High River Gold Mines Ltd HRIVF

RE: citical mass, question for you on FX

[Critical_Mass]

Okay well I'll give it a shot.  On review I may be mistaken and we in fact have a unrealize foreign exchange gain as it was deducted from income in deriving cash flow as opposed to being added back as the prognoz loss was.  But here is what I as thinking generally about how currency changes affect us.

Our revenue is in USD as gold is priced in USD.  It is possible gold is sold locally for other currencies but the base rates are derived from the USD price.
Our mining expenses are in Russian Ruble's and CFA Francs, which are tied to the Euro.
We report in CDN $ and also have some costs as well mostly in admin expenses.

During the quarter the USD dropped relitive to all of these currencies. The Ruble went from about 33.88/1 USD to slightly over 31.15/1 USD.  A 8.76% increase in the Ruble
Using the Euro as a proxy for the CFA Franc  April 1st rate = 0.754945 EUR/ USD to  0.707514 EUR the last day of the quarter.  So a  6.7 increase relitive to the USD%
Also the CDN dollar increased from 1.25397 CDN/USD to 1.16231/ USD at the end of the quarter.
A 7.9% increase

So throughout the quarter costs in USD terms increased as the USD fell against the Ruble, Euro, and CDN dollar. 
So although we report in CDN dollars, we actually pay in USD and convert that currency into local fair to pay for our expenses more or less as they are incurred.  Russian Ruble's CFA Francs and CDN dollars. So from a currency standpoint, a increasing US dollar helps our bottom line as it lowers our costs by requiring less USD to pay the expenses, and increases our revenue by converting into more CDN dollars in which we report.   At least that is how I thought it would work.  We certainly took a hit to our revenue. So this is actually a bit of a mystery now how we had a gain... I had prepared a response as to why we would have a loss based on our income and expense timing.  Where we needed to adjust Acounts recievable, accounts payable as well as cash and other short term items valued in other currencies as unrealized gains or losses.  If there are any accountants arround firmiliar with GAAP in regards to this issue I would be very curious. 

Oh and on another matter in relation to the Prognoz writedown that I was meaning to mention.  Although we all see it as a negitive hit to our latest earnings.  Looking to pervious actions from Severstal in trying to buy all of HRG, would it not also be a brilliant, and very firmiliar strategy for us to take this hit, if we were in fact looking to buy out the remaining 50% stake for a very low price from Evergreen or whoever owns the other half.  This would be much easier if it is on our books for 25.6 million vs 84.2 million.  If they were to pull that buy off, I for sure would be very forgiving of this short term negitivity if this turned out to be the case.  Things are not always as they appear people, maybe HRG and Severstal have another target in mind now.  After all Severstal is very happy having a minority interest itself.  Maybe they are happy with the % now that they have.  And we we can help them boost the share price in return for running this company for the best interests of all.