TORONTO, ONTARIO--(Marketwire - March 31, 2011) -
(All currency figures are in Canadian dollars unless otherwise noted)
High River Gold Mines Ltd. ("High River" or the "Company") (TSX:HRG) today reported its financial results and operational highlights for the year ended December 31, 2010. The Consolidated Financial Statements and related Notes along with the Management's Discussion and Analysis have been filed with SEDAR (www.sedar.com) and can be viewed on the Company's website at www.hrg.ca.
HIGHLIGHTS FOR 2010
Financial Results -- Net gold revenue of $435.6 million, an increase of 20% from 2009. -- Net income of $114.9 million (
.14 per share) compared to a net loss of $9.8 million ($-0.02 per share) in 2009. -- Cash flow from operations of $155.9 million, up from $125.5 million in 2009. -- Cash and cash equivalents increased to $154.0 million from $82.1 million in 2009. -- Working capital increased to $205.2 million from $95.8 million in 2009. -- Current and long term debt decreased to $25.0 million from $84.0 million in 2009. -- Following discussions between High River and Royal Gold Inc. ("Royal Gold"), which commenced in 2010 and concerned the results of the Completion Test at the Taparko mine (as such term was defined in the Amended and Restated Funding Agreement dated February 22, 2006 between Royal Gold and Somita (the "Taparko Funding Agreement"), Royal Gold agreed in January 2011 that the Completion Test had been satisfied and agreed to release its security interests in certain collateral (including certain equity investments in public companies) that it held pursuant to the Taparko Funding Agreement. Operations -- Total gold production (dore) decreased 2% to 329,971 ounces (2009 - 336,366 ounces (100%). Total cash cost per ounce increased 29% to US$ 653 (2009 - US$505 per ounce) (see the Non-GAAP Financial Measures table). -- The Zun-Holba and Irokinda Gold Mines produced 135,636 ounces (2009 - 149,382) (100%) at a total cash cost of US$ 628 per ounce. -- The Taparko-Bouroum Gold Mine produced 127,684 ounces (2009 - 99,536) (100%) at a total cash cost of US$ 500 per ounce. -- Gold production at Berezitovy was 66,651ounces (2009 - 87,488 ounces) (100%), at a total cash cost of US$ 995 per ounce. -- At the Bissa Gold Project, the technical report describing the results of the feasibility study was published in Q3 2010. ---------------------------------------------------------------------------- Production (100%) Cash Operating Costs Total Cash Costs Oz US$/Oz US$/Oz ---------------------------------------------------------------------------- Buryatzoloto 135,636 553 628 ---------------------------------------------------------------------------- Berezitovy 66,651 918 995 ---------------------------------------------------------------------------- Somita 127,684 462 500 ---------------------------------------------------------------------------- Total 329,971 592 653 ----------------------------------------------------------------------------
2010 total operating and non-operating cash costs reached US $725 per ounce. Non-operating cash costs per ounce mainly represent corporate administration, exploration, and other expenses such as realized foreign exchange losses.
-- Zun-Holba and Irokinda Underground Gold Mines: -- Production close to full capacity with no material shortcomings -- Berezitovy Open-pit Gold Mine: -- Production levels continue to be constrained by technical problems; -- Successful installation of the second ball mill -- Taparko-Bouroum Open-pit Gold Mine: -- Production increased compared to 2009 mainly because of increased throughput in the mill Corporate -- Igor Klimanov resigned as Chief Executive Officer on October 4, 2010. -- A subsidiary of Severstal acquired 19,000,000 common shares of the Company in October 2010. Following the transaction, Severstal has beneficial ownership and control over 610,362,172 Common Shares, representing approximately 72.64% of the issued and outstanding Common Shares of the Company. -- Konstantin Sobolevskiy was appointed as Chief Executive Officer effective October 28, 2010. -- The Company paid off the principal amount of the Royal Gold loan. The Company has started to pay the tail royalty to Royal Gold, which amounts to 2% of the revenue generated by Somita. -- Andrei Maslov resigned as a Director and Chief Financial Officer of the Company effective December 20, 2010. Yury Lopukhin was appointed as the new Chief Financial Officer and Director on January 19, 2011. -- On January 24, 2011, the Company's shareholders approved the change of the Company's governing jurisdiction from the Canadian federal jurisdiction under the Canada Business Corporations Act to the Yukon Territory under the Business Corporations Act (Yukon). The Company received its Letter of Satisfaction dated January 25, 2011. Industry Canada issued the Certificate of Discontinuance effective February 2, 2011. The effect of these filings was to transfer the governing jurisdiction of the Company from the Canadian federal jurisdiction to the Yukon Territory. In connection with the continuance, the shareholders also approved a new general by-law. The Articles of Continuance and the new by-law are available on SEDAR. DISCUSSION OF FINANCIAL RESULTS Selected Financial Results (in thousands of Canadian dollars except per share amounts) ----------------------------------------- 2010 2009 2008 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Gold revenue $ 435,615 $ 363,259 $ 180,788 Net income (loss) 114,852 (9,764) (57,447) Net income (loss) per share (basic) 0.14 (0.02) (0.16) Cash provided by (used in) operating activities 155,906 125,496 25,605 Total Assets 812,332 706,962 753,109 Loans and interest payable 25,025 84,031 188,145 Weighted average number of shares outstanding (basic) 816,437,980 634,009,385 354,923,765 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
The Company's consolidated net gold revenues for 2010 increased to $435.6 million from $363.3 million in 2009. Higher production by Taparko increased the number of ounces sold. The average gold price realized on sales was US$1,238 per ounce during 2010, up from US$976 in 2009 and up from US$862 in 2008.
The Company had a net income of $114.9 million compared to a net loss of $9.8 million in 2009 and a net loss of $57.4 million in 2008.
Cash flow from operations of $155.9 million increased from $125.5 million in 2009. Cash flow from operations increased from last year largely due to the higher gold revenue as discussed above.
OVERVIEW OF OPERATIONS
Underground Mines
The Zun-Holba and Irokinda underground gold mines located in Russia and operated by Buryatzoloto reported no material changes or shortcomings in their operations during the year and continue to operate according to plan. Buryatzoloto continues to be profitable and achieved its production objectives for 2010 with 135,636 ounces (100%) of gold produced at an estimated total cash cost of US$628 per ounce as compared to 149,382 ounces at US$494 per ounce in 2009. The increase of cash costs is due mainly to the decrease in ore grade which leads to higher volumes of mining and processing necessary to get the same output and inflation processes.
Replacing reserves at these mines is a priority of local management. An approximately $17 million budget for mine-site exploration is proposed for 2011 to replace mined-out reserves and extend the mine life at Irokinda and Zun-Holba.
Open Pit Mines
Berezitovy Mine (Russia)
Berezitovy continued to underperform. Production (100%) at Berezitovy in 2010 was 66,651 ounces of gold, compared to 87,448 ounces produced in 2009. The second ball mill was successfully installed and the second crushing unit was ordered in 2010. However, due to mechanical problems, the plant availability remained below planned level in 2010.
Taparko-Bouroum Mine (Burkina Faso)
In 2010, gold poured at Taparko (100%) totaled 127,684 ounces, up from the 2009 level of 99,536 ounces. The production exceeded the planned level in 2010 mainly because of increased throughput in the mill.
Advanced Exploration Projects
Bissa Gold Project
In 2010 the Company finalized the work related to a feasibility study of the Bissa project and published technical report on the Feasibility Study. The Company applied for the mining license (which may be granted in 2011), and prepared for construction of the mine. In 2011, new reserve and resource estimates for Bissa project were released.
At the same time, High River continues exploration at Bissa. Approximately US$5 million is recommended for additional exploration at Bissa.
Other Exploration Properties
Exploration work continued on other areas within the Bissa Group Permits and on other exploration concessions in Burkina Faso. The first time resource estimates for some exploration properties in Burkina Faso (Yeou, Ankouma, Bouly, Gougre, Zinigma) were announced in 2011.
About High River
High River is an unhedged gold company with interests in producing mines and advanced exploration projects in Russia and Burkina Faso. Two underground mines, Zun-Holba and Irokinda, are situated in the Lake Baikal region of Russia. Two open pit gold mines, Berezitovy in Russia and Taparko-Bouroum in Burkina Faso, are also in production. Finally, High River has two advanced exploration projects with NI 43-101 compliant resource estimates, the Bissa gold project in Burkina Faso and 50% interest in the Prognoz silver project in Russia.
FORWARD-LOOKING INFORMATION
This release and subsequent oral statements made by and on behalf of the Company may contain forward-looking statements. Wherever possible, words such as "intends", "expects", "scheduled", "estimates", "anticipates", "believes", and similar expressions or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, have been used to identify these forward-looking statements. Although the forward-looking statements contained in this release reflect management's current beliefs based upon information currently available to management and based upon what management believes to be reasonable assumptions, High River cannot be certain that actual results will be consistent with these forward-looking statements. A number of factors could cause events and achievements to differ materially from the results expressed or implied in the forward-looking statements. These factors should be considered carefully and prospective investors should not place undue reliance on the forward-looking statements. Forward-looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause High River's actual results, event, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Although High River has attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not to be anticipated, estimated or intended, including those risk factors discussed in the Company's 2009 Annual Information Form. There can be no assurance that the forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, prospective investors should not place undue reliance on forward-looking statements. Any forward-looking statements are made as of the date of this release, and High River assumes no obligation to update or revise them to reflect new events or circumstances, unless otherwise required by law.
High River Gold Mines Ltd. Consolidated Balance Sheets (Expressed in thousands of Canadian dollars) As at December 31 2010 2009 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 153,964 $ 82,061 Restricted cash 1,285 562 Accounts receivable 13,639 18,115 Inventory 97,663 81,090 Other assets 15,589 12,382 ---------------------------------------------------------------------------- 282,140 194,210 Investments 109,633 64,810 Property, plant and equipment 291,130 340,606 Exploration properties and deferred exploration 119,847 105,061 Other assets 7,986 697 Future income taxes 1,596 1,578 ---------------------------------------------------------------------------- Total Assets $ 812,332 $ 706,962 ---------------------------------------------------------------------------- Liabilities Current Liabilities Accounts payable $ 53,692 $ 39,726 Loans and interest payable 23,293 58,666 ---------------------------------------------------------------------------- 76,985 98,392 Loans and interest payable 1,732 25,365 Reclamation and other non-current obligations 17,839 14,208 Non-hedge derivatives - 13,684 Future income taxes 24,291 20,567 ---------------------------------------------------------------------------- 120,847 172,216 Non-controlling interests 34,330 21,922 ---------------------------------------------------------------------------- Total Liabilities 155,177 194,138 ---------------------------------------------------------------------------- Shareholders' Equity Share capital 640,157 610,770 Warrants - 13,265 Contributed surplus 24,538 15,907 Debenture conversion option 538 538 Deficit (6,949) (121,801) Accumulated other comprehensive income (1,129) (5,855) ---------------------------------------------------------------------------- Total Shareholders' Equity 657,155 512,824 ---------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $ 812,332 $ 706,962 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- High River Gold Mines Ltd. Consolidated Statements of Operations (Expressed in thousands of Canadian dollars except per share figures) For the years ended December 31, 2010 2009 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Revenue Gold $ 435,615 $ 363,259 Silver 5,154 6,090 ---------------------------------------------------------------------------- 440,769 369,349 ---------------------------------------------------------------------------- Expenses Mining costs 193,272 183,433 Mine administrative costs 11,166 9,717 Mine amortization and depletion 60,682 58,716 Asset retirement obligation accretion 1,191 853 ---------------------------------------------------------------------------- 266,311 252,719 ---------------------------------------------------------------------------- Income before the undernoted 174,458 116,630 Administrative costs (4,469) (13,245) Amortization (6) (46) Exploration expense (15,518) (4,330) Financing costs and investment income, net 6,032 (21,699) Other expenses (12,000) (80,026) ---------------------------------------------------------------------------- Income (loss) before tax and non-controlling interest 148,497 (2,716) Income tax expense (21,237) (3,593) ---------------------------------------------------------------------------- Income (loss) before non-controlling interest 127,260 (6,309) Non-controlling interests in earnings of subsidiary (12,408) (3,455) ---------------------------------------------------------------------------- Net income (loss) for the year 114,852 $ (9,764) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Net income (loss) per share - basic and diluted $ 0.14 $ (0.02) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- High River Gold Mines Ltd. Consolidated Statements of Cash Flows (Expressed in thousands of Canadian dollars) For the years ended December 31, 2010 2009 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating Activities Net income (loss) for the year $ 114,852 $ (9,764) Non-cash items: Non-controlling interest in earnings of subsidiary 12,408 3,455 Mining costs (25,081) (4,482) Amortization and depletion 60,688 58,762 Asset retirement obligation accretion 1,191 853 Financial instrument accretion 392 835 Fair value adjustments to financial instruments (13,684) 1,917 Stock based compensation 74 223 Write down of exploration 628 70,764 Loss on disposal of assets 1,121 1,977 Future income taxes (1,929) (7,794) Foreign exchange loss 5,361 2,992 Other 1,223 2,278 ---------------------------------------------------------------------------- Subtotal 157,244 122,016 Change in non-cash working capital (1,338) 3,480 ---------------------------------------------------------------------------- Net cash provided by operating activities 155,906 125,496 ---------------------------------------------------------------------------- Investing Activities Property, plant and equipment (40,740) (25,798) Proceeds on disposal 1,641 1,756 Exploration properties and deferred exploration (17,110) (8,484) Allocation of restricted cash (813) (562) Purchase/sale of other long-term assets (7,810) 168 ---------------------------------------------------------------------------- Net cash used in investing activities (64,832) (32,920) ---------------------------------------------------------------------------- Financing Activities Loans received 10,154 12,331 Loans repaid (46,528) (106,781) Common shares issued 26,249 67,511 ---------------------------------------------------------------------------- Net cash used in financing activities (10,125) (26,939) ---------------------------------------------------------------------------- Effect of exchange rate changes on cash held in foreign currencies (9,046) (2,699) ---------------------------------------------------------------------------- Increase in cash and cash equivalents during the year 71,903 62,938 Cash and cash equivalents - Beginning of year 82,061 19,123 ---------------------------------------------------------------------------- Cash and cash equivalents - End of year $ 153,964 $ 82,061 ---------------------------- ---------------------------- ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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