High River Gold Mines Ltd.

High River Gold Mines Ltd.

May 15, 2009 18:07 ET

High River Gold Reports First Quarter 2009 Results

TORONTO, ONTARIO--(Marketwire - May 15, 2009) -

(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 three month period ended March 31, 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.


Financial Results

- Net income for Q1/2009 of $0.9 million ($0.00 per share).

- Cash flow from operations was $29.7 million, up from ($0.3) million last year.

- Cash and cash equivalents increased to $25.0 million from $19.1 million as at 2008 year-end.

- The working capital deficit improved to ($29.7) million from ($42.1) million as at 2008 year-end.

- Current and long term debt levels declined to $175.8 million from $188.1 million as at 2008 year-end.

- Q1/2009 gold production and cash operating costs were as follows:

Production Production Cash Operating Costs
(100%) (attributable) (US$/oz)
(ozs) (ozs)
Zun-Holba 18,236 15,490 467
Irokinda 16,554 14,061 374
Placer Operation (1) N/A N/A N/A
Taparko-Bouroum 22,408 20,167 386
Berezitovy 19,596 19,400 430
Total 76,794 69,118 414

(1) non-operational in winter months

- Q1/2009 operating and non-operating cash costs combined totalled US $572 per ounce, compared to US $670 per ounce in Q1/2008. 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:

-- Production and cash costs on budget.

- Taparko-Bouroum Open-pit Gold Mine:

-- Lower than expected gold production due to mill shutdowns during the quarter.

- Berezitovy Open-pit Gold Mine:

-- Production levels continue to be constrained by disk filter plant under-performance.

- Bissa Gold Exploration Project:

-- Work related to feasibility study continued during the quarter.

- Prognoz Silver Exploration Project:

-- Due to capital constraints, no exploration activity occurred on the project.


- On January 2, 2009, High River announced that it had advised Somita trade creditors that it will slow down payments for accounts payable for a brief period in light of lower than expected cashflows from the group's operations, and that it planned to pay suppliers for current purchases of goods and services. High River also indicated that it was continuing to pursue discussions relating to additional debt and equity financing required to ensure that it is able to meet its financial obligations.

- On March 17, 2009, High River announced the results of a NI 43-101 compliant gold reserve and resource estimate, as of December 31, 2007, on the Zun-Holba and Irokinda Gold mines.

- On March 25, 2009 High River reported that the acquisition of the Chaya Nickel Deposit will not be completed. An initial payment of approximately US $4.15 million made in February 2008, which represents all acquisition costs incurred to-date, has been written off as at the 2008 year end.

- On March 30, 2009, High River announced that OAO Severstal ("Severstal") and a Special Committee comprised of High River independent directors have been unable to agree on terms of any transaction whereby Severstal would acquire the remaining outstanding common shares of High River and/or provide debt or equity financing to High River. It was also announced that Terrence Lyons, Chairman of the Board of High River and a member of the Company's Special and Audit Committees, had tendered his resignation, effective March 31, 2009, due to the demands of his other business interests.

- On March 31, 2009, High River announced that it would be late in filing its audited financial statements, management's discussion and analysis, annual information form and related CEO and CFO certifications for the year ended December 31, 2008 due to concerns raised by the board of directors regarding production numbers received by the Company from the Berezitovy Gold mine. The concerns were subsequently addressed to the satisfaction of the board of directors and the financial statements and other filings were released on April 29, 2009.

Events Subsequent to Quarter-end

- On April 8, 2009, High River announced the resignation of John W. Crow from the Company's board of directors, and the appointment of Alexey Khudyakov and Karl Glackmeyer to the board of directors. Alexey Khudyakov assumed the role of Chairman of the board of directors.

- On April 20, 2009, High River announced that two loans, with a total amount outstanding of US$ 27 million, were assigned by Standard Bank Plc to Severstal, and continue to be in default. It was also announced that Steven Poad, CFO of High River, was appointed to the board of directors on an interim basis until the next annual meeting of shareholders of High River.

- On May 1, 2009, High River announced the resignation of Roman Deniskin from the Company's board of directors.


Selected Financial Results

(in thousands of Canadian dollars
except per share amounts)
Q1/2009 Q1/2008
Gold revenue $ 88,779 $ 45,009
Net income (loss) 931 (2,308)
Net income (loss) per share (basic) 0.00 (0.01)
Cashflow from operations 29,672 (252)
Weighted average number of shares
outstanding (basic) 590,193,673 307,787,242

Gold revenue for the quarter was almost twice that of last year mostly due to a higher amount of gold ounces sold and a weaker Canadian dollar. Ounces sold increased by 54% to 77,091 ounces from 49,991 ounces in Q1 of last year, with the increase due to higher production from Taparko-Bouroum and Berezitovy. The average US$/C$ exchange rate declined 19% to .81 during the quarter versus 1.00 in Q1/2008. The average gold price realized on sales was US $926 per ounce during Q1/2009, up 3% from US $898 per ounce last year.

The change to net income ($3 million) from a net loss last year reflects higher revenues ($44 million), as discussed above, a reduction in financing costs ($3 million), and a change to an income tax recovery from an expense last year ($3 million), partially offset by: (a) proportionately higher mining costs ($18 million); (b) higher amortization and depletion ($8 million) related to higher production levels; and (c) an increase in other expenses ($22 million) related to higher unrealized foreign exchange losses.

Cashflow from operations increased from last year as higher production levels resulted in increased sales volumes.

Working capital improved to a deficit of ($29.7) million, from a deficit of ($42.1) million last year, due to decreases in accounts payable and current loans and interest payable as the Company repaid certain amounts owing to trade creditors and made scheduled repayments on loans.


Underground Mines

Zun-Holba Mine (Buryatia, Russia)

In Q1/2009, Zun-Holba produced (100%) 18,236 ounces of gold, up 5% from last year's level, due mostly to an increase in mill throughput. Cash operating costs decreased to US $467 per ounce from US $554 per ounce in Q1/2008. The decrease in cost per ounce was due largely to the impact of a weaker rouble on input costs, and cost control measures.

Irokinda Mine (Buryatia, Russia)

Production (100%) at Irokinda during the first quarter was 16,554 ounces, virtually unchanged from the first quarter last year. Higher mill throughput and slightly higher recoveries offset marginally lower grades. In Q1/2009, cash operating costs decreased to US $374 per ounce compared to US $471 per ounce in 2008. The decrease in cost per ounce was largely due to the impact of a weaker rouble on input costs, and cost control measures.

New Open Pit Mines

Taparko-Bouroum Mine (Burkina Faso)

In Q1/2009, Taparko-Bouroum produced (100%) 22,408 ounces of gold, up 77% from last year's level, due to higher grade ore from the Bouroum pit processed during the quarter. Cash operating costs decreased to US $386 per ounce compared to US $679 per ounce largely due to this increase in production. The mill utilization rate during the quarter averaged approximately 68% as the mill experienced continuing problems related to excessive vibrations in the ball mill drive train. Various remedial actions, recommended by specialized mill and vibrations consultants, were undertaken to correct this issue during two scheduled mill shutdowns totalling 25 days. However these actions resulted in only temporary reductions of vibrations to normal levels, and failed to achieve stable operation of the mill. In fact, the mill performance deteriorated during the quarter with throughput rates estimated at about 95, 94 and 87 tonnes of ore per operating hour in January, February and March, respectively. As reported in an earlier press release, the maximum production capacity of the mill is now estimated at about 100 tonnes per hour, which is 20% less than the original design capacity of 125 tonnes. While vibrations are currently at levels that allow operation of the mill at throughput rates of 80-90 tonnes, to ensure proper long term functioning of the mill and the achievement of the maximum production capacity, a reduction to lower levels of vibrations is required. Analysis of the problem and a plan of further action are currently being undertaken by the operating team in conjunction with consultants.

Berezitovy Mine (Amur Oblast, Russia)

Production (100%) at Berezitovy during the first quarter was 19,596 ounces of gold, compared to no ounces produced in the Q1/2008, as commercial production was only declared on October 1, 2008. Cash operating costs were US $430 per ounce during the quarter. The mill utilization rate during the quarter averaged 65% due to two mill shutdowns (totalling 16 days) and continuing disk filter plant underperformance. The first mill shutdown, which began on January 28th and lasted for 7 days, was unplanned and was undertaken to correct damage incurred to clutch disks. The second mill shutdown, largely a scheduled maintenance operation, ran for 9 days in mid-March. During this time, SAG mill liner replacement and additional work was completed. The disk filter plant continues to perform poorly, limiting mill throughput rates. The Company continues to undertake action to permanently resolve this problem.

Advanced Exploration Projects

Bissa Gold Project

A feasibility study was initiated early in 2008 to evaluate the economic viability of a mining and processing facility based on the current Bissa resource area. Substantial progress was made on this study during the quarter. Work included resource block modelling, pit design, ore reserve estimation, etc.

Other Burkina Faso Exploration

During the quarter, a 3,000 metre (68 hole) rotary air blast drilling programme was completed on the Nongo-Fayere permit which adjoins the Taparko mining license on its eastern boundary. The purpose of the programme was to test for a potential eastern extension, onto the Nongo-Fayere permit, of mineralization identified on the Taparko mining license (the Kangarse target). Assay results yielded no significant intersections.

Prognoz Silver Project

Due to capital constraints, no drilling or other exploration activity occurred at the Prognoz project site during the quarter. Prognoz drill hole data compilation and analysis, as well as work programme planning, were undertaken at the Buryatzoloto exploration offices in Ulan Ude.

About High River

High River is a gold company with interests in producing mines and advanced exploration projects in Burkina Faso and Russia.


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. 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)
March 31, December 31,
(unaudited) 2009 2008
Current Assets
Cash and cash equivalents $ 25,020 $ 19,123
Accounts receivable 13,868 14,546
Inventory 73,057 79,369
Other assets 12,502 11,401
124,447 124,439
Investments 37,913 22,724
Property, plant and equipment 395,202 432,089
Exploration properties and deferred exploration 173,668 170,522
Other assets 3,370 3,335
Total Assets $ 734,600 $ 753,109

Current Liabilities
Accounts payable $ 24,151 $ 29,842
Loans and interest payable 130,042 136,699
154,193 166,541
Loans and interest payable 45,731 51,446
Reclamation 9,917 10,078
Non-hedge derivatives 11,805 13,651
Future income taxes 14,982 15,884
236,628 257,600
Non-controlling interest 18,556 18,467
Total Liabilities 255,184 276,067

Shareholders' Equity
Share capital 543,244 543,244
Warrants 16,121 16,627
Contributed surplus 13,433 12,876
Debenture conversion option 538 538
Deficit (111,106) (112,037)
Accumulated other comprehensive income (loss) 17,186 15,794
Total Shareholders' Equity 479,416 477,042
Total Liabilities and Shareholders' Equity $ 734,600 $ 753,109

High River Gold Mines Ltd.
Consolidated Statements of Operations
(Expressed in thousands of Canadian dollars except per share figures)
Three months ended March 31,
(unaudited) 2009 2008
Gold $ 88,779 $ 45,009
Silver 342 40
89,121 45,049
Mining costs 43,247 25,463
Mine administrative costs 3,445 2,304
Mine amortization and depletion 13,986 5,861
Asset retirement obligation accretion 200 135
60,878 33,763
Income before the undernoted 28,243 11,286
Administrative costs (4,185) (2,991)
Amortization (20) (176)
Exploration expense (806) (2,120)
Financing costs and investment income, net (3,397) (6,722)
Other income/(expense) (18,829) 2,830
Income before tax and non-controlling
interest 1,006 2,107
Income tax recovery (expense) 13 (2,514)
Income (loss) before non-controlling interest 1,019 (407)
Non-controlling interest in earnings of subsidiary (88) (1,901)
Net income (loss) for the period $ 931 $ (2,308)
Net income (loss) per share - basic
and diluted $ 0.00 $ (0.01)

High River Gold Mines Ltd.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
Three months ended
March 31,
(unaudited) 2009 2008
Operating Activities
Net income (loss) for the period $ 931 $ (2,308)
Non-cash items:
Non-controlling interest in earnings of subsidiary 88 1,900
Amortization and depletion expense 14,006 6,362
Asset retirement obligation accretion 200 221
Financial instrument accretion (207) 538
Fair value adjustments to financial instruments (1,778) 4,212
Stock-based compensation expense 50 1,199
Future income taxes (2,294) 515
Unrealized foreign exchange loss (gain) 11,967 (1,970)
Other (65) 81
Subtotal 22,898 10,750
Change in non-cash working capital 6,774 (11,002)
Net cash provided (used) by operating activities 29,672 (252)

Investing Activities
Property, plant and equipment (2,589) (4,635)
Exploration properties and deferred exploration (1,950) (8,475)
Development properties - (16,047)
Purchase of investments - (11,801)
Increase in other long-term assets 167 248
Net cash used by investing activities (4,372) (40,710)

Financing Activities
Loans received 31 13,507
Loans repaid (19,756) (14,440)
Common shares issued - 30,334
Net cash (used in) provided by financing activities (19,725) 29,401

Effect of exchange rate changes on cash held in foreign
currencies 322 460

Increase/(decrease) in cash and cash equivalents during
the period 5,897 (11,101)
Cash and cash equivalents - Beginning of period 19,123 51,491
Cash and cash equivalents - End of period $ 25,020 $ 40,390

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