High River Gold vs. Nord Gold Q1, 2011
July 15, 2011
To High River Gold Shareholders (HRG.TO),
HRG's Q1 results show over $214M in annualized cash flow and $292.5M in net liquid assets. At the recent trading price of $1.25, HRG's $1.05B market cap less the net liquid assets has it trading at a very low 3.5 times cash flow. With the $178M capex program for HRG properties in 2011 (including Bissa mine construction), we can expect HRG's resource base to increase from the current 5.8M oz of gold resources (8.4M oz if you include gold equivalent in silver). We have already heard of potential additional resources of 2M oz at Bissa, 4.5M oz gold equivalent in silver at Prognoz (represents HRG's 50%) and up to 2M oz at Bouly. Also, we are expecting positive drill results before year's end from the depleting Zun-Holba and Irokinda mines.
Nord Gold, a Severstal subsidiary and HRG's largest shareholder, attempted an IPO on the LSE early this year, but postponed it due to falling short of valuation targets. We minority shareholders warned Nord/Severstal that they needed to promote the HRG story to have it trading at its pro rata contribution value of Nord. The bankers in London likely saw the disconnect between HRG's $1B market cap and Nord's $4 - 5B valuation attempt. HRG contributes more than 50% of Nord's important metrics.
HRG vs. Nord Q1, 2011:
HRG produced 91,756 oz vs. Nord's 174,193 oz - 52.67%.
HRG's revenue was $124.4M vs. Nord's $244M - 50.97%.
HRG's cash flow was $53.5M vs. Nord's $78.7M - 68%.
HRG's total cash costs/oz was $560 vs. Nord's $603.
HRG's EBITDA was $64.3M vs. Nord's "normalized' $135.1M - 47.59%.('normalized' definition not given)
HRG's Net Income was $44.9M vs. Nord's $95.6M - 46.97% (including non-controlling interests).
HRG had $287M of working capital and $292.5M net liquid assets (cash, third party stock less debt). At end of Q3 2010, HRG made up 83% of Nord's total net liquid assets.
Recently an article suggested that Nord may attempt another buyout offer of HRG minority shares at a price of $1.50/share. I have collected share counts from all of the larger shareholders including institutions and larger retail shareholders. This core group holds 114M shares (including 66M institutional shares). Although we have not yet canvassed the smaller retail minority shareholders, we expect that their numbers would add significantly to this position. The 114M shares puts us well ahead of the minimum 85M shares (10%) required to prevent any squeeze out under Canadian securities laws. When the smaller retail share counts are collected, we should easily eclipse the 115M shares (50%, majority of minority) needed to keep HRG from going private by way of a related party bid.
Eric Sprott (with 4% of HRG via certain managed funds) has informed Nord management that he and other minority shareholders believe HRG to be worth at minimum 50% of Nord’s value.
HRG's Q2 results should be out on August 15th.
HRG's Q1 results.
https://finance.yahoo.com/news/High-River-Gold-Reports-First-ccn-2372744534.html?x=0&.v=1
Nord Gold's Q1 results.
https://www.nordgold.com/
Nord Gold video and PDF Presentation
https://www.gowebcasting.com/events/denver-gold-group/2011/04/13/nord-gold-n-v/play/stream/2268
HRG's Bissa gets mining license in Burkina Faso.
https://finance.yahoo.com/news/High-River-Announces-the-ccn-423237464.html?x=0&.v=1
Chris Charlwood
Investor
Rainerc7@gmail.com- to be added or removed from e-mail list.
604-718-2668
www.stockhouse.com– for ongoing HRG shareholder communication.