High River Gold Mines Ltd.
TSX : HRG

High River Gold Mines Ltd.

March 31, 2011 17:09 ET

High River Gold Reports 2010 Results

TORONTO, ONTARIO--(Marketwire - March 31, 2011) -

(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, 2010. 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 2010

Financial Results
  • Net gold revenue of $435.6 million, an increase of 20% from 2009.
  • Net income of $114.9 million ($0.14 per share) compared to a net loss of $9.8 million ($-0.02 per share) in 2009.
  • Cash flow from operations of $155.9 million, up from $125.5 million in 2009.
  • Cash and cash equivalents increased to $154.0 million from $82.1 million in 2009.
  • Working capital increased to $205.2 million from $95.8 million in 2009.
  • Current and long term debt decreased to $25.0 million from $84.0 million in 2009.
  • Following discussions between High River and Royal Gold Inc. ("Royal Gold"), which commenced in 2010 and concerned the results of the Completion Test at the Taparko mine (as such term was defined in the Amended and Restated Funding Agreement dated February 22, 2006 between Royal Gold and Somita (the "Taparko Funding Agreement"), Royal Gold agreed in January 2011 that the Completion Test had been satisfied and agreed to release its security interests in certain collateral (including certain equity investments in public companies) that it held pursuant to the Taparko Funding Agreement.
Operations
  • Total gold production (doré) decreased 2% to 329,971 ounces (2009 – 336,366 ounces (100%). Total cash cost per ounce increased 29% to US$ 653 (2009 – US$505 per ounce) (see the Non-GAAP Financial Measures table).
  • The Zun-Holba and Irokinda Gold Mines produced 135,636 ounces (2009 – 149,382) (100%) at a total cash cost of US$ 628 per ounce.
  • The Taparko-Bouroum Gold Mine produced 127,684 ounces (2009 – 99,536) (100%) at a total cash cost of US$ 500 per ounce.
  • Gold production at Berezitovy was 66,651ounces (2009 – 87,488 ounces) (100%), at a total cash cost of US$ 995 per ounce.
  • At the Bissa Gold Project, the technical report describing the results of the feasibility study was published in Q3 2010.
  Production (100%)
Oz
Cash Operating Costs
US$/Oz
Total Cash Costs
US$/Oz
Buryatzoloto 135,636 553 628
Berezitovy 66,651 918 995
Somita 127,684 462 500
Total 329,971 592 653

2010 total operating and non-operating cash costs reached US $725 per ounce. Non-operating cash costs per ounce mainly represent corporate administration, exploration, and other expenses such as realized foreign exchange losses.

  • Zun-Holba and Irokinda Underground Gold Mines:
    • Production close to full capacity with no material shortcomings
  • Berezitovy Open-pit Gold Mine:
    • Production levels continue to be constrained by technical problems;
    • Successful installation of the second ball mill
  • Taparko-Bouroum Open-pit Gold Mine:
    • Production increased compared to 2009 mainly because of increased throughput in the mill
Corporate
  • Igor Klimanov resigned as Chief Executive Officer on October 4, 2010.
  • A subsidiary of Severstal acquired 19,000,000 common shares of the Company in October 2010. Following the transaction, Severstal has beneficial ownership and control over 610,362,172 Common Shares, representing approximately 72.64% of the issued and outstanding Common Shares of the Company.
  • Konstantin Sobolevskiy was appointed as Chief Executive Officer effective October 28, 2010.
  • The Company paid off the principal amount of the Royal Gold loan. The Company has started to pay the tail royalty to Royal Gold, which amounts to 2% of the revenue generated by Somita.
  • Andrei Maslov resigned as a Director and Chief Financial Officer of the Company effective December 20, 2010. Yury Lopukhin was appointed as the new Chief Financial Officer and Director on January 19, 2011.
  • On January 24, 2011, the Company's shareholders approved the change of the Company's governing jurisdiction from the Canadian federal jurisdiction under the Canada Business Corporations Act to the Yukon Territory under the Business Corporations Act (Yukon). The Company received its Letter of Satisfaction dated January 25, 2011. Industry Canada issued the Certificate of Discontinuance effective February 2, 2011. The effect of these filings was to transfer the governing jurisdiction of the Company from the Canadian federal jurisdiction to the Yukon Territory. In connection with the continuance, the shareholders also approved a new general by-law. The Articles of Continuance and the new by-law are available on SEDAR.
DISCUSSION OF FINANCIAL RESULTS  
   
Selected Financial Results  
   
(in thousands of Canadian dollars except per share amounts)  
   
  2010 2009   2008  
Gold revenue $ 435,615 $ 363,259   $ 180,788  
Net income (loss) 114,852 (9,764 ) (57,447 )
Net income (loss) per share (basic) 0.14 (0.02 ) (0.16 )
Cash provided by (used in) operating activities 155,906 125,496   25,605  
Total Assets 812,332 706,962   753,109  
Loans and interest payable 25,025 84,031   188,145  
Weighted average number of shares outstanding (basic) 816,437,980 634,009,385   354,923,765  

The Company's consolidated net gold revenues for 2010 increased to $435.6 million from $363.3 million in 2009. Higher production by Taparko increased the number of ounces sold. The average gold price realized on sales was US$1,238 per ounce during 2010, up from US$976 in 2009 and up from US$862 in 2008.

The Company had a net income of $114.9 million compared to a net loss of $9.8 million in 2009 and a net loss of $57.4 million in 2008.

Cash flow from operations of $155.9 million increased from $125.5 million in 2009. 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 and operated by Buryatzoloto reported no material changes or shortcomings in their operations during the year and continue to operate according to plan. Buryatzoloto continues to be profitable and achieved its production objectives for 2010 with 135,636 ounces (100%) of gold produced at an estimated total cash cost of US$628 per ounce as compared to 149,382 ounces at US$494 per ounce in 2009. The increase of cash costs is due mainly to the decrease in ore grade which leads to higher volumes of mining and processing necessary to get the same output and inflation processes.

Replacing reserves at these mines is a priority of local management. An approximately $17 million budget for mine-site exploration is proposed for 2011 to replace mined-out reserves and extend the mine life at Irokinda and Zun-Holba.

Open Pit Mines

Berezitovy Mine (Russia)

Berezitovy continued to underperform. Production (100%) at Berezitovy in 2010 was 66,651 ounces of gold, compared to 87,448 ounces produced in 2009. The second ball mill was successfully installed and the second crushing unit was ordered in 2010. However, due to mechanical problems, the plant availability remained below planned level in 2010.

Taparko-Bouroum Mine (Burkina Faso)

In 2010, gold poured at Taparko (100%) totaled 127,684 ounces, up from the 2009 level of 99,536 ounces. The production exceeded the planned level in 2010 mainly because of increased throughput in the mill.

Advanced Exploration Projects

Bissa Gold Project

In 2010 the Company finalized the work related to a feasibility study of the Bissa project and published technical report on the Feasibility Study. The Company applied for the mining license (which may be granted in 2011), and prepared for construction of the mine. In 2011, new reserve and resource estimates for Bissa project were released.

At the same time, High River continues exploration at Bissa. Approximately US$5 million is recommended for additional exploration at Bissa.

Other Exploration Properties

Exploration work continued on other areas within the Bissa Group Permits and on other exploration concessions in Burkina Faso. The first time resource estimates for some exploration properties in Burkina Faso (Yeou, Ankouma, Bouly, Gougre, Zinigma) were announced in 2011.

About High River

High River is an unhedged gold company with interests in producing mines and advanced exploration projects in Russia and Burkina Faso. Two underground mines, Zun-Holba and Irokinda, are situated in the Lake Baikal region of Russia. Two 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 2009 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)  
         
As at December 31 2010   2009  
Assets        
Current Assets        
  Cash and cash equivalents $ 153,964   $ 82,061  
  Restricted cash 1,285   562  
  Accounts receivable 13,639   18,115  
  Inventory 97,663   81,090  
  Other assets 15,589   12,382  
  282,140   194,210  
Investments 109,633   64,810  
Property, plant and equipment 291,130   340,606  
Exploration properties and deferred exploration 119,847   105,061  
Other assets 7,986   697  
Future income taxes 1,596   1,578  
Total Assets $ 812,332   $ 706,962  
         
Liabilities        
Current Liabilities        
  Accounts payable $ 53,692   $ 39,726  
  Loans and interest payable 23,293   58,666  
  76,985   98,392  
Loans and interest payable 1,732   25,365  
Reclamation and other non-current obligations 17,839   14,208  
Non-hedge derivatives -   13,684  
Future income taxes 24,291   20,567  
  120,847   172,216  
Non-controlling interests 34,330   21,922  
Total Liabilities 155,177   194,138  
         
Shareholders' Equity        
Share capital 640,157   610,770  
Warrants -   13,265  
Contributed surplus 24,538   15,907  
Debenture conversion option 538   538  
Deficit (6,949 ) (121,801 )
Accumulated other comprehensive income (1,129 ) (5,855 )
Total Shareholders' Equity 657,155   512,824  
Total Liabilities and Shareholders' Equity $ 812,332   $ 706,962  
   
   
High River Gold Mines Ltd.  
   
Consolidated Statements of Operations  
(Expressed in thousands of Canadian dollars except per share figures)  
     
For the years ended December 31, 2010   2009  
Revenue        
Gold $ 435,615   $ 363,259  
Silver 5,154   6,090  
  440,769   369,349  
Expenses        
Mining costs 193,272   183,433  
Mine administrative costs 11,166   9,717  
Mine amortization and depletion 60,682   58,716  
Asset retirement obligation accretion 1,191   853  
  266,311   252,719  
Income before the undernoted 174,458   116,630  
Administrative costs (4,469 ) (13,245 )
Amortization (6 ) (46 )
Exploration expense (15,518 ) (4,330 )
Financing costs and investment income, net 6,032   (21,699 )
Other expenses (12,000 ) (80,026 )
Income (loss) before tax and non-controlling interest 148,497   (2,716 )
Income tax expense (21,237 ) (3,593 )
Income (loss) before non-controlling interest 127,260   (6,309 )
Non-controlling interests in earnings of subsidiary (12,408 ) (3,455 )
Net income (loss) for the year 114,852   $ (9,764 )
Net income (loss) per share – basic and diluted $ 0.14   $ (0.02 )
   
   
High River Gold Mines Ltd.  
   
Consolidated Statements of Cash Flows  
(Expressed in thousands of Canadian dollars)  
     
For the years ended December 31, 2010   2009  
Operating Activities        
Net income (loss) for the year $ 114,852   $ (9,764 )
Non-cash items:        
  Non-controlling interest in earnings of subsidiary 12,408   3,455  
  Mining costs (25,081 ) (4,482 )
  Amortization and depletion 60,688   58,762  
  Asset retirement obligation accretion 1,191   853  
  Financial instrument accretion 392   835  
  Fair value adjustments to financial instruments (13,684 ) 1,917  
  Stock based compensation 74   223  
  Write down of exploration 628   70,764  
  Loss on disposal of assets 1,121   1,977  
  Future income taxes (1,929 ) (7,794 )
  Foreign exchange loss 5,361   2,992  
  Other 1,223   2,278  
Subtotal 157,244   122,016  
Change in non-cash working capital (1,338 ) 3,480  
Net cash provided by operating activities 155,906   125,496  
         
Investing Activities        
  Property, plant and equipment (40,740 ) (25,798 )
  Proceeds on disposal 1,641   1,756  
  Exploration properties and deferred exploration (17,110 ) (8,484 )
  Allocation of restricted cash (813 ) (562 )
  Purchase/sale of other long-term assets (7,810 ) 168  
         
Net cash used in investing activities (64,832 ) (32,920 )
         
Financing Activities        
  Loans received 10,154   12,331  
  Loans repaid (46,528 ) (106,781 )
  Common shares issued 26,249   67,511  
  Net cash used in financing activities (10,125 ) (26,939 )
         
Effect of exchange rate changes on cash held in foreign currencies (9,046 ) (2,699 )
         
Increase in cash and cash equivalents during the year 71,903   62,938  
Cash and cash equivalents - Beginning of year 82,061   19,123  
Cash and cash equivalents - End of year $ 153,964   $ 82,061  
         

Contact Information

  • High River Gold Mines Ltd.
    Konstantin Sobolevskiy
    CEO
    011 7 495 981 0910 ext. 6676
    info@hrg.ca
    www.hrg.ca