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NEWS RELEASE TRANSMITTED BY CCNMatthews
FOR: HIGH RIVER GOLD MINES LTD.
TSX SYMBOL: HRG
MAY 12, 2004 - 08:37 ET
High River Gold 2003 Financial Results
TORONTO, ONTARIO--(CCNMatthews - May 12, 2004) - (TSX:HRG) - High
River Gold Mines Ltd. today reported consolidated financial
results for the year ending December 31, 2003. All figures are
in Canadian dollars unless otherwise stated.
Financial Highlights
For the year ended December 31, 2003, the Company reported a loss
of $17.1 million, or $0.16 per share, compared to a profit of
$1.7 million, or $0.02 per share, in 2002. A major contributing
factor to the 2003 loss was a non-operating loss of $14.2 million
resulting from the write-down of the Company's share of the
property, plant and equipment of the New Britannia Mine. In the
future, High River expects to recognize a non-operating gain
equal to the full amount (currently $30.3 million) of the
non-recourse, joint venture obligation carried on the Company's
balance sheet, once the disposition of its venture interest in
New Britannia is finalized.
The Company's 54.1%-owned Russian subsidiary, OJSC Buryatzoloto,
reported an after tax profit of $9.7 million for the year.
The Company's cash flow from operations, before working capital
adjustments, declined to $15.7 million compared to $19.4 million
in the previous year. Consolidated working capital at December
31, 2003 was $27.0 million compared to $14.4 million at December
31, 2002.
High River's consolidated financial statements are available on
SEDAR
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Three months ended Year ended
(Thousands of $ Cdn ------------------------------------------
except per share amounts Dec 31, Dec 31, Dec 31, Dec 31,
and # of shares) 2003 2002 2003 2002
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Revenue 20,756 25,664 96,415 83,492
Profit (loss) (17,444) (1,180) (17,127) 1,706
Profit (loss) per share (0.16) (0.02) (0.16) 0.02
Cash flow from
operations(a) 1,205 5,703 15,730 19,350
Weighted average
shares o/s - basic 105,969,738 82,269,000 104,393,203 72,961,105
- diluted 105,969,738 82,269,000 104,393,203 75,738,149
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(a) Before change in non-cash working capital
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Corporate Highlights
In Russia, High River operates through its controlled subsidiary,
OJSC Buryatzoloto, which owns a 100% interest in the Zun-Holba
and Irokinda gold mines. These mines produced approximately
154,000 ounces of gold in 2003. High River also has a 50% joint
venture interest in the New Britannia Mine located in Snow Lake,
Manitoba where Kinross Gold Corporation is the mine operator.
High River has "two development projects", the Berezitovy Gold
Project located in the Amur Oblast in southern Siberia, Russia,
and the Taparko Gold Project in Burkina Faso, West Africa. Both
of these projects are being developed as open pit mines with
conventional mills and are scheduled to start production during
the fourth quarter of 2005.
High River is close to completing bankable feasibility studies on
both projects. The final feasibility study and the environmental
study on the Taparko Project was presented to the Government of
Burkina Faso in October of 2003 and High River made a positive
development decision at that time. Discussions with various
banks for the debt portion of the Taparko project financing are
already well advanced. Discussions with banks that may be
interested in financing the Berezitovy project have just
commenced. The successful development of the Taparko and
Berezitovy projects would result in approximately 200,000 ounces
of annual gold production.
Consolidated Production Results
High River's attributable gold production for the year declined
by 15% to 118,182 ounces compared to 139,121 ounces in 2002. The
decreased production resulted from lower production at the New
Britannia Mine which is nearing the end of its mine life and is
suffering from a combination of a thinning orebody and lower
grades. Production at Buryatzoloto was equivalent to the previous
year. Total cash cost for the year was US $234 per ounce (cash
operating cost of US $217 per ounce) compared to US $180 per
ounce (cash operating cost of US $166 per ounce) in 2002. The
higher costs were primarily a result of increasing operating
costs at New Britannia and, to a lesser extent, a change in
mining method at the Zun-Holba Mine in Russia.
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Production Highlights New Britannia Mine Buryatzoloto Mines
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2003 2002 2003 2002
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High River Share (oz) 35,001 53,745 83,181 85,376
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Gold production (oz)(100%) 70,002 107,490 153,754 153,377
Total Cash Cost (US $/oz) 329 206 194 164
Tonnes Milled 606,630 751,146 485,245 461,975
Head Grade (g/t) 3.80 4.73 10.1 10.8
Recovery (%) 94.5 94.0 94.1 94.3
Realized Gold Price (US$/oz) 359 315 358 307
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Buryatzoloto Operating Results
Buryatzoloto continues to be one of Russia's leading gold
producers. For 2003, Buryatzoloto achieved its target and
produced 153,754 ounces (100%) of gold, from its two underground
mines and a small placer operation, at a total cash cost of US
$194 per ounce (cash operating cost of approximately US $171 per
ounce). The 2003 results exceeded last year's record production
of 153,377 ounces at a total cash cost of US $164 per ounce (cash
operating cost of US $143 per ounce). The increased cash cost
reflects the impact of a transition to shaft mining using a
cut-and-fill mining method at the Zun-Holba operation, combined
with a stronger Russian rouble. Buryatzoloto is essentially
unhedged and realized an average price of US $358 per ounce for
gold sales during the year.
Buryatzoloto's net earnings increased to US $6.8 million, or US
$1.00 per share, compared to US $5.5 million, or US $0.86 per
share, in 2002. Cash flow from operations, before working
capital adjustments, totalled US $15.2 million, versus US $12.7
million in the previous year. Buryatzoloto finished the year
with a net working capital position of US $7.2 million, compared
to US $2.8 million at the end of 2002.
New Britannia Operating Results
At the New Britannia Mine, gold production for the year was
70,002 ounces (100%) at a total cash cost of US $329 per ounce.
Gold production (100%) for 2002 was 107,490 ounces at a total
cash cost of US $ 206 per ounce. Lower than planned mill
throughput and lower realized head grades resulted in a 24%
shortfall from planned production which, combined with the
stronger Canadian dollar, resulted in a 29% higher than budgeted
total cash cost. New Britannia realized an average price of US
$359 per ounce for gold sales during the year.
Production at New Britannia is being negatively impacted by a
thinning and flattening of the orebody in the current area of
mining, contributing to fewer tonnes and a diluted grade. The
increased costs resulting from mining at deeper levels, a reduced
strike length of the ore zones and a flattening of the ore zones
adjacent to the McLeod Road Thrust Fault has caused Kinross (mine
operator) and High River to re-evaluate the mine and its future
operations. Kinross and High River recently announced an
agreement to suspend further underground development and mine the
developed ore over a four month period (press release May 10,
2004). The mine is expected to close at the end of the third
quarter of 2004.
Strategic Alliance Strategy
High River continues to focus its funds on the development of its
existing projects and on the acquisition of development-stage
projects on its own in West Africa or in conjunction with its
subsidiary, Buryatzoloto, in Russia. In order to extend its
influence in greenfields areas or other areas of exceptional
exploration merit and to create a pipeline of potential projects
for the future, High River has established preferred status
relationships and/or strategic alliances with well-managed
exploration companies.
Intrepid Minerals Corporation (TSXV:IAU), in which the Company
has a 10% equity interest, is currently drilling in Argentina and
El Salvador. One of Intrepid's most significant assets is its
exploration team, headed by Laurie Curtis. Mr. Curtis'
credibility, knowledge and international experience opens doors
to exciting new projects which, when advanced, could present
joint venture opportunities between Intrepid and High River.
Intrepid's Casposo Project in Argentina is well advanced having
an identified, relatively high grade, open-pit resource of
320,000 ounces of gold and 6.7 million ounces of silver in a
single zone with drilling underway on four similar targets along
strike. High River has a right of first offer should Intrepid
require an operating partner for this project. Intrepid has also
recently made an exciting new discovery in El Salvador.
Jilbey Gold Exploration Ltd. (TSXV:JLB), in which the Company
holds a 10% equity interest, has initiated a drill programme to
follow up significant gold assays from exploration on its permits
adjacent to the Company's Taparko property in Burkina Faso. High
River has formed a strategic alliance with Jilbey in Burkina Faso
to focus on gold exploration which could enhance or expand the
Company's development plans in that country. High River has
back-in and operatorship rights on discoveries within trucking
distance of the planned Taparko mill and a right of first refusal
on discoveries outside trucking distance. Jilbey recently
reported excellent drill results from the first 16 holes of an 80
hole programme on its newly acquired Bissa property.
Pelangio Mines Inc. (TSXV:PLG), in which the Company has a 19%
equity interest, is drilling their large Detour Lake gold camp.
The objective of this programme is to upgrade and extend the
current gold resource of 1.7 million ounces (1.2 million ounces
presently in the inferred category). High River is supervising
all the technical work for Pelangio and is acting as Pelangio's
technical advisor. Pelangio may enter into joint venture
agreements with third party companies, where appropriate, but
will control the development and mine operatorship of production
from any new discoveries. High River is well positioned to become
the development and production operator.
Non-Hedging Strategy
High River is unhedged except for a small forward sale for
delivery in 2004 of approximately 5,000 ounces by Buryatzoloto at
a price of US $401 per ounce. The Company remains very bullish on
the future gold price. To meet minimal requirements of the
financial institutions to fund development of new projects or
major expansions at existing operations, the Company would
consider the purchase of "put options" to provide protection
while maintaining full participation for shareholders from higher
gold prices.
High River Management
During the year High River strengthened its management team. A
highlight was the appointment of Daniel Vanin as Executive Vice
President and Chief Operating Officer for the Company. In
accepting this position, Daniel has assumed responsibility for
all of the Company's mining operations. Daniel's knowledge,
operating experience and people skills will be critical to High
River meeting its corporate objectives and the challenges of
growth as it develops new mines and expands activities.
John Green also joined High River as Controller to add his
considerable mining accounting experience to the finance team
headed by Chief Financial Officer, Steve Poad.
High River's success in Russia is largely attributable to
Buryatzoloto's management team headed by Valery Dmitriev.
Buryatzoloto will continue to play an important part in the
Company's focus on Russia through its role as mine operator of
the new Berezitovy development project and through its
involvement in joint acquisition and exploration initiatives.
Going Forward
High River's primary growth strategy continues to focus on Russia
and West Africa. The Company sees merit in further consolidating
the Russian assets and continues to evaluate opportunities to
increase its equity interest in Buryatzoloto. Increasing the
interest in Buryatzoloto will add critical mass and simplify the
Company's structure from the investor perspective. Buryatzoloto's
development and operating expertise enables High River to acquire
new, advanced or producing properties in Russia and nearby
Mongolia.
The Company intends to use the Taparko operation as a base to
expand its activities in Burkina Faso and throughout the rest of
West Africa.
In Canada, High River is hopeful that exploration success at New
Britannia and at Detour Lake could provide production
opportunities for the Company in the future.
The next few years should be exciting for High River shareholders
as the Company is uniquely positioned to expand its gold
production base and become an intermediate-sized gold producer
through its current development activities, new acquisitions and
exploration success.
Forward-Looking Statements
This report contains forward-looking statements based on current
expectations. These forward-looking statements entail various
risks and uncertainties that could cause actual results to differ
materially from those reflected. Risk and uncertainties about the
Company's business are more fully discussed in the Management's
Discussion and Analysis published in the Company's Annual Report
and Annual Information Form.
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FOR FURTHER INFORMATION PLEASE CONTACT:
High River Gold Mines Ltd.
David Mosher
President and CEO
(416) 947-1440
or
High River Gold Mines Ltd.
Don Whalen
Chairman
(416) 947-1440
(416) 360-0010 (FAX)
highrivergold@hrg.ca
www.hrg.ca
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