,567) $ (15,348) $ (41,413) $ (22,382)
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Net loss per share -- basic and
diluted $ (0.01) $ (0.05) $ (0.07) $ (0.07)
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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
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Subtotal 28,114 (2,911) 83,121 9,074
Change in non-cash working
capital 4,897 7,584 2,383 (1,982)
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Net cash provided by operating
activities 33,011 4,673 85,504 7,092
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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)
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Net cash used by investing
activities (10,932) (18,715) (17,752) (89,953)
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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
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Net cash provided by (used by)
financing activities (5,709) 995 (46,676) 35,300
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Effect of exchange rate changes
on cash held in foreign
currencies (837) (69) (1,536) 143
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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
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Cash and cash equivalents - End
of period $ 38,663 $ 4,073 $ 38,663 $ 4,073
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Contact Information

  • High River Gold Mines Ltd.
    Igor Klimanov
    CEO
    011 7 495 981 0910 ext. 6678
    Email: info@hrg.ca
    Website: www.hrg.ca