High River Gold Mines Ltd HRIVF

HRG debt.

[peego]

I was reading through the footnotes in the financials on their debt.

In the NR today, it said the following:

Severstal has already provided significant financial support to High River (including the November 2008 private placement of US$45 MM and the April 2009 reassignment of loans-in-default totalling US$27 MM), and absent further support as suggested above, the Board of High River believes that outlook for the Company remains uncertain.

Of this $27 loans owing to severstal, $15M is from High River, and $12M is from Somita.

From what's said here, this $27M in loans in in default.

Now, reading the FY08 year end report, in the footnote 14(a) and 14(K) - pages 56 and 57 https://www.hrg.ca/i/pdf/rpt_Q4-2008.pdf

It says this:

14 (a)

In 2007, the Company arranged a US$15,000,000 revolving credit facility with Standard Bank for working capital requirements of the Berezitovy gold development project... The Somita and High River facilities were consolidated and extended until June 30, 2010. The interest rate was increased to LIBOR plus 7.5% until July 2, 2009 and to LIBOR plus 9.5% thereafter until the termination date. Mandatory repayments are required from any excess cash flow (as defined) from Somita and under certain other conditions. The Company paid a restructuring fee of US$270,000 and has agree to pay a fee of US$30,000 per month to Standard Bank to act as a financial adviser on restructuring, the fee to continue until the debt is retired. The loan is guaranteed by OAO Severstal, the indirect controlling shareholder of High River. The loan was reclassified as current since Somita is in breach of its loan covenants even though waivers have been granted.

From my understanding of this, the consolidated $27M (now assigned to severstal0 is extended until June 30, 2010, which is a year away...

They had cash of about $25M end of March, as at May 11, consolidated cash is $7.4M. Attributable product for Q1 is roughly 70k oz. Operating and non-op costs is $572/oz, and average gold price was $926 - so cash flow would be roughly $354/oz.

If we use these assumptions for April 1 to May 11, gold production would be about 30k oz (rough estimate), which would give a cash flow of 30k X $354/oz = $10.6M

March 31 cash: $25M
Cash flow from April 1 to may 11: ~$10.6M
Remaining Cash on May 11: $7.4M
Cash paid out: = $28.2M

So, they had a cash out flow of roughly $28M based on these estimates. Yet, they make no mention what this $28M has been used for. All that was said was: current liquidity and loan maturities that include the obligation to repay approximately US$15 MM to its lenders in May and June 2009 as well as approximately US$27 MM in obligations to Standard Bank now assigned to OAO Severstal ("Severstal") which are currently in default.

Now, $15M payable in May and June, and we've had a cash outflow of about $28M up to may 11. How much of this cash out was used to pay off the $15M obligation due in may/june? It is obvious, that the cash flow from operatiion is more than enough to meet these near term obligations. Why more detail is not made available, other than how much loan payment obligation there is? Oh wait... to keep SP down... regardless, if you just look at the numbers (under some assumptions of same production numbers/costs as Q1), it would seem cash flow easily covers these currently due and upcoming obligations.

Obviously there are other debt obligation to be paid, but it doesn't appear this $27M owed to severstal is due till june 2010... am I missing something?