High River Gold Mines Ltd.
TSX : HRG

High River Gold Mines Ltd.

August 15, 2011 17:55 ET

High River Gold Reports Second Quarter 2011 Results

TORONTO, ONTARIO--(Marketwire - Aug. 15, 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 three month period ended June 30, 2011. 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 SECOND QUARTER 2011

Financial Results

  • Net gold revenue of $136.2 million, an increase of 11% from $122.4 million in Q1 2011, an increase of 20% from $113.8 million in Q2 2010.
  • Net income of $41.4 million ($0.05 per share) compared to a net income of $37.3 million ($0.04 per share) in Q1 2011 and a net income of $37.5 million ($0.05 per share) in Q2 2010.
  • Cash flow from operations of $42.9 million, down from $53.5 million in Q1 2011, and down from $48.8 million in Q2 2010.
  • Cash and cash equivalents increased to $207.2 million from $204.1 million at the end of Q1 2011, and up from $92.7 million at the end of Q2 2010.
  • Working capital increased to $307.2 million from $287.0 million at the end of Q1 2011 and from $150.9 million at the end of Q2 2010.
  • Current and long term debt increased to $24.0 million from $23.5 million at the end of Q1 2011 and decreased from $31.5 million at the end of Q2 2010.
  • In June 2011, High River agreed to settlement terms with its former contractor in respect of a previously disclosed action brought against Somita. As previously disclosed, a claim regarding services which were delivered to Somita was filed against Somita before an arbitrator in South Africa in 2009. The aggregate amount of the claim was US$3.7 million and High River filed a statement of defense and counterclaim for damages. The settlement agreement provides for full and final settlement of the contractor's claim against Somita for a settlement amount of US$1.35 million.

Operations

  • Total gold production increased 5% to 96,093 (Q1 2011 – 91,756) ounces (100%). Total cash cost per ounce increased 25% to US$704 (Q1 2011 – US$560 per ounce).
  • The Zun-Holba and Irokinda Gold Mines produced 33,594 ounces (Q1 2011 – 31,855) (100%) at a total cash cost of US$778 per ounce.
  • The Taparko-Bouroum Gold Mine produced 33,753 ounces (Q1 2011 – 36,456) (100%) at a total cash cost of US$556 per ounce.
  • Gold production at Berezitovy was 28,746 ounces (Q1 2011 – 23,445 ounces) (100%) at a total cash cost of US$792 per ounce.
  • High River's subsidiary in Burkina Faso, Bissa Gold S.A. ("Bissa Gold"), was granted the mining license for the Bissa Gold Project by the governmental authorities of Burkina Faso for a term of 20 years with a possibility of renewal. Bissa Gold has engaged the EPCM (Engineering, Procurement, and Construction Management) contractor and the ball mills supplier for the Project.

Subsequent Events

  • In July 2011, Bissa Gold engaged the mining fleet supplier and power plant constructor for the Bissa Gold Project.

DISCUSSION OF FINANCIAL RESULTS

Selected Financial Results

The Company reported a net income of $41.4 million ($0.05 per share) in Q2 2011 compared to a net income of $37.3 million ($0.04 per share) during Q1 2011 and net income of $37.5 million ($0.05 per share) in Q2 2010.

In thousands of Canadian dollars Three months ended Six months ended
(except per share amounts) June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
Gold revenue $ 136,204 $ 113,808 $ 258,566 $ 211,464
Net income (loss) 41,375 37,456 78,674 67,877
Net income (loss) per share (basic) 0.05 0.05 0.09 0.08
Cash provided by (used in) operating activities 42,893 48,800 96,410 80,299
Weighted average number of shares outstanding (basic)
840,218,962

799,327,755

840,218,962

799,327,755

About High River

High River is an unhedged gold company with interests in producing mines, development 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 a 90% interest in a development project, the Bissa gold project in Burkina Faso, and a 50% interest in an advanced exploration project with NI 43-101 compliant resource estimates, 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, events, 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 2010 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 STATEMENTS OF FINANCIAL POSITION
As at June 30, 2011
(Unaudited, expressed in thousands of Canadian Dollars)
June 30,
2011
December 31,
2010
ASSETS
Current Assets
Cash & cash equivalents 207,264 153,964
Restricted cash 2,179 1,285
Inventories 124,104 97,663
Trade and other receivables 22,003 13,639
Other assets 18,862 15,589
374,412 282,140
Non-Current Assets
Exploration and evaluation assets 124,202 119,847
Mine properties 71,428 67,436
Property, plant & equipment 183,912 190,256
Available for sale financial assets 98,116 109,633
Other assets 28,599 7,986
Deferred tax asset 5,080 1,596
511,337 496,753
TOTAL ASSETS 885,749 778,893
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities 37,268 33,905
Loans and other borrowings 12,826 22,686
Finance Leases 243 607
Income tax payable 16,873 19,787
67,210 76,985
Non-Current Liabilities
Other liabilities 833 696
Derivative financial liabilities -
Loans and other borrowings 10,397 1,732
Provisions 21,147 19,067
Deferred tax liabilities 37,619 23,595
69,995 45,090
TOTAL LIABILITIES 137,205 122,075
EQUITY
Share Capital 640,157 640,157
Warrants -
Contributed surplus 24,538 24,538
Debenture conversion option 538 538
Other comprehensive income 4,819 3,023
Retained Earnings/Deficit 32,906 (45,768 )
Equity attributable to equity holders of the Company 702,959 622,488
Non-controlling interest 45,585 34,330
TOTAL EQUITY 748,544 656,818
TOTAL LIABILITIES AND EQUITY 885,749 778,893
High River Gold Mines Ltd.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the three months ended June 30, 2011
(Expressed in thousands of Canadian Dollars)
Three months ended Six months ended
June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
Revenue
Gold 136,204 113,808 258,567 211,464
Silver 2,902 1,388 4,902 2,211
139,106 115,196 263,469 213,675
Cost of sales (75,851 ) (60,076 ) (130,356 ) (115,098 )
Gross Profit 63,255 55,121 133,113 98,578
Exploration expenses 4,036 (1,892 ) - (3,152 )
General and administrative expenses (3,686 ) (4,077 ) (8,142 ) (7397 )
Other expenses (5,236 ) (4,239 ) (9,044 ) (4,004 )
Interest income 1,251 663 3,022 893
Finance costs (485 ) (2,969 ) (2,491 ) (7,055 )
Change in fair value of derivative 3,171 7,000
Profit before income taxes 59,135 45,777 116,458 84,862
Income tax expense (14,106 ) (5,899 ) (26,529 ) (11,936 )
Profit for the period 45,029 39,878 89,930 72,926
Attributable to:
Non-controlling interest 3,653 2,422 11,255 5,049
Equity shareholders of the Company 41,375 37,456 78,674 67,877
Profit for the period 45,029 39,878 89,930 72,926
Other Comprehensive Income (loss)
Net gains on available for sale financial assets (9,846 ) 9,353 (1,923 ) 9,206
Exchange differences on translation of foreign operations (74,582 ) (11,390 ) (57,380 ) (24,252 )
Other comprehensive income, net of tax (84,428 ) (2,037 ) (59,303 ) (15,046 )
Attributable to:
Non-controlling interest 3,653 2,422 11,255 5,049
Equity shareholders of the Company (43,052 ) 35,419 19,372 52,831
Comprehensive Income, net of tax (39,399 ) 37,841 30,627 57,880
High River Gold Mines Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in thousands of Canadian Dollars)
(Unaudited) Six months ended
OPERATING ACTIVITIES June 30 2011 June 30 2010
Profit after income taxes 89,930 72,926
Adjustments to profit for non-cash items
Depreciation of property, plant and equipment 28,397 31,254
Accretion expense 952 931
Write-down of exploration (175 ) 628
Loss/(gain) on disposal of investments (432 ) -
Non-cash mining costs (1,526 ) (11,776 )
Fair value adjustment to financial instruments -
Share based payment expense - 89
Interest on capital lease - 30
Gain/loss on disposal of property, plant and equipment (601 ) 153
Deferred tax expense 10,420 1,011
Other non-cash items 12,679 (1,450 )
Working Capital Adjustments
Change in trade receivable and other assets (6,845 ) 4,359
Change in inventories (26,441 ) (10,001 )
Change in other assets (5,499 ) (3,473 )
Change in accounts payable and accrued liabilities 2,994 (7 )
Income Tax Paid (7,436 ) (4,375 )
NET OPERATING CASH FLOWS 96,416 80,299
INVESTING ACTIVITIES
Investment in exploration and evaluation assets (21,546 ) (4,635 )
Expenditure on property, plant and equipment (15,937 ) (13,222 )
Allocation of restricted cash (895 ) (238 )
Proceeds on sale of property, plant and equipment 1,273 542
NET INVESTING CASH FLOWS (37,104 ) (17,553 )
FINANCING ACIVITIES
Payments of loans and borrowings (10,283 ) (52,674 )
Joint venture repayment of Prognoz contribution 18,885 -
Other Financing activities (16,726 ) -
Proceeds from exercise of share options - 217
NET FINANCING CASH FLOWS (8,124 ) (52,457 )
Increase (decrease) in cash and cash equivalents 51,188 10,289
Net foreign exchange difference 2,113 381
Cash and cash equivalents, beginning of the period 153,964 82,061
Cash and cash equivalents, end of the period 207,264 92,731

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