High River Gold Mines Ltd.
TSX : HRG

High River Gold Mines Ltd.

November 15, 2010 10:00 ET

High River Gold Reports Third Quarter 2010 Results

TORONTO, ONTARIO--(Marketwire - Nov. 15, 2010) -

(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 nine month periods ended September 30, 2010. 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 THIRD QUARTER 2010

Financial Results

  • Net gold revenue of $100.8 million, a decrease of 11% from $113.8 million in Q2 2010, an increase of 13% from $89.6 million in Q3 2009.
  • Net income of $ 25.8 million ($ 0.03 per share) compared to a net income of $39.3 million ($0.05 per share) in Q2 2010 and a net loss of $4.6 million (-$0.01 per share) in Q3 2009.
  • Cash flow from operations of $26.3 million, compared to $48.8 million in Q2 2010, and $33.00 million in Q3 2009.
  • Cash and cash equivalents increased to $125.6 million from $92.7 million at the end of Q2 2010, and up from $38.7 million at the end of Q3 2009.
  • Working capital increased to $205.3 million from $150.9 million at the end of Q2 2010, up from $18.5 million at the end of Q3 2009.
  • Current and long term debt decreased to $22.1 million from $31.5 million at the end of Q2 2010 and from $121.1 million at the end of Q3 2009.

Operations

  • Total gold production (doré) decreased 10% to 77,427 ounces (Q2 2010 – 86,803 ounces (100%) and 84,990 ounces in Q3 2009). Total cash cost per ounce increased 9% to US$603 (Q2 2010 – US$554 per ounce and US$518 per ounce in Q3 2009) (see the Non-GAAP Financial Measures table).
  • The Zun-Holba and Irokinda Gold Mines produced 30,186 ounces (Q3 2009 – 37,430) (100%) at a total cash cost of US$583 per ounce.
  • The Taparko-Bouroum Gold Mine produced 29,582 ounces (Q3 2009 – 25,073) (100%) at a total cash cost of US$421 per ounce. 
  • Gold production at Berezitovy was 17,659 ounces (Q3 2009 – 22,487 ounces) (100%), at a total cash cost of US$939 per ounce.
  • At the Bissa Gold Project, the technical report describing the results of the feasibility study was published in Q3 2010.

Subsequent Events

  • 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.

DISCUSSION OF FINANCIAL RESULTS

Selected Financial Results

The Company reported a net income of $25.78 million ($0.03 per share) in Q3 2010 compared to net income of $39.3 million ($0.05 per share) in Q2 2010 and a net loss of $4.6 million (-$0.01 per share) in Q3 2009.

  Three months ended Nine months ended
(except per share amounts) September 30, 2010 June 30, 2010 September 30, 2009   September 30, 2010 September 30, 2009  
Gold revenue $100,767 $113,808 $89,557   $312,231 $262,917  
Net income (loss) 25,775 39,267 (4,567 92,572 (41,413
Net income (loss) per share (basic) 0.03 0.05 (0.01 0.11 (0.07
Cash provided by (used in) operating activities 26,296 48,800 33,011   106,595 85,504  
Weighted average number of shares outstanding (basic) 826,660,782 799,327,755 649,217,295   808,510,986 612,272,706  

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, 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 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)
 
  September 30,     December 31,  
(unaudited) 2010     2009  
Assets          
Current Assets          
  Cash and cash equivalents 125,587   $ 82,061  
  Restricted cash 1,348     562  
  Accounts receivable 16,332     18,115  
  Inventory 99,097     81,090  
  Other assets 17,384     12,382  
  259,748     194,210  
Investments 103,871     64,810  
Property, plant and equipment 311,087     340,606  
Exploration properties and deferred exploration 114,919     105,061  
Other assets 759     697  
Future income taxes 1,122     1,578  
Total Assets 791,506   $ 706,962  
           
Liabilities          
Current Liabilities          
  Accounts payable 43,164   $ 39,726  
  Loans and interest payable 8,466     58,666  
  Non-hedge derivatives 2,863      
  54,493     98,392  
Loans and interest payable 13,628     25,365  
Reclamation and closure costs 17,755     14,208  
Non-hedge derivatives -     13,684  
Future income taxes 33,884     20,567  
  119,760     172,216  
Non-controlling interest 31,408     21,922  
Total Liabilities 151,168     194,138  
           
Shareholders' Equity          
Share capital 640,157     610,770  
Warrants 10,126     13,265  
Contributed surplus 16,002     15,907  
Debenture conversion option 538     538  
Deficit (29,228   (121,801
Accumulated other comprehensive income 2,743     (5,855
Total Shareholders' Equity 640,338     512,824  
Total Liabilities and Shareholders' Equity 791,506   $ 706,962  
 
 
High River Gold Mines Ltd.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in thousands of Canadian dollars except per share figures)
 
    Three months ended September 30,     Nine months ended September 30,  
(unaudited)   2010     2009     2010     2009  
Revenue                        
Gold   100,767   $ 89,577     312,231   $ 262,917  
Silver   1,068     950     3,279     4,914  
    101,835     90,527     315,510     267,831  
Expenses                        
Mining costs   42,134     47,736     127,030     134,315  
Mine administrative costs   3,543     1,676     9,015     8,153  
Mine amortization and depletion   13,868     13,145     45,116     41,913  
Asset retirement obligation accretion   327     216     947     639  
    59,872     62,773     182,108     185,020  
Income before the undernoted   41,963     27,754     133,402     82,811  
Administrative costs   (1,470 )    (5,205   (2,809 )    (11,525
Amortization   -     (15   (6 )    (46
Exploration expense   (6,764 )    (999   (9,916 )    (3,000
Financing costs and investment income, net   3,084     (8,490   3,922     (15,356
Other income/(expenses)   (572 )    (13,513   (4,570 )    (80,447
Income (loss) before tax and non-controlling interest   36,241     (468   120,023     (27,563
Income tax expense   (6,029 )    (4,085   (17,965   (9,438
Income (loss) before non-controlling interest   30,212     (4,553   102,058     (37,001
Non-controlling interest in earnings of subsidiary   (4,437 )    (14   (9,486   (4,412
Net income (loss) for the period $ 25,775   $ (4,567 $ 92,572   $ (41,413
Net income (loss) per share – basic and diluted $ 0.03   $ (0.01 $ 0.11   $ (0.07
 
 
High River Gold Mines Ltd.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of Canadian dollars)
 
    Three months ended September 30,     Nine months ended September 30,  
(unaudited)   2010     2009     2010     2009  
Operating Activities                        
Net income (loss) for the period $ 25,775   $ (4,567 $ 92,572   $ (41,413
Non-cash items:                        
  Non-controlling interest in earnings of subsidiary   4,437     14     9,486     4,412  
  Mining cost -change in inventory   (6,200 )    1,593     (17,976 )    470  
  Amortization and depletion   13,868     13,161     45,122     41,959  
  Asset retirement obligation accretion   327     216     947     639  
  Financial instrument accretion   40     114     351     568  
  Fair value adjustments to financial instruments   (3,510 )    4,007     (10,821 )    1,000  
  Stock based compensation   6     70     95     250  
  Write down of exploration   -     11,383     628     70,167  
  Loss on disposal of assets   (286 )    6,429     (133 )    6,991  
  Future income taxes   2,061     1,898     3,072     768  
  Unrealized foreign exchange loss   (1,156 )    (6,204   2,067     (2,690
  Other   201     -     (313 )       
Subtotal   35,563     28,114     125,097     83,121  
Change in non-cash working capital   (9,267 )    4,897     (18,502 )    2,383  
Net cash provided by operating activities   26,296     33,011     106,595     85,504  
                         
Investing Activities                        
  Property, plant and equipment   (10,165 )    (6,081   (23,387 )    (13,721
  Proceeds on disposal   1,092     1,636     1,634     1,636  
  Exploration properties and deferred exploration   (7,137 )    (1,560   (11,772 )    (4,114
  (Increase) decrease in other assets   (573 )    (4,927   (811 )    (1,553
Net cash used by investing activities   (16,783 )    (10,932   (34,336 )    (17,752
                         
Financing Activities                        
  Loans received   -     13     -     5,991  
  Loans repaid   -     (5,722   (50,040 )    (63,290
  Common shares issued   26,032     -     26,249     10,623  
  Net cash used by financing activities   26,032     (5,709   (23,791 )    (46,676
                         
Effect of exchange rate changes on cash held in foreign currencies   (2,688 )    (837   (4,942 )    (1,536
                         
Increase in cash and cash equivalents during the period   32,857     15,533     43,526     19,540  
Cash and cash equivalents - Beginning of period   92,730     23,130     82,061     19,123  
Cash and cash equivalents - End of period $ 125,587   $ 38,663   $ 125,587   $ 38,663  

Contact Information

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