High River Gold Mines Ltd HRIVF

Quick initial thoughts - Bissa FS

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1) It looks to me like they are aiming for 2012 for first gold pour.

2) Initial mine plan of 95,000 ounce of annual production.

3) I would like to see them eventually ramp up to 125,000 - 150,000 oz production range eventually (I always assumed it would be a 2 phase ramp up anyway - 80,000 to 100,000 is what I thought the first phase would be, thus I am comfortable with 95,000 ounces initially).  They are building the processing plant with scalability which bodes well for higher production down the road.

4) Very competitive, Total cash cost per oz = US$467, Operating cash cost per oz = US$339

5) US$110M in start up capital cost is excellent - we can easily fund it out of cash 

6) Sustainable capital is almost nothing - US$13M during future years of production.

6) They used US$900 gold price.

7) I`m surprised the strip ratio is so high (5.3), but nevertheless it doesn`t bother us - given the good cash cost per oz.

8) P&P ounces of 704K is a good start.  They have 1.6M total ounces to work with so lots more P&P ounces to add down the road.  Plus, I am still expecting Bissa to be well over 5 million ounces at some point down the road (with our huge current exploration potential around Bissa, never mind our other far away exploration properties in other parts of Burkina Faso which would be new stand alone productive/processing mines if successful). 

It`s disappointing that they released such good info on a Friday after market.  At least they didn`t hide the good results within the report (they were upfront with the numbers).

With Bissa successfully on stream we are likely looking at over 450,000 attributable (run rate) High River Gold ounces at some point in 2012, with total cash cost per oz around US$450 and the gold price likely around US$1,500 per oz by then.  There is absolutely no way HRG`s market cap should be a piddly C$783M.  Red Back Mining got C$8 billion with similar numbers and similar exploration potential (they currently have a lot more ounces established in 43-101, but no where near C$7.3 billion worth relative to HRG).