In my view, there areabsolutely no justifications for a 150,000,000 share dilution.
Simply outrageous!!!
$83,000,000 via cash on handand likely Q4 cash flow should be plenty enough to close off the
US$27M debt (plus interestpayments) with Severstal and also perform exploration, plus much more. It doesn’t take a rocket scientist to figurethat out.
HRG’s POG Q3 = US$964
Likely avg POG in Q4 =US$1,100
HRG’s CF in Q3 = C$33M
Potential CF in Q4 (with increase in POG) = C$44M
HRG’s attributable production ounces Q3 = 76,620
HRG’s attributable annualizedounces (based on Q3’s production) = 306,480
On July 16th Iposted details as to why our attributable production ounces would reach approx.334,000 in the short-term and why itwould reach around 370,000 ounces in themid-term. What would all this do to cash flow with US$1,140 gold? Short-term is looking tobe early 2010 and mid-term may turn out to be late 2010 (at least todemonstrate good progress towards it):
Berezitovy Outlook (from Q3MD&A)
“A contract for a second ball mill to be built andcommissioned in 2010 has been signed. The mill will have a capacity of 90tonnes per hour and the estimated cost is 43 million Roubles (approximately$1.6 million).”
Taparko Outlook (from Q3MD&A):
“A second ball mill is planned to be built andcommissioned in 2010 significantlyincreasing production by the end of the year. The estimated cost is US$4.4million for the mill and another US$4.1 million for the mine and plantexpansion.”
Here is my post from July 16th (with thedetails):
It means that Q2’srun rate production ounces have already reached 96% of previous management’sconservative target (attributable to HRG) of 300,000 ounces.
This 96% achievement was realized even thoughTaparko’s average rate per operating hour was only 94 tonnes. Thedesigned capacity is 125 tonnes. As such, the rate was 75% of designedcapacity. What does that tell me? It tells me that we have atremendous opportunity to increase production once we ramp up average ratecloser to the designed capacity (they have been using a higher grade source topartly offset the low tonnage in the short term).
Also, this 96% achievement was realized evenwith Berezitovy’s mill utilization rate being only 80% or perhaps below (May19’09 NR). What does that tell me? It tells me that we have atremendous opportunity to increase production once we increase millutilization.
1) Conservative target production(based on comments by previous management):
*Zun-Holda and Irokinda – 122,000 ounces
*Berezitovy – 93,000
*Taparko – 85,000
Total Conservative Target (attributable toHRG) = 300,000 ounces
2) Stretch target production (based oncomments by previous management):
*Zun-Holda and Irokinda – 122,000 ounces
*Berezitovy – 121,700
*Taparko – 90,000
Total Stretch Target (attributable to HRG) = 333,700ounces
From High River’sMay 15, 2006 news release:
“The revised mine plan at the BerezitovyProject anticipates average annual gold production to
exceed 120,000 ounces”
It appears as if that capability still exist,given that Berezitovy’s ounces poured (attributable to HRG) in Q2’09 hasalready reached 23,783. This represents a run rate of 95,131 ounces(attributable to HRG). This was done with mill utilization of 80% or less.Once mill utilization has been cranked up to 100%, it certain appears that thepossibilities exist to achieve 120,000 ounces.
3) Target production with Taparko Expansion Project (based on comments by previous management):
*Zun-Holda and Irokinda – 122,000 ounces
*Berezitovy – 121,700
*Taparko – 126,000
Total Target with Taparko Expansion Project(attributable to HRG) = 369,770 ounces
The plan has been to expand Taparko’sproduction capabilities by 40,000 ounces (36,000 attributable to HRG) throughoperating cash flow – to 140,000 ounces for Taparko. Naturally, that hasbeen put on hold due to the mechanical problems over the past couple of years.
Right now the focus is to pay downdebt. However, once the most pressing debt payments are made (and cash showis freed up), the Taparko Expansion program will be initiated. With thegold price in the US$900 range, excellent cash flows will be generated towardsthis program. If the company deems this initiative as the top priority atthat stage, then cash flow from all 300,000 company ounces can flow toinitiative in order to expedite the expansion efforts. The TaparkoExpansion Project represents an extremely low hanging fruit.