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TORONTO, ONTARIO--(CCNMatthews - Aug. 15, 2006) -
(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 three and six month periods ended June 30, 2006. 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 the Second Quarter of 2006
Financial Results
- Revenue for Q2/06 was down 8% to $18.3 million (from $19.9 million last year) due to an increase in unsold gold inventory. Refined gold in inventory as at June 30, 2006 stood at 19,391 ounces. The estimated unrealized revenue represented by that inventory is $13.3 million.
- Revenue for the 6 months ending June 30, 2006 was up 3% from the same period last year.
- Net loss for Q2/06 was $626,000 ($0.00/share), compared to a net loss of $539,000 in Q2/05. For the 6 months ending June 30, 2006, the net loss was $400,000 versus a net loss of $1.5 million for the same period last year. The estimated unrealized net profit represented by the unsold gold inventory of 19,391 ounces as at June 30, 2006 is $4.1 million.
- Attributable gold production was 33,070 ounces for the quarter at a direct mining cost of US $257 per ounce, versus 31,525 ounces at a direct mining cost of US $249 per ounce last year.
- Attributable gold production for the 6 months ending June 30, 2006 increased marginally to 62,763 ounces, from 62,066 ounces last year. Direct mining costs increased from US $257 per ounce (total cash cost of US $362 per ounce) to US $248 per ounce (total cash cost of US $265 per ounce) over the same period.
Corporate Achievements
- Significantly increased independent resource estimate at Bissa, based on latest drill results.
- Acquired 50% and operatorship of the world-class Prognoz Silver Project with Russian classified historical reserves and resources of 194 million ounces (non 43-101 compliant) grading in excess of 800 grams per tonne silver.
- US $40 million project financing secured for the Berezitovy Project.
- Excellent progress achieved at the Company's two mines under construction: Berezitovy and Taparko-Bouroum.
- High River remains unhedged.
Discussion of Financial Results
Selected Financial Results
(in thousands of Three Months Ending Six Months Ending
Canadian dollars June 30, June 30,
except per share 2006 2005 2006 2005
amounts)
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Gold revenue $ 18,298 $ 19,914 $ 40,821 $39,521
Net (loss) income (1) (626) (539) (400) (1,469)
Net (loss) income
per share (basic) (0.00) (0.00) (0.00) (0.01)
Cash flow from
operations (2) 4,040 3,365 9,060 7,874
Weighted average
number of shares
outstanding
(basic) 233,183,289 171,942,767 228,179,910 170,978,687
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(1) The net loss in the second quarter of 2006 includes non-cash accounting adjustments of $0.8 million (Q2 2005 - $0.7 million).
(2) Before changes in non-cash working capital.
Gold revenue for the quarter was lower than last year due to lower sales as reflected by the increase in unsold gold inventory. Partially offsetting this were positive effects from a higher realized gold price (US $601 per ounce versus US $425 in Q2/05) and higher attributable gold production (33,070 ounces versus 31,525 ounces last year).
The net loss for the quarter was a result of lower revenue as above, higher operating costs due to inflation in fuel, materials and labour costs, and a weakening of the US dollar with respect to the Russian rouble.
Gold revenue was up for the first half of 2006, compared to H1/05, as the positive impact of a higher realized gold price more than offset the negative impact of the lower number of ounces sold, and the weakening US dollar.
The net loss for the 6 months ending June 30, 2006 was lower than last year largely due to the higher revenue noted above.
Gold production for the quarter was up 5% versus Q2/05 reflecting lower mill throughput last year at the Irokinda mine due to a maintenance shut-down.
For the 6 months ending June 30, 2006, gold production increased due to higher mill throughput at the Zun-Holba mine.
OVERVIEW OF OPERATIONS
Operating Mines
Zun Holba (Russia)
Zun Holba's Q2/06 production declined by 4% to 17,763 ounces from 18,566 last year due to lower mill throughput this quarter. Direct mining costs increased to US $292 per ounce (total cash cost of US $411) from US $225 per ounce (total cash cost of US $297 per ounce) largely due to inflation in materials and energy costs, the strengthening Russian rouble, and the added cost of retaining skilled employees.
Irokinda (Russia)
Increased production levels at the Irokinda mine (20,850 ounces this quarter versus 18,003 last year) were due to the lower mill throughput in Q2/05 resulting from a maintenance shutdown. Direct mining costs declined to US $212 per ounce (total cash cost of US $316 per ounce) from US $219 per ounce (total cash cost of US $286 per ounce) last year.
Mines under Construction
Berezitovy (Russia)
Construction is advancing well with production start-up expected in the second quarter 2007. Construction activities were mainly concentrated on the crushing and grinding foundations and enclosures, the tailings pad, the crushed ore stockpile, and pre-stripping of the open pit. In May, an agreement was finalized with Nomos Bank for an additional US $20 million of project financing, and the European Bank for Reconstruction and Development ("EBRD") advised approval of a US $20 million project financing loan plus a US $5 million stand-by tranche. Project expenditures to June 30, 2006 totalled approximately US $62.9 million.
Taparko-Bouroum (Burkina Faso)
Construction at Taparko is also advancing well, and production start-up is expected for the first quarter 2007. Construction activities during the quarter included tailings pond excavation and liner installation, pre-stripping of the 3/5 pit, construction of the run-of-mine pad, tower crane erection, and construction of the leach tanks. Expenditures on the project to June 30, 2006 were approximately US $51.6 million.
Advanced Exploration Projects
Bissa Project
An independent resource estimate (NI 43-101 compliant) on the Bissa project, prepared by SRK, was received in May 2006. Measured and Indicated resources increased from 147,250 ounces to 662,250 ounces, while Inferred resources grew from 9,970 ounces to 679,470 ounces. The database for the resource estimate was based on 81 diamond drill holes, 224 reverse circulation holes and 36 trenches. A planned exploration drilling programme, to begin in the fourth quarter of 2006, is to test the southwest extension of mineralization along the Sabce deformation corridor, as well as other high priority targets (including Bouly, Liliga, Rofo, Lessa and Gougre) in the immediate vicinity.
Prognoz Project
High River's 84.6% - owned Russian subsidiary, OJSC Buryatzoloto, entered into an agreement to purchase a 50% interest in the high grade Prognoz Silver Project, located in the Republic of Yakutia, approximately 450 kilometres north of the capital city of Yakutsk. Significant previous work on this project by the Russian State Geological Department consisted of 89 drill holes and 317 trenches. Russian classified historical reserves and resources (non 43-101 compliant) total 194 million ounces of silver grading in excess of 800 grams per tonne silver. An aggressive three year exploration programme is already underway, with the initial aim of confirming, upgrading and expanding the known Russian classified reserves and resources in the two identified main mineralized zones.
INVESTOR RELATIONS
High River Gold Mines Ltd. is pleased to announce the appointment of Dan Hrushewsky as Vice-President Investor Relations. Dan comes to High River with extensive experience in marketing, financing, valuation and risk analysis of mining companies and projects, gained through previous investor relations, corporate development, and investment analysis roles in the mining and mining finance sectors.
FORWARD LOOKING STATEMENTS
This press release 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 in the Annual Information Form.
HIGH RIVER GOLD MINES LTD.
CONSOLIDATED BALANCE SHEETS
(Thousands of Canadian dollars)
June 30, December 31,
(unaudited) 2006 2005
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Assets
Current Assets
Cash and cash equivalents $7,538 $ 8,524
Restricted cash 24,689 2,087
Accounts receivable 6,313 4,587
Inventory 20,032 13,688
Other assets 3,697 980
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62,269 29,866
Investments 10,389 5,950
Property, plant and equipment 67,868 71,584
Exploration properties and deferred
exploration 62,323 61,292
Development properties 187,595 134,202
Other assets 877 1,304
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Total Assets $ 391,321 $ 304,198
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 13,008 $ 13,163
Loans and interest payable 17,149 23,532
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30,157 36,695
Loans and interest payable 72,937 8,316
Reclamation 1,386 1,378
Venture obligation 32,396 31,422
Future income taxes 11,327 10,966
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148,203 88,777
Non-controlling interest 15,554 14,955
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Total Liabilities 163,757 103,732
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Shareholders' Equity
Share capital 299,918 276,575
Warrants 11,786 11,827
Contributed surplus 8,754 7,721
Cumulative translation adjustment (19,887) (23,050)
Deficit (73,007) (72,607)
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227,564 200,466
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Total Liabilities and Shareholders'
Equity $ 391,321 $ 304,198
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HIGH RIVER GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Canadian dollars, except for income per share and
number of shares)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
(unaudited) 2006 2005 2006 2005
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Revenue
Gold $18,298 $ 19,914 $ 40,821 $39,521
Other 895 1,045 986 1,385
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19,193 20,959 41,807 40,906
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Expenditures
Mining costs 11,400 13,739 26,788 27,175
Amortization and
depletion 3,383 3,486 6,283 5,997
Exploration 202 1,154 267 1,217
Administrative costs 1,994 858 2,761 1,788
Financing costs 711 574 1,112 889
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17,690 19,811 37,211 37,066
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Income before the
under noted 1,503 1,148 4,596 3,840
Financing costs on
venture obligation (512) (403) (974) (790)
Equity loss from
associated company -- (78) -- (78)
Stock-based
compensation (390) (370) (1,392) (742)
Gain (loss) on
sale
of assets 303 (147) 296 (147)
Gain on sale of
investments -- 539 -- 539
Write-down of
carrying value -- -- -- (860)
Unrealized
derivatives loss -- (195) -- (784)
Non-controlling
interest in
earnings
of subsidiary (240) (95) (598) (399)
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664 399 1,928 579
Income tax expense 1,290 938 2,328 2,048
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Net loss for the
period $ (626) $ (539) $ (400) $ (1,469)
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Net loss per share
-- basic and
diluted $ (0.00) $ (0.00) $(0.00) $ (0.01)
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CONSOLIDATED
STATEMENTS OF
DEFICIT
(Thousands of Three Three Six Six
Canadian dollars) Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
(unaudited) 2006 2005 2006 2005
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Deficit --
Beginning
of period $ (72,381) $ (72,493) $ (72,607) $ (71,563)
Net loss for the
period (626) (539) (400) (1,469)
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Deficit -- End of
period $ (73,007) $ (73,032) $ (73,007) $ (73,032)
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HIGH RIVER GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Canadian dollars)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
(unaudited) 2006 2005 2006 2005
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Cash provided by
(used in):
Operating
activities
Net income (loss)
for the period $ (626) $ (539) $ (400) $ (1,469)
Non-cash items:
Non-controlling
interest in
earnings of
subsidiary 240 95 598 399
Equity loss from
associated
company -- 78 -- 78
Financing cost on
venture obligation 512 403 974 790
Amortization and
depletion 3,383 3,486 6,283 5,997
Write-down of
carrying value -- -- -- 860
Unrealized
derivative loss -- 195 -- 784
(Gain) on disposal
of assets (303) (99) (296) --
(Gain) on sale of
investments -- (539) -- (539)
Stock-based
compensation 390 370 1,392 742
Future income taxes 457 264 522 232
Other (13) (349) (13) --
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Subtotal 4,040 3,365 9,060 7,874
Change in non-cash
working capital (12,944) 434 (15,132) (5,201)
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Total operating (8,904) 3,799 (6,072) 2,673
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Investing
Activities
Property, plant and
equipment (2,507) (2,240) (5,081) (3,940)
Exploration
properties
and deferred
exploration (2,401) (7,245) (3,533) (7,667)
Development
properties (24,485) (19,765) (44,735) (37,404)
Decrease (increase)
in investments (259) 1,480 (259) 1,350
Proceeds on asset
disposal 361 -- 361 --
Allocation to
restricted cash (24,725) 143 (22,683) 2
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Total investing (54,016) (27,627) (75,930) (47,659)
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Financing
Activities
Dividends paid by
subsidiary to
non-controlling
interest (2) (7) (3) (79)
Increase in loans
and interest
payable 44,235 5,497 58,146 6,943
Issuance of common
shares 3,208 60 23,026 529
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Total financing 47,441 5,550 81,169 7,393
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Effect of exchange
rate changes on
cash held in
foreign
currencies (255) 425 (153) 607
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Increase (decrease)
in cash
and cash
equivalents
during the period (15,734) (17,853) (986) (36,986)
Cash and cash
equivalents
Beginning of
period 23,272 21,576 8,524 40,709
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Cash and cash
equivalents
End of period $ 7,538 $ 3,723 $ 7,538 $ 3,723
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FOR FURTHER INFORMATION PLEASE CONTACT:
High River Gold Mines Ltd.
Dan Hrushewsky
(416) 947-1440
(416) 360-0010 (FAX)
info@hrg.ca
www.hrg.ca
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