Q2 ResultsHigh River Gold Reports Second Quarter 2009 Results 14 Aug 2009 18:20 ET
Marketwire
High River Gold Mines Ltd.
August 14, 2009 - 06:20:38 PM
High River Gold Reports Second Quarter 2009 Results
TORONTO, ONTARIO--(Marketwire - Aug. 14, 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 and
six month periods ended June 30, 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.
HIGHLIGHTS FOR THE SECOND QUARTER 2009
Financial Results
- Net loss for Q2/2009 of $37.8 million ($0.06 per share), compared to a net
income of $0.9 million ($0.00 per share) in Q1/2009 and a net loss of $4.7
million ($0.01 per share) in Q2/2008.
- Cash flow from operations was $22.8 million, down from $29.7 million in the
previous quarter, and up from $2.7 million last year.
- Cash and cash equivalents was $23.1 million down from $25.0 million at the
end of Q1/2009, and up from $19.1 million as at the end of 2008.
- Working capital increased to $2.8 million from a ($29.7) million deficit at
the end of Q1/2009, and a deficit of ($42.1) million as at the end of 2008.
- Current and long term debt levels declined to $135.6 million from $175.8
million at the end of Q1/2009, and $188.1 million as at the end of 2008.
- Q2/2009 gold production and cash operating costs were as follows:
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Production Production Cash Total Cash Costs
(100%) (attributable) Operating (US$/Oz)
(ozs) (ozs) Costs
(US$/oz)
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Zun-Holba 17,123 14,544 443 497
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Irokinda 18,712 15,894 370 424
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Placer Operation(1) N/A N/A N/A N/A
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Taparko-Bouroum 20,139 18,125 491 515
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Berezitovy 24,023 23,783 640 699
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Total 79,997 72,346 497 545
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(1) no production during the quarter
Q2/2009 operating and non-operating cash costs increased 14% to US $650 per
ounce, compared to US $572 per ounce in Q1/2009. Non-operating cash costs per
ounce mainly represent corporate administration, exploration, and other
expense such as realized foreign exchange losses.
Operations
- Zun-Holba and Irokinda Underground Gold Mines:
-- Stable production with no material shortcomings.
- Taparko-Bouroum Open-pit Gold Mine:
-- Production decreased from Q1/2009, despite improvements in mill throughput
rate, due to processing of lower grade ore.
- Berezitovy Open-pit Gold Mine:
-- Production increased from Q1/2009, despite lower grades and recoveries, due
to higher throughput, and a reduction in work-in-process at the end of the
quarter. Production levels continue to be constrained by maintenance
shut-downs and disk filter plant under-performance.
- Bissa Gold Exploration Project:
-- A revised NI 43-101 compliant Resource Estimate was reported, supporting a
feasibility study currently being completed.
- Prognoz Silver Exploration Project:
-- The project's value was written down by $58.6 million to $25.6 million,
reflecting two independent estimates prepared for the Company in connection
with an offer by Severstal to acquire all of the shares of High River.
Corporate
- On April 8, 2009, High River announced the resignation of John W. Crow from
the Company's board of directors, and the appointment of Alexey Khudyakov and
Karl Glackmeyer to the board of directors. Alexey Khudyakov assumed the role
of Chairman of the board of directors.
- On April 20, 2009, High River announced that two loans, with a total amount
outstanding of US$ 27 million, were assigned by Standard Bank Plc to OAO
Severstal ("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.
- On May 22, 2009, High River announced that on May 19, 2009 Severstal
indicated to the Board of High River, by way of non-binding expression of
interest, that it proposed to make a cash offer of $0.18 per share to minority
shareholders of High River. On June 9, 2009, High River announced that
following receipt of an improved proposal from Severstal, the Special
Committee of independent directors recommended to the Board of High River that
High River negotiate a support agreement with Severstal, pursuant to which
Severstal would offer to acquire all of the outstanding common shares of High
River for cash at a price of $0.22 per common share. High River and Severstal
also agreed to complete a private placement whereby Severstal would acquire
59,019,367 common shares at a price of $0.18 per common share for proceeds of
approximately $10.6 million. Following closing of the private placement,
Severstal would control 57.3% of the common shares of High River. On June 16,
2009, it was announced that High River entered into the support agreement.
- On June 18, 2009 High River announced the closing of the private placement
previously announced on June 9, 2009. Proceeds of the financing were to be
used for repayment of the approximately US$5.2 million short term loan from
Severstal to OJSC Buryatzoloto ("Buryatzoloto"), the Corporation's 84.94%
-owned subsidiary, which Buryatzoloto required for a US $10 million debt
repayment on June 12, 2009, and for general corporate purposes. High River
also announced that it had been advised by the Toronto Stock Exchange (the
"TSX") that High River's delisting review period has been extended to August
17, 2009 due to the pending take-over bid by Severstal and that in the absence
of such take-over bid, the TSX would have determined to delist the
Corporation's securities due to its current financial condition. High River
was also advised by the TSX that if the take-over bid is not successful or is
otherwise terminated, or the take-over bid does not proceed on the expected
timetable, the TSX reserves the right to immediately call a meeting of the
Listings Committee to consider abridging the extension and whether to suspend
trading in and delist the securities of the Corporation.
- On June 19, 2009, High River reported the results of a revised NI 43-101
compliant Mineral Resource evaluation completed for the Bissa Gold Exploration
Project ("Bissa"), by SRK Consulting (Canada) Inc. ("SRK"), as of April 23,
2009. It was prepared to support conceptual mine design work currently being
completed by engineering consultants GENIVAR ("GENIVAR") to evaluate the
feasibility of an open pit mining and processing operation at Bissa. The
revised resource estimate ("in pit") was as follows: Measured and Indicated:
15.9 million tonnes grading 1.81 g/t for 926,000 contained gold ounces,
Inferred: 17.7 million tonnes grading 1.40 g/t for 799,000 contained gold
ounces. Relative to a previous Mineral Resource estimate incorporating Mineral
Resource evaluations dated September 28, 2004 and May 23, 2006, Measured
Mineral Resources increased by 11%, Indicated Mineral Resources increased by
43%, and Inferred Mineral Resources increased by 18%.
- On June 25, 2009, High River announced that a take-over bid circular dated
June 24, 2009, a directors' circular dated June 24, 2009 and related documents
were mailed to High River's shareholders. The mailing was in connection with
the offer, announced on June 9, 2009, by Severstal for all of the issued and
outstanding common shares of High River, not currently held by Severstal and
its affiliates, which was due to expire at 5:00 p.m. (Toronto time) on July
31, 2009. Also, High River reported that if the TSX determines to delist High
River's securities, High River would have the opportunity to appeal any such
decision or it could seek an alternate listing for its securities on another
stock exchange, although the outcome of either action is uncertain.
Events Subsequent to Quarter-end
- On July 16, 2009, High River announced that Steven Poad tendered his
resignation from the position of Chief Financial Officer effective July 31,
2009, to pursue other business interests, and that replacing Mr. Poad will be
High River Treasurer Andrei Maslov. Mr. Poad will continue to serve as a
Director of High River. On July 23, 2009 High River announced that High
River's board of directors appointed Andrei Maslov as the Company's new Chief
Financial Officer, effective July 31st, 2009.
- On July 28, 2009, Severstal announced that it intends to increase its offer
to $0.30 per common share in cash, an increase of $0.08 or 36% per common
share from the previous offer price of $0.22 per common share. The Special
Committee of independent directors unanimously recommended that High River
shareholders accept the increased offer. Severstal confirmed that its new
offer is full and final and that it will not be extended beyond the revised
closing date of August 10, 2009.
- On August 11, 2009 Severstal announced that it acquired 28,897,135
additional shares at $0.30 per share as a result of the offer. Severstal
ownership of the Company subsequently increased to 61.7%.
DISCUSSION OF FINANCIAL RESULTS
Selected Financial Results
(in thousands of Canadian dollars
except per share amounts)
Q2/2009 Q1/2009 Q2/2008
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Gold revenue $ 84,561 $88,779 $ 43,427
Net income (loss) (37,777) 931 (4,725)
Net income (loss) per share (basic) (0.06) 0.00 (0.01)
Cashflow from operations 22,821 29,672 2,671
Weighted average number of shares
outstanding (basic) 597,407,151 590,193,673 171,942,767
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The Company's consolidated net gold revenues for Q2 2009 decreased to $84.6
million from $88.8 million in Q1 2009. A lower foreign currency translation
rate was the main factor. Higher production by Berezitovy increased the number
of ounces sold. Compared to last year, ounces sold increased by 64% to 78,274
ounces from 47,905 ounces in Q2 of last year, with the increase due to higher
production from Berezitovy and Taparko-Bouroum. The average gold price
realized on sales was US $924 per ounce during Q2/2009, down from US $926
during Q1/2009, and up 3% from US $897 per ounce last year.
The Company had a net loss of $37.8 million in Q2/2009, compared to a net
income of $0.9 million in Q1/2009 and a loss of $4.7 million last year. The
net change in earnings of -$38.7 million compared to the previous quarter and
-$34.6 million compared to Q2/2008, largely reflects the write-down of the
Prognoz Silver project of -$59 million. The decrease from Q2/2008, despite
higher revenues, was additionally caused by higher mining costs and
amortization and depletion costs largely related to higher production levels,
higher deduction of non-controlling interest in earnings of subsidiaries
reflecting higher earnings at 90% owned Taparko and 85% owned Zun-Holba and
Irokinda, and higher tax expense.
Cash flow from operations of $22.8 million decreased 23% from $29.7 million in
Q1 this year, up from $2.7 million in Q2 last year. Cash flow from operations
increased from last year largely due to the higher gold revenue as discussed
above.
Working capital increased to $2.8 million from a $29.7 million deficit at the
end of Q1 2009, and a $42.1 million deficit at year-end.
OVERVIEW OF OPERATIONS
Underground Mines
Zun-Holba Mine (Russia)
In Q2/2009, Zun-Holba produced (100%) 17,123 ounces of gold, down from 18,236
ounces produced in Q1/2009 and virtually unchanged from last year. Cash
operating costs decreased to US $443 per ounce from US $467 per ounce in
Q1/2009 and US $617 per ounce in Q2/2008. The decrease in cost per ounce
compared to last year was due largely to the impact of a weaker rouble on
input costs, and cost control measures.
Irokinda Mine (Russia)
Production (100%) at Irokinda during the second quarter was 18,712 ounces, up
from 16,554 ounces in Q1/2009 and virtually unchanged from the second quarter
last year. Higher mill throughput offset slightly lower grades and recoveries.
In Q2/2009, cash operating costs decreased to US $370 per ounce compared to US
$374 per ounce in Q1/2009 and US $468 per ounce in 2008. The decrease in cost
per ounce compared to last year was largely due to the impact of a weaker
rouble on input costs, and cost control measures.
Open Pit Mines
Taparko-Bouroum Mine (Burkina Faso)
In Q2/2009, gold poured at Taparko (100%) totalled 20,139 ounces, down 10%
from the first quarter, and up 95% from last year's level due to higher mill
throughput and grades. Approximately 182,000 tonnes of ore were processed
during the quarter for an average rate of 94 tonnes per operating hour (25%
below the original design capacity), significantly higher than the 136,000
tonnes processed in Q1/2009 and 126,000 tonnes processed in Q2/2008 when
several unplanned mill shutdowns occurred. Mill head grades during the quarter
of 4.2 g/t were 10% lower than grades processed in the previous quarter, but
still 50% higher than the Taparko-Bouroum average grade. Recoveries averaged
91%, in line with planned levels. Cash operating costs increased to US $491
per ounce compared to US $386 last quarter due to lower grade. Total cash
costs increased to US $515 per ounce compared to US $413 in Q1/2009.
Several initiatives during the quarter, such as replacement of a trommel
screen and two cyclone pumps, enabled the plant to operate at slightly higher
capacity than during the last quarter. However, vibration levels at the
pinion/girth gear interface remain above acceptable levels, which limit the
productivity of the mill. The Company continues to study the problem with the
goal of implementing a long term solution.
Berezitovy Mine (Russia)
Production (100%) at Berezitovy during the first quarter was 24,023 ounces of
gold, compared to 19,596 ounces produced in Q1 2009 and no ounces produced in
the Q2/2008, as commercial production was only declared on October 1, 2008.
Production increased from Q1/2009, despite lower grades and recoveries, due to
higher throughput, and a reduction in work-in-process at the end of the
quarter. Approximately 282,000 tonnes of ore were processed during the quarter
(28% below the design capacity) with an average grade of 2.5 g/t. Recoveries
averaged approximately 86% during the quarter, just below planned levels of
89%. Cash operating costs were US $640 per ounce during Q2/2009, while total
cash costs were US $699 per ounce.
Mill throughput during Q2/2009 was lower than planned due mostly to planned
shutdowns in April, May, and June during which repairs were made to SAG mill
lifters, pumps, conveyors, and the ball mill motor.
Additionally, in June, the flow of crushed ore to the mill was interrupted due
to a break-down of the crushed ore stockpile apron feeder. A new motor and
pumps have been ordered and the apron feeder is expected to be restarted in
the early part of Q3/2009. In the meantime, mill production is being
maintained with the feeding of uncrushed ore into the ball mill. This is
expected to result in lower mill throughput until the problem is resolved.
While all three disk filter units are operational at the disk filter plant,
throughput is below design capacity requiring a by-pass of a portion of the
tailings slurry past the disk filter plant into a wet tailings storage
facility. As the wet tailings storage facility is expected to be filled up in
the third quarter, two new disk filter units from a different supplier have
been ordered to improve throughput rates of the disk filter plant and
eliminate the need for a wet tailings by-pass.
Advanced Exploration Projects
Bissa Gold Project
A feasibility study was initiated early in 2008 by engineering consultants
GENIVAR ("GENIVAR") to evaluate the feasibility of an open pit mining and
processing operation at Bissa. A significant amount of work has been completed
on this study to date. A key component supporting this conceptual design work
was a NI 43-101 compliant revised Mineral Resource evaluation completed for
Bissa which was contained within a Technical Report prepared by SRK dated June
18, 2009. This new resource estimate incorporated new assay results from
drilling and trenching performed by High River during 2007 and 2008. The
following resource estimate was reported by High River in a June 19, 2009
press release:
Bissa Mineral Resource Statement(i) (100% basis), SRK Consulting, April 23,
2009
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Resource Measured and Indicated Resources
Category --------------------------------------------------------
Tonnage (t) Gold Grade (g/t) Contained Gold (oz)
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Measured 906,000 3.13 91,000
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Indicated 15,010,000 1.73 834,000
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Total 15,917,000 1.81 926,000
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Resource Inferred Resources
Category --------------------------------------------------------
Tonnage (t) Gold Grade (g/t) Contained Gold (oz)
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Total Inferred 17,730,000 1.40 799,000
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(i) Note:
- All figures rounded to reflect the relative accuracy of estimates.
- Reported Resources are within optimized pit shells at a cut-off grade of
0.5 g/t gold. The results from the pit optimization work are used solely
for the purpose of reporting Mineral Resources that have "reasonable
prospects" for economic extraction by an open pit and do not represent
an attempt to evaluate Mineral Reserves for this project.
- Mineral Resources are not Mineral Reserves and do not have demonstrated
economic viability. There is no certainty that all or any of the Mineral
Resources will be converted into Mineral Reserves.
Prognoz Silver Project
No drilling or other exploration activity occurred at the Prognoz project site
during the quarter and no work is planned for the balance of 2009 and 2010.
The project's value was written down by $58.6 million to $25.6 million,
reflecting two independent estimates and Canadian GAAP (EIC - 174).
About High River
High River is a gold company with interests in producing mines and advanced
exploration projects in Burkina Faso and 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. 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)
June 30, December 31,
(unaudited) 2009 2008
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Assets
Current Assets
Cash and cash equivalents $ 23,130 $ 19,123
Accounts receivable 15,116 14,546
Inventory 71,695 79,369
Other assets 15,493 11,401
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125,434 124,439
Investments 37,816 22,724
Property, plant and equipment 377,720 432,089
Exploration properties and deferred exploration 112,539 170,522
Other assets 1,558 3,335
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Total Assets $ 655,067 $ 753,109
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Liabilities
Current Liabilities
Accounts payable $ 23,377 $ 29,842
Loans and interest payable 99,255 136,699
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122,632 166,541
Loans and interest payable 36,355 51,446
Reclamation 9,778 10,078
Non-hedge derivatives 8,760 13,651
Future income taxes 15,889 15,884
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193,414 257,600
Non-controlling interest 22,866 18,467
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Total Liabilities 216,280 276,067
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Shareholders' Equity
Share capital 553,867 543,244
Warrants 15,748 16,627
Contributed surplus 13,937 12,876
Debenture conversion option 538 538
Deficit (148,883) (112,037)
Accumulated other comprehensive income 3,580 15,794
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Total Shareholders' Equity 438,787 477,042
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Total Liabilities and Shareholders' Equity $ 655,067 $ 753,109
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High River Gold Mines Ltd.
Consolidated Statements of Operations
(Expressed in thousands of Canadian dollars except
per share figures)
Three months ended Six months ended
June 30, June 30,
(unaudited) 2009 2008 2009 2008
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Revenue
Gold $ 84,561 $ 43,427 $ 173,340 $ 88,436
Silver 3,622 29 3,964 69
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88,183 43,456 177,304 88,505
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Expenses
Mining costs 43,332 33,936 86,579 59,399
Mine administrative costs 3,032 2,154 6,477 4,458
Mine amortization and
depletion 14,782 5,403 28,768 11,264
Asset retirement
obligation accretion 223 141 423 276
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61,369 41,634 122,247 75,397
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Income before the undernoted 26,814 1,822 55,057 13,108
Administrative costs (2,135) (2,387) (6,320) (5,378)
Amortization (11) (193) (31) (369)
Exploration expense (1,195) (2,563) (2,001) (4,683)
Financing costs and
investment income, net (3,469) (1,845) (6,866) (8,567)
Other income/(expense) (48,105) 2,869 (66,934) 5,699
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Income before tax and non-
controlling interest (28,101) (2,297) (27,095) (190)
Income tax expense (5,366) (2,066) (5,353) (4,580)
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Loss before
non-controlling interest (33,467) (4,363) (32,446) (4,770)
Non-controlling interest
in earnings of subsidiary (4,310) (362) (4,398) (2,263)
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Net loss for the period $ (37,777) $ (4,725) $ (36,846) $ (7,033)
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Net loss per share -
basic and diluted $ (0.06) $ (0.01) $ (0.06) $ (0.02)
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High River Gold Mines Ltd.
Consolidated Statements of Cash Flows
(Expressed in thousands of
Canadian dollars)
Three months ended Six months ended
June 30, June 30,
(unaudited) 2009 2008 2009 2008
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Operating Activities
Net loss for the period $ (37,777) $ (4,725) $ (36,846) $ (7,033)
Non-cash items:
Non-controlling interest
in earnings of subsidiary 4,310 363 4,398 2,263
Amortization and depletion 14,792 5,922 28,798 12,284
Asset retirement
obligation accretion 223 227 423 448
Financial instrument
accretion 661 351 454 889
Fair value adjustments
to derivatives (1,229) (418) (3,007) 3,794
Stock option benefit
expense 130 (218) 180 981
Future income taxes 1,164 (145) (1,130) 370
Unrealized foreign
exchange (8,453) (1,104) 3,514 (3,074)
Writedown of carrying
value and other 59,218 30 59,247 111
Other (930) 952 (1,024) 952
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Subtotal 32,109 1,235 55,007 11,985
Change in non-cash working
capital (9,288) 1,436 (2,514) (9,566)
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Net cash provided by
operating activities 22,821 2,671 52,493 2,419
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Investing Activities
Property, plant and
equipment (5,164) (7,136) (7,640) (11,771)
Exploration properties and
deferred exploration (604) (10,026) (2,554) (18,501)
Development properties - (13,337) - (29,384)
Increase in investments - 1,000 - (10,801)
Allocation of restricted
cash - - - 69
(Increase) in other
long-term assets 3,320 (1,029) 3,374 (850)
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Net cash used by investing
activities (2,448) (30,528) (6,820) (71,238)
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Financing Activities
Loans received 5,947 16,634 5,978 30,141
Loans repaid (37,812) (11,730) (57,568) (26,170)
Common shares issued 10,623 - 10,623 30,334
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Net cash provided by (used
by) financing activities (21,242) 4,904 (40,967) 34,305
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Effect of exchange rate
changes on cash held
in foreign currencies (1,021) (248) (699) 212
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Increase (decrease) in cash
and cash equivalents
during the period (1,890) (23,201) 4,007 (34,302)
Cash and cash equivalents -
Beginning of period 25,020 40,390 19,123 51,491
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Cash and cash equivalents -
End of period $ 23,130 $ 17,189 $ 23,130 $ 17,189
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FOR FURTHER INFORMATION PLEASE CONTACT:
High River Gold Mines Ltd. Dan Hrushewsky (416) 947 1440 (416) 360 0010
(FAX) info@hrg.ca www.hrg.ca