High River Gold Mines Ltd.
TSX : HRG

High River Gold Mines Ltd.

August 14, 2007 19:15 ET

High River Gold Reports Second Quarter 2007 Results

TORONTO, ONTARIO--(Marketwire - Aug. 14, 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 three and six month periods ended June 30, 2007. 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 THE SECOND QUARTER OF 2007



Financial Results
-----------------

- Net income for Q2 2007 of $896,000 ($0.00 per share).
- Attributable gold production of 31,980 ounces for the quarter at a total
cash cost of US $413 per ounce.
- Cash flow from operations before working capital changes of $6.6 million.

Operations
----------

- Taparko-Bouroum Gold Mine:
- Construction neared completion.
- First gold pour announced on July 17, 2007(i).

- Berezitovy Gold Mine:
- Construction well advanced.
- First gold pour announced on August 8, 2007(i).
- Internal scoping study reported positive economics for recovering zinc
and lead.

- Bissa Advanced Exploration Project:
- Drilling at the Gougre Target Area in Burkina Faso identified a
potential new gold zone.
- Follow-up work extended the Gougre geophysical anomaly from a strike
length of 300 metres to 1,200 metres(i).
- Positive drill results at Bissa indicated potential new gold zones at
Gonglou and Wemstenga(i).
- High River's interest in the Bissa, Zandkom, and Barsa permits
increased to 90%.

- Prognoz Advanced Exploration Project:
- Fill-in drilling on-going with four diamond drill rigs.
- MICON International Ltd. ("MICON") visited Prognoz and will be
calculating a NI 43-101 interim resource estimate during the third
quarter of 2007.

- Zun-Holba and Irokinda Operating Mines:
- MICON visited the Zun-Holba and Irokinda mines and will produce
separate NI 43-101 reports for both operating mines during the third
quarter of 2007.

Corporate
---------

- Financing:
- US $10 million revolving credit facility completed with Standard Bank
Plc ("Standard Bank") to fund Taparko-Bouroum Mine working capital
requirements.
- $18.2 million equity financing closed(i).
- US $15 million senior revolving credit facility completed with Standard
Bank to fund working capital requirements at the Berezitovy Mine and
for general corporate purposes(i).
- Index:
- High River was added to the S&P/TSX Global Mining Index and the S&P/TSX
Global Gold Index.

(i) Event occurred subsequent to the quarter end.


Director Resignation

Effective June 8, 2007, Mr. Alexandr Balabanov resigned as a Director from High River and its Russian subsidiary, Buryatzoloto. Mr. Balabanov's decision to resign resulted from his desire to accept a business opportunity in the resource sector in Russia and to avoid potential future conflicts of interest with High River and Buryatzoloto.

Mr. Balabanov has been an important factor in the Company's success in Russia. In addition to his Board activities, Mr. Balabanov also provided valuable consulting services to High River in many areas. In order to maintain future access to his counsel and guidance in matters pertaining to Russia, the Company has entered into a new consulting services contract with Mr. Balabanov.

The Board of Directors and Management of High River wish to thank Mr. Balabanov for his significant contributions to the Company in the past and wish him every success in his new endeavour. We look forward to continuing our successful business relationship and retaining Alex as a close friend.

DISCUSSION OF FINANCIAL RESULTS

Selected Financial Results



(in thousands of Canadian
dollars except per share Three Months Ending Six Months Ending
amounts) June 30, June 30,
2007 2006 2007 2006
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Gold revenue $ 27,603 $ 18,298 $ 58,247 $ 40,821
Net income (loss) 896 (626) 1,162 (400)
Net income (loss) per share
(basic) 0.00 (0.00) 0.00 (0.00)
Cash flow from operations
(1) 6,637 4,009 14,894 9,060
Weighted average number of
shares outstanding
(basic) 251,078,660 233,183,289 250,558,372 228,179,910
---------------------------------------------------------------------------
---------------------------------------------------------------------------

(1) Before changes in non-cash working capital.


Gold revenue for the quarter increased 51% to $27.6 million (from $18.3 million last year) due to higher gold prices and ounces sold. The average gold price realized on sales was US $661 per ounce during Q2/07, up from US $601 per ounce last year, and up from US$ 651 per ounce in Q1/07. A total of 37,938 ounces of gold was sold during the quarter, in line with production during the quarter of 37,668 ounces, but 40% higher than Q2/06 when a larger amount of production of refined gold remained in inventory and was not sold.

Net Income during the quarter increased to $896,000 from last year's loss of $626,000, largely due to the increase in gold revenue, which offset higher operating costs related to inflation in materials and energy costs, a stronger Russian Rouble, increases in labour wages due to indexation and the implementation of employee bonus initiatives designed to retain skilled employees.

Attributable gold production was 31,980 ounces for the quarter at a total cash cost of US $413 per ounce, down from US $429 per ounce for Q1/07, but up 16% from US $355 per ounce a year ago. The decrease in total cash cost from the first quarter was due to a higher gold production volume mainly at Irokinda.

OVERVIEW OF OPERATIONS

Operating Mines

Zun Holba Mine (Russia)

Zun Holba's second quarter production of 17,859 ounces and year-to-date production of 35,066 ounces were comparable to last year's levels. Higher tonnes mined and milled offset a 9% lower head grade. Direct mining costs for the quarter increased 8% to US $373 per ounce from US $346 last year, and were virtually unchanged from US $375 per ounce in the first quarter, as inflationary cost pressures mentioned above were offset by productivity improvements.

Irokinda Mine (Russia)

Production levels at the Irokinda Mine declined 7% to 19,298 ounces during the quarter, from 20,850 last year, due to lower mill throughput and head grades. Direct mining costs increased to US $299 per ounce during the quarter from US $244 per ounce last year due to increased transportation costs related to production from a new but more distant ore body, and development costs related to a second adit, as well as the inflationary cost pressures cited earlier. Direct mining costs declined from US $338 per ounce last quarter due to increased gold production related to higher mill throughput.

New Mines

Taparko-Bouroum Mine (Burkina Faso)

On July 17, 2007, High River announced the first gold pour out of the gravity circuit. Gold was produced out of the leach circuit on August 1, 2007. Commercial Production is expected to be achieved during Q3 2007. Gold production for 2007 at the Taparko-Bouroum Mine is expected to total approximately 35,000 ounces on a 100% basis (31,500 ounces attributable to High River). Gold production for the first 12 months is planned to exceed 100,000 ounces, increasing to over 140,000 ounces in the third year of operation following the planned increase in mill capacity from 1 million to 1.5 million tonnes per year.

Berezitovy Mine (Amur Oblast, Russia)

On August 8, 2007, High River announced that gold was produced as scheduled out of the gravity circuit of the Berezitovy Mine. Commercial production is scheduled to be achieved during Q4 2007. Annual production, after commissioning, is expected to exceed 100,000 ounces of gold for at least 10 years. During the quarter, High River announced positive internal scoping study results for the potential installation of flotation circuits to recover zinc and lead, and to improve the recovery of silver. The production of zinc and lead concentrates could begin as early as January 2009 following permit approvals from the Russian authorities.

Advanced Exploration Projects

Bissa Gold Project

High River has established a NI 43-101 gold resource of 662,000 measured and indicated ounces plus 680,000 inferred ounces over just 6 kilometres of a 30 kilometre-long anomalous regional structural trend called the Sabce Deformation Corridor.

Exploration results so far this year support the Company's belief that it can achieve its target to expand the gold resources at Bissa by 50% to over 2 million ounces by the end of 2007.

High River reported exciting results from diamond drilling on the Gougre target area, one of 12 Drill Target Areas on the Company's Bissa permits currently being explored. A 300 metre-long zone of pervasive alteration and gold mineralization was discovered at Gougre Main Zone (10 kilometres from the 6 kilometre-long Bissa Resource Area) which strongly coincided with chargeability and resistivity anomalies. A second gradient IP survey suggested that the Gougre Main Zone mineralization may have a total strike length of at least 1,200 metres. Also, similar parallel anomalies to the northeast were identified, possibly indicating new zones of mineralization.

Initial reconnaissance drilling on several other Drill Target Areas along the Sabce Deformation Corridor, beyond the 6 kilometre section which hosts the existing NI 43-101 resource, identified potential new gold zones in the Gonglou Area (1-3 kilometres to the southwest) and the Wemstenga Area (approximately 15 kilometres to the southwest of the 6 kilometre Bissa Resource Area).

- Strategic Alliance Partner (Goldrush Resources Ltd.)

Goldrush has outlined what appears to be a significant new gold zone at Ronguen, 6 kilometres north of High River's Bissa Deposit. High River has a back-in right on any economic mineral deposits defined by Goldrush in Burkina Faso.

Prognoz Silver Project

Early in 2006, High River's subsidiary, OJSC Buryatzoloto, acquired a 50% interest in and operatorship of the world-class Prognoz Silver Project. Prognoz has historic Russian classified (not NI 43-101 compliant and must not be relied upon) reserves and resources containing 194 million ounces grading 820 g/t on average making it one of the largest and highest grade undeveloped silver projects in the world. There are over 30 veins on the Prognoz property. These veins can reach several kilometres in length, two to four metres in width, and several hundred metres in depth. The aforementioned Russian classified reserves and resources are based on data from only two of these veins, the Glavnoye (4.1 kilometres long and open along strike) and the Boloto (2.4 kilometres long and open along strike) silver veins.

A fill-in drilling programme, which began in May 2006, continued during the quarter with 4 diamond drills operational. Year-to-date, 177 core holes (21,539 metres) have been completed. The average grade-thickness of all core holes reported to-date, drilled by Buryatzoloto on the Prognoz Silver Project, is 92% of the comparable historical value, showing excellent correlation to historical results.

MICON, engaged by Buryatzoloto to calculate a NI 43-101 compliant resource estimate for the Prognoz Silver Project, visited the property in June 2007 to independently evaluate core drilling, sample preparation and analysis procedures. An interim NI 43-101 compliant resource estimate, on part of the existing Russian classified resources, is expected during the third quarter of 2007.

Also during the quarter, two bulk samples, totaling 17 tonnes, were sent to two separate laboratories for metallurgical testing which will determine preliminary flow sheet parameters and silver and base metal content. Progress continued on a 300 kilometre-long winter road, leading from an existing regional road system to the project site, with construction approximately one-third complete.

About High River

High River has brought two new open-pit gold mines into production this year, the Taparko-Bouroum Gold Mine in Burkina Faso (July) and the Berezitovy Gold Mine in Russia (August). Annual gold production from Taparko-Bouroum is planned at 100,000 ounces for the first 12 months increasing to over 140,000 ounces in the third year of operation, and annual production from Berezitovy is expected to exceed 100,000 ounces. Combined with gold production from High River's 85%-owned Russian subsidiary, OJSC Buryatzoloto, High River's attributable unhedged gold production is expected to approach 200,000 ounces in 2007, and to exceed 300,000 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
(Thousands of Canadian dollars)
June 30, December 31,
(unaudited) 2007 2006
------------------------------------------------------------------------
------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $ 2,346 $ 35,616
Restricted cash 146 73
Accounts receivable 24,079 11,055
Inventory 20,622 20,223
Other assets 4,998 1,231
------------------------------------------------------------------------
52,191 68,198
Available-for-sale securities 22,767 9,854
Property, plant and equipment 64,861 71,110
Exploration properties and deferred exploration 112,476 107,825
Development properties 300,175 259,846
Other assets 513 599
------------------------------------------------------------------------
Total Assets $ 552,983 $ 517,432
------------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 30,340 $ 24,207
Loans and interest payable 56,324 27,396
------------------------------------------------------------------------
86,664 51,603
Loans and interest payable 125,822 137,895
Reclamation 1,431 1,506
Future income taxes 20,326 17,776
------------------------------------------------------------------------
234,243 208,780
Non-controlling interest 17,929 16,341
------------------------------------------------------------------------
Total Liabilities 252,172 225,121
------------------------------------------------------------------------

Shareholders' Equity
Share capital 343,170 338,371
Warrants 6,855 6,294
Contributed surplus 11,887 11,363
Debenture conversion option 538 538
Deficit (43,059) (41,562)
Accumulated other comprehensive income/(loss) (18,580) (22,693)
------------------------------------------------------------------------
Total Shareholders' Equity 300,811 292,311
------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 552,983 $ 517,432
------------------------------------------------------------------------
------------------------------------------------------------------------



HIGH RIVER GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Canadian dollars, except for income per share and number
of shares)

Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
(unaudited) 2007 2006 2007 2006
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Operating revenue
Gold $ 27,603 $ 18,298 $ 58,247 $ 40,821
Other 248 760 248 760
---------------------------------------------------------------------------
27,851 19,058 58,495 41,581
---------------------------------------------------------------------------
Operating expenses
Mining costs 16,319 9,667 32,768 23,730
Mining administrative costs 1,133 1,733 3,006 3,058
Amortization and depletion 4,055 3,336 7,853 6,190
Asset retirement obligation
accretion 33 32 68 63
---------------------------------------------------------------------------
21,540 14,768 43,695 33,041
---------------------------------------------------------------------------
Net operating income 6,311 4,290 14,800 8,540
Exploration expense (42) (202) (160) (267)
Administrative costs (1,916) (2,163) (6,903) (4,039)
Amortization and depletion (13) (14) (30) (30)
Other revenue/(expenses) 53 216 1,091 408
Financing costs (1,501) (1,223) (2,756) (2,086)
---------------------------------------------------------------------------
Income before tax 2,892 904 6,042 2,526
Income tax expense (1,379) (1,290) (3,291) (2,328)
---------------------------------------------------------------------------
Income (loss) before non-controlling
interest 1,513 (386) 2,751 198
Non-controlling interest in earnings
of subsidiary (617) (240) (1,589) (598)
---------------------------------------------------------------------------
Net income (loss) for the period $ 896 $ (626) $ 1,162 $ (400)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net income (loss) per share
- basic $ 0.00 $ (0.00) $ 0.00 $ (0.00)
- diluted $ 0.00 $ (0.00) $ 0.00 $ (0.00)
---------------------------------------------------------------------------
---------------------------------------------------------------------------



HIGH RIVER GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Canadian dollars)

Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
(unaudited) 2007 2006 2007 2006
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Cash provided by (used in):
Operating activities
Net income (loss) for the period $ 896 $ (626) $ 1,162 $ (400)
Non-cash items:
Non-controlling interest in earnings
of subsidiary 617 240 1,589 598
Financing cost on venture obligation - 512 - 974
Amortization and depletion 4,068 3,320 7,883 6,220
Asset retirement obligation accretion 33 32 68 63
Debenture accretion expense 85 - 170 -
Financial instrument accretion
expense 776 - 1,043 -
Fair value adjustments to financial
instruments (645) - 1,455 -
Stock option benefit expense 534 390 1,265 1,392
Write-down of carrying value (1) - 8 -
Loss (gain) on disposal of assets 9 (303) 20 (296)
Future income taxes 267 457 237 522
Other (2) (13) (6) (13)
---------------------------------------------------------------------------
Subtotal 6,637 4,009 14,894 9,060
Change in non-cash working capital (4,378) (12,913) (13,044) (15,132)
---------------------------------------------------------------------------
Total operating 2,259 (8,904) 1,850 (6,072)
---------------------------------------------------------------------------

Investing Activities
Property, plant and equipment (3,437) (2,507) (7,639) (5,081)
Proceeds on disposal 10 361 5 361
Exploration properties and deferred
exploration (5,072) (2,401) (10,043) (3,533)
Development properties (24,876) (24,485) (47,101) (44,735)
(Increase)/decrease in investments - (259) - (259)
Allocation to restricted cash (73) (24,725) (73) (22,683)
Increase in other long-term assets 475 - (67) -
---------------------------------------------------------------------------
Total investing (32,973) (54,016) (64,918) (75,930)
---------------------------------------------------------------------------

Financing Activities
Loans received 25,232 44,235 35,812 58,146
Loans and interest paid (3,250) - (10,122) -
Dividends paid by subsidiary to
non-controlling interest - (2) - (3)
Issuance of common shares 3,745 3,208 4,428 23,026
---------------------------------------------------------------------------
Total financing 25,727 47,441 30,118 81,169
---------------------------------------------------------------------------

Effect of exchange rate changes on
cash held in foreign currencies (310) (255) (320) (153)
---------------------------------------------------------------------------

(Decrease) in cash and cash
equivalents during the period (5,297) (15,734) (33,270) (986)
Cash and cash equivalents - Beginning
of period 7,643 23,272 35,616 8,524
---------------------------------------------------------------------------
Cash and cash equivalents - End of
period $ 2,346 $ 7,538 $ 2,346 $ 7,538
---------------------------------------------------------------------------
---------------------------------------------------------------------------



HIGH RIVER GOLD MINES LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Thousands of Canadian dollars)

Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
(unaudited) 2007 2006 2007 2006
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Share capital
Balance at beginning of period $ 339,516 $ 296,723 $ 338,371 $ 276,575
Issue of common shares 3,654 3,195 4,799 23,343
---------------------------------------------------------------------------
Balance at end of period 343,170 299,918 343,170 299,918
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Warrants
Balance at beginning of period 6,290 12,479 6,294 11,827
Issued 565 - 565 652
Exercised - (693) - (693)
Expired - - (4) -
---------------------------------------------------------------------------
Balance at end of period 6,855 11,786 6,855 11,786
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Contributed surplus
Balance at beginning of period 11,635 8,537 11,363 7,721
Expired warrants - - 4 -
Stock-based compensation, net 534 390 1,265 1,392
Stock options exercised (282) (173) (745) (359)
---------------------------------------------------------------------------
Balance at end of period 11,887 8,754 11,887 8,754
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Debenture conversion option 538 - 538 -
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Deficit
Balance at beginning of period (43,955) (72,381) (41,562) (72,607)
Transitional adjustment on
adoption of new accounting
policies - - (2,659) -
---------------------------------------------------------------------------
Balance at beginning of period as
restated (43,955) (72,381) (44,221) (72,607)
Net income (loss) for the period 896 (626) 1,162 (400)
---------------------------------------------------------------------------
Balance at end of period (43,059) (73,007) (43,059) (73,007)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Accumulated other comprehensive
income/(loss)
Balance at beginning of period (13,266) (22,919) (22,693) (23,050)
Transitional adjustment on
adoption of new accounting
policies - - 8,855 -
---------------------------------------------------------------------------
Balance at beginning of period as
restated (13,266) (22,919) (13,838) (23,050)
Net change in unrealized gains in
available for sale securities 2,682 - 4,145 -
Unrealized loss on translation of
net foreign operations (7,996) 3,032 (8,887) 3,163
---------------------------------------------------------------------------
Balance at end of period (18,580) (19,887) (18,580) (19,887)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Shareholders' equity at end of
period $ 300,811 $ 227,564 $ 300,811 $ 227,564
---------------------------------------------------------------------------
---------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Thousands of Canadian dollars)

Three Six
Months Months
Ended Ended
June 30, June 30,
(unaudited) 2007 2007
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Net income for the period $ 896 $ 1,162
Other comprehensive income (loss), net of taxes
Net change in unrealized gains in
available-for-sale securities 2,682 4,145
Unrealized loss on translation of net
foreign operations (7,996) (8,887)
-----------------------------------------------------------------------
Comprehensive income (loss) for the period $ (4,418) $ (3,580)
-----------------------------------------------------------------------
-----------------------------------------------------------------------


Contact Information

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