High River Gold Mines Ltd.
TSX : HRG

High River Gold Mines Ltd.

March 29, 2007 20:44 ET

High River Gold Reports 2006 Year-End Results

TORONTO, ONTARIO--(CCNMatthews - March 29, 2007) -

(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 year ended December 31, 2006. 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 2006

Financial Results

- Net income for 2006 was $31.0 million, or $0.13 per share, compared to a loss of $1.0 million ($0.01 per share) in 2005.

- Attributable gold production of 129,828 ounces was achieved for the year at a direct mining cost of US $333 per ounce for a total cash cost of US $381 per ounce (including a 6% government royalty).

- Cash flow from operations before working capital changes increased 38% to $21.2 million.

Operations

- Construction of the Taparko-Bouroum Gold Mine in Burkina Faso, West Africa:

- substantial progress was made during 2006 and the first gold pour is on target for May/June 2007.

- Construction of the Berezitovy Gold Mine in the Amur region of Russia:

- construction significantly advanced during the year, with the first gold pour scheduled for August/September 2007.

- Bissa Advanced Gold Exploration Project:

- the NI 43-101 gold resource estimate increased to:

Measured 81,980 ounces

Indicated 580,270 ounces

Inferred 679,470 ounces

- A new drill programme (US $10 million over 5 quarters) began in November 2006 to test 12 new drill target areas and further explore the high-grade "IO zone".

- Acquired the world-class Prognoz Silver Project:

- High River's 84.9%-owned Russian subsidiary, OJSC Buryatzoloto, acquired a 50% interest in and operatorship of the high-grade, world-class Prognoz Silver Project in the

- first half of 2006 (historic, non NI 43-101 compliant Russian classified reserves and resources of 194 million ounces grading 830 g/t silver).

- Reserves and Resources:

- Attributable reserves and resources doubled from 3 to 6 million gold and gold equivalent ounces.

- Achieved financing requirements for project construction and exploration expenditures through the exercise of warrants, additional project debt financing and a small convertible debenture.

- Signed a strategic alliance agreement with Goldrush Resources Inc., which provided High River with back-in and operatorship rights - increasing the Company's exposure to high potential grassroots exploration discoveries in Burkina Faso.

- Acquired a high potential, past producing exploration property package, adjacent to the Berezitovy mine site.

Corporate

- The Board of Directors believes that the Company's share price does not reflect the true value of the Company's individual assets and mandated the Strategic Review Committee to evaluate alternatives to unlock shareholder value.

GUIDANCE FOR 2007

- Production: High River's mines plan to produce, on a 100% basis(i), a total of 239,400 ounces of gold in 2007 as follows:

- Irokinda: 76,300 ounces

- Zun Holba: 69,100 ounces

- Taparko-Bouroum: 62,000 ounces

- Berezitovy: 32,000 ounces

(i)High River's interest: Irokinda and Zun Holba Mines - 85%, Taparko-Bouroum Mine - 90%, Berezitovy Mine - 99%

- Operating Costs: Direct mining costs for 2007 are expected to average US $324 per ounce. This cost figure includes the costs from the post-completion initial start-up phase at the Taparko-Bouroum and Berezitovy mines which are forecast to decline once full production levels are attained in 2008.

HIGHLIGHTS FOR THE FOURTH QUARTER 2006

Financial and Operating Results

- Net loss for Q4/06 was $2.2 million ($ .01per share)

- Attributable gold production was 45,818 ounces at a direct mining cost of US $354 per ounce, and a total cash cost of US $406 per ounce

- Cash flow from operations before working capital changes equaled $7.2 million



DISCUSSION OF FINANCIAL RESULTS

Selected Financial Results
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($ thousands)
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2006 2005
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Total Revenue $ 105,917 $ 83,828
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Net income (loss) 31,045 (1,044)
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Net income (loss) per share
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- Basic and Diluted 0.13 (0.01)
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Total Assets 517,432 304,198
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Total Long-term Financial Liabilities 137,895 8,316
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Revenues from gold sales in 2006 were $103.3 million, up significantly from 2005 revenues of $82.2 million. The increase was due to higher realized gold prices partially offset by fewer ounces sold and the weakening of the US dollar against the Canadian dollar.

The Company realized a consolidated net income of $31.0 million, or $0.13 per share, in 2006 compared to a net loss of $1.0 million ($0.01 per share) in 2005. The increase was predominantly due to the recognition during the third quarter of a non-cash gain of $32.9 million on the transfer of High River's interest in the New Britannia Mine to a third party. Going forward, earnings will benefit from the elimination of non-cash interest expense, associated with the New Britannia Mine, of approximately $2 million per year.

Total assets increased from 2005 to 2006 as the Company invested in its two development projects coming into production in 2007, Taparko-Bouroum Mine and Berezitovy Mine, and acquired a 50% interest in the Prognoz Silver Project for US $30 million.

Total long-term financial liabilities increased from 2005 as a result of obtaining debt financing to advance the development projects.

OVERVIEW OF OPERATIONS

Operating Mines

Zun Holba Mine (Buryatia, Russia)

The underground Zun Holba Mine, owned and operated by High River's 85%-owned subsidiary, OJSC Buryatzoloto, produced 70,107 ounces of gold in 2006, virtually unchanged from the previous year, as the mill processed 245,655 tonnes of ore at an average head grade of 9.3 g/t. Direct mining costs increased to approximately US $352 per ounce (total cash cost of US $391 per ounce) compared to direct mining costs of approximately US $285 per ounce (total cash cost of US $305 per ounce) in 2005. The increase was largely due to higher costs related to deeper underground workings, material inflation, a new incentive plan to retain skilled personnel, and a strengthening rouble.

Irokinda Mine (Buryatia, Russia)

Production levels at Buryatzoloto's other underground mine, Irokinda, declined slightly during 2006 to 80,066 ounces from 83,280, due to a 6.7% decrease in tonnes milled (to 280,097 tonnes) related to lower mine output.

In 2006, direct mining costs increased to approximately US $269 per ounce (total cash cost of US $305 per ounce) compared to direct mining costs of approximately US $216 per ounce (total cash cost of US $241 per ounce) in 2005. The rise in operating costs was mainly the result of higher wage and materials costs and a stronger rouble.

Mines under Construction

Taparko-Bouroum Mine (Burkina Faso)

Construction at Taparko-Bouroum advanced substantially during 2006, and the mine is on target for a gold pour in May/June 2007. Major accomplishments during the year included: virtual completion of engineering design, pre-stripping of the 3/5 and G/T pits and actual mining and stockpiling of ore, erection of all six CIL tanks, mill building and components, completion of the tailings pad, and construction of the mine reservoir and water pipeline.

During May and June, the project will be undergoing preproduction activities with the mill running, circuit testing and gold production. It is expected that commercial production will be declared in July 2007 upon achievement of the following criteria:

1. Major project capital expenditures will be substantially completed to the extent of at least 85% of planned expenditures

2. Completion of a reasonable testing period of continuous operation of the facilities of not less than 30 days

3. A level of gold production of at least 60% of a planned monthly capacity of 8,900 ounces achieved over a continuous 30 day period

4. A significant portion of monthly expenditures are directed to operating activities, and

5. The gold produced must be in a saleable form.

Berezitovy Mine (Amur Oblast, Russia)

The Berezitovy Mine construction project also saw significant progress during 2006, with the first gold pour scheduled for August/September 2007. Notable accomplishments during the year included: completion of engineering for all major components, the start of pre-stripping and some minor stockpiling of ore, erection of the mill building and installation of the SAG and ball mills, erection of four of the six leach tanks, completion of approximately half of the phase 1 tailings pad, and installation of the jaw crusher and the front end of the ore feeder system. It is expected that commercial production will be declared in October 2007 upon achievement of the same criteria as detailed for the Taparko-Bouroum Gold Project except, that the gold production target of at least 60% will be measured against a planned monthly capacity of 10,000 ounces.

Advanced Exploration Projects

Bissa Gold Project

The Bissa Project consists of 1,000 square kilometres of exploration permits in Burkina Faso. During 2006, High River established a new, increased NI 43-101 resource (Measured: 81,980 ounces, Indicated: 580,270 ounces, Inferred: 679,470 ounces) over just 6 kilometres of the anomalous 30 kilometres of strike, on High River's property, of the regional structural trend called the Sabce Deformation Corridor.

Recently completed surface exploration, together with past exploration work, identified 12 target areas for drilling. In November 2006, High River began a US $10 million drill programme, budgeted at US $2 million per quarter. This programme's initial objective is to expand the National Instrument 43-101 resource estimate to over 2 million ounces of gold. This will be accomplished by drill testing the 12 target areas, as well as in-fill drilling on the high-grade IO zone.

Prognoz World-Class Silver Project

Early in 2006, Buryatzoloto acquired a 50% interest in, and operatorship of, the world-class Prognoz Silver Project. Prognoz has historic Russian classified (non NI 43-101 compliant and must not be relied upon) reserves and resources containing 194 million ounces grading 830 g/t on average (see September 25, 2006 news release), making it one of the largest and highest grade, undeveloped silver projects in the world. The historical reserves and resources calculation was based on extensive past work over the period 1987 to 2000 by the Russian State Exploration Company (17,805 metres of diamond drilling and 17,756 metres of trenching). The reserves and resources were based on data from only two of the more than 30 veins known to exist on the property, the Glavnoye Vein (4.1 kilometres long and open along strike) and the Boloto Vein (2.4 kilometres long and open along strike).

During 2006, a US$ 6 million exploration programme consisted of 85 diamond drill holes totaling 13,613 metres, and 744 metres of trenching. To date, results for 54 of these drill holes were received and released. They generally showed: high silver grades across mineable widths, grades and widths generally consistent with historical values over the strike length tested, and vertical and horizontal continuity of mineralization within the Glavnoye vein along the approximately 2.5 kilometre strike length tested. A new US $13 million drill programme, which will ultimately utilize 5 drill rigs, began in January 2007. The objective of this programme is to:



- Establish NI 43-101 resources
- Expand the total resource
- Extract and metallurgically test a 10 tonne bulk sample
- Begin a scoping study


About High River

High River is currently constructing two open-pit gold mines which are on schedule to commence production in 2007, the Taparko-Bouroum Project in Burkina Faso (May/June) and the Berezitovy Project in Russia (August/September). Annual gold production from Taparko-Bouroum is planned at 100,000 ounces in year one increasing to over 140,000 ounces in the third year of operation, and annual production from Berezitovy will average more than 100,000 ounces. Combined with gold production from High River's 85%-owned Russian subsidiary, OJSC Buryatzoloto, High River's attributable gold production is expected to exceed 200,000 ounces in 2007, and 350,000 ounces in 2008. In addition, the Company has two advanced exploration projects, the Bissa Gold Project in Burkina Faso and the world-class Prognoz Silver Project in Russia. These projects are expected to significantly add to the Company's production profile in the future.

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.





High River Gold Mines Ltd.
CONSOLIDATED BALANCE SHEETS
As at December 31
(Thousands of Canadian dollars)

2006 2005
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Assets
Current Assets
Cash and cash equivalents $ 35,616 $ 8,524
Restricted cash 73 2,087
Accounts receivable 11,055 4,587
Inventory 20,223 13,688
Other assets 1,231 980
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68,198 29,866
Investments 9,854 5,950
Property, plant and equipment 71,110 71,584
Exploration properties and deferred exploration 107,825 61,292
Development properties 259,846 134,202
Other assets 599 1,304
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Total Assets $ 517,432 $ 304,198
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 24,207 $ 13,163
Loans and interest payable 27,396 23,532
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51,603 36,695
Loans and interest payable 137,895 8,316
Reclamation 1,506 1,378
Venture obligation - 31,422
Future income taxes 17,776 10,966
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208,780 88,777
Non-controlling interest 16,341 14,955
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Total Liabilities 225,121 103,732
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Shareholders' Equity
Share capital 338,371 276,575
Warrants 6,294 11,827
Contributed surplus 11,363 7,721
Debenture conversion option 538 -
Cumulative translation adjustment (22,693) (23,050)
Deficit (41,562) (72,607)
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292,311 200,466
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Total Liabilities and Shareholders' Equity $ 517,432 $ 304,198
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High River Gold Mines Ltd.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31
(Thousands of Canadian dollars except per share figures)

2006 2005
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Revenue
Gold $ 103,255 $ 82,156
Other 2,662 1,672
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105,917 83,828
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Expenditures
Mining costs 67,833 56,957
Amortization and depletion 14,444 11,154
Exploration 4,183 3,832
Administrative costs 6,367 3,975
Financing costs 1,743 1,767
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94,570 77,685
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Income before the under noted 11,347 6,143
Financing costs on venture obligation (1,518) (1,541)
Settlement of venture obligation 32,940 -
Stock option benefit expense (3,388) (1,378)
Debenture accretion (47) -
Loss on disposal of assets (259) (352)
Gain on sale of investments - 539
Write down of carrying value (568) (231)
Non-controlling interest in earnings of subsidiary (1,685) (841)
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36,822 2,339
Income tax expense 5,777 3,383
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Net income (loss) for the year $ 31,045 $ (1,044)
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Net income (loss) per share - basic $ 0.13 $ (0.01)
- diluted $ 0.13 $ (0.01)
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ONSOLIDATED STATEMENTS OF DEFICIT
For the years ended December 31
(Thousands of Canadian dollars)
2006 2005
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Deficit - Beginning of year $ (72,607) $ (71,563)
Net income (loss) for the year 31,045 (1,044)
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Deficit - End of year $ (41,562) $ (72,607)
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High River Gold Mines Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
(Thousands of Canadian dollars)

2006 2005
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Cash provided by (used in):
Operating Activities
Net income (loss) for the year $ 31,045 $ (1,044)
Non-cash items:
Non-controlling interest in earnings of subsidiary 1,685 841
Financing cost on venture obligation 1,518 1,541
Settlement of venture obligation (32,940) -
Reclamation 124 -
Amortization and depletion 15,152 11,275
Debenture accretion 47 -
Loss on disposal of assets 259 352
Gain on sale of investments - (539)
Stock option benefit expense 3,388 1,378
Future income taxes 239 1,289
Write down of carrying value and other 649 261
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Subtotal 21,166 15,354
Change in non-cash working capital (15,187) (7,146)
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Total operating 5,979 8,208
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Investing Activities
Property, plant and equipment (15,089) (10,233)
Proceeds on disposal 366 779
Exploration properties and deferred exploration (5,698) (10,976)
Development properties (116,279) (64,202)
Purchase of subsidiary net of cash acquired - (480)
Investment in joint venture (26,214) -
Decrease (increase) in investments - 338
Allocation of restricted cash 2,016 (790)
Decrease in other long-term assets (265) (2,549)
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Total investing (161,163) (88,113)
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Financing Activities
Dividends paid by subsidiary to non-controlling
interest (6) (65)
Loans received 152,955 18,028
Loans and interest paid (24,868) (1,574)
Issuance of common shares 54,133 32,045
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Total financing 182,214 48,434
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Effect of exchange rate changes on cash held
in foreign currencies 62 (714)
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Increase (decrease) in cash and cash equivalents
during the year 27,092 (32,185)
Cash and cash equivalents - Beginning of year 8,524 40,709
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Cash and cash equivalents - End of year $ 35,616 $ 8,524
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Contact Information

  • High River Gold Mines Ltd.
    Dan Hrushewsky
    (416) 947-1440
    (416) 360-0010 (FAX)
    Email: info@hrg.ca
    Website: www.hrg.ca