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TORONTO, ONTARIO--(CCNMatthews - May 15, 2007) -
(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 month period ended March 31, 2007. 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 FIRST QUARTER OF 2007
Financial Results
- Net Income for Q1/07 of $0.3 million ($0.00 per share)
- Attributable gold production of 29,272 ounces for the quarter at a direct mining cost of US $357 per ounce (total cash cost of US $429 per ounce)
- Cash flow from operations before working capital changes of $8.3 million
Operations/Corporate
- Taparko-Bouroum Gold Mine:
construction is in final stages with first gold pour on schedule for June.
- Berezitovy Gold Mine:
construction is well advanced with first gold pour on schedule for August.
- Bissa Advanced Exploration Project:
the high grade IO zone was extended and a new zone of gold mineralization was discovered at Gougre.
- Prognoz Advanced Exploration Project:
drilling continues, with a NI 43-101 resource estimate planned for the third quarter.
- Strategic Review:
High River's Strategic Review Committee retained an independent advisor to provide analysis and recommendations on unlocking shareholder value.
DISCUSSION OF FINANCIAL RESULTS
Selected Financial Results
(in thousands of Canadian dollars Three Months Ending
except per share amounts) March 31,
2007 2006
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Gold revenue $ 30,644 $22,523
Net income(1) 266 226
Net income per share (basic) 0.00 0.00
Cash flow from operations(2) 8,257 5,020
Weighted average number of
shares outstanding (basic) 250,038,083 223,176,530
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(1) The net income in the first quarter of 2007 includes non-cash
accounting adjustments of $4.2 million (Q1 2006 - $1.8 million).
(2) Before changes in non-cash working capital.
Gold revenue for the quarter was up 36% to $30.6 million (from $22.5 million last year) due to higher gold prices and ounces sold. The average gold price realized on sales was US $651 per ounce during Q1/07, up from US $533 per ounce last year. Ounces sold increased by 10%, or 3,634 ounces, due largely to a corresponding decrease in refined gold in inventory.
Net Income was largely unchanged, compared to last year, as higher revenues were offset by higher operating costs in Russia related to inflation in materials and energy costs, a stronger Rouble, increases in labour wages due to indexation and the implementation of employee bonus initiatives designed to retain skilled employees, as well as the impact of fair value adjustments to financial instruments required by the adoption of CICA section 3855 - Financial Instruments - Recognition and Measurement.
Attributable gold production was 29,272 ounces for the quarter at a direct mining cost of US $357 per ounce (total cash cost of US $429 per ounce), compared to 29,693 ounces at a direct mining cost of US $304 per ounce (total cash cost of US $368 per ounce) a year ago.
OVERVIEW OF OPERATIONS
Operating Mines
Zun Holba Mine (Russia)
Zun Holba's first quarter production of 17,207 ounces remained virtually unchanged from last year. Direct mining costs for the quarter increased to US $375 per ounce from US $328 last year.
Irokinda Mine (Russia)
Production at the Irokinda Mine totaled 17,255 ounces during the quarter, down slightly from 17,762 last year. Direct mining costs were US $338 per ounce compared to US $298 per ounce last year.
Mines under Construction
Taparko-Bouroum Mine (Burkina Faso)
Construction is in its final stages, and the project is scheduled for a first gold pour in June. All equipment has been installed. The bulk of the remaining work consists of piping and electrical connections, and testing of component machinery. Cold commissioning has begun, where components are run on a no load basis. Mining has been underway for some time, with 3 months of ore currently stockpiled.
Berezitovy Mine (Amur Oblast, Russia)
Construction continues in preparation for an August gold pour. Installation has been largely completed for the primary crusher, conveyor system, SAG and ball mills, and the leach and carbon column tanks, with minor component installation together with piping and electrical connections for these systems remaining.
Advanced Exploration Projects
Bissa Project
A US $10 million drill programme (US$ 2 million per quarter) began in November 2006 to further define and extend the high grade "IO" zone within the Bissa Resource Area, and to further explore 12 drill target areas along and adjacent to the Sabce Deformation Corridor, previously identified through systematic surface exploration work and compilation/reinterpretation of historical exploration data.
On the high grade "IO" zone, drill results received during the quarter extended the high grade zone down dip and along strike, and confirmed a new gold zone down plunge.
Drilling on the Loffo and Lessa drill target areas, 2 of the 12 drill target areas, identified 3 new drill targets for further follow up work.
Subsequent to the quarter, High River reported exciting results from diamond drilling on the Gougre target area, one of the 12 drill target areas, only 10 kilometres from the Bissa Resource Area which contains the current 1.3 million ounce resource. The Company believes that the Gougre Main Zone represents a potentially important new zone of gold mineralization which has the potential to add to the existing resources on the Bissa Project. Nine diamond drill holes intersected mineralization within an alteration zone over a 300 metre strike. This zone is open in both directions along strike and at depth. (See April 17, 2007 news release.)
Prognoz Project
Early in 2006, High River's Russian subsidiary, OJSC Buryatzoloto, acquired a 50% interest in and operatorship of the world-class Prognoz Silver Project. Prognoz has historic Russian classified (non NI 43-101 compliant and must not be relied upon) reserves and resources containing 194 million ounces grading 820 g/t on average (see September 25, 2006 news release), making it one of the largest and highest grade undeveloped silver projects in the world.
During the first quarter, High River reported results from an additional 14 diamond drill holes of the 85 holes drilled during 2006. Results confirmed historical grades, widths, and vertical and horizontal continuity of mineralization. Drilling during the quarter began January 1st with 3 drills. An additional 2 will be operational by mid-year. As well, four declines were driven and a 17 tonne bulk sample was extracted, split into 2 portions, and sent to 2 laboratories for metallurgical testing. The objective this year is to convert a large part of the existing Russian classified reserves and resources to NI 43-101 compliant resources, and to begin scoping studies which would include the metallurgical testing currently underway.
Strategic Review
In December 2006, High River announced that the Strategic Review Committee of The Board of Directors had been mandated to assess the potential alternatives available to unlock shareholder value. The Board felt that the assets of the Company were not being properly valued in the marketplace.
During the quarter, the Strategic Review Committee retained an advisor to provide an independent assessment of the value of the Company's individual assets, and to evaluate potential strategic alternatives for enhancing shareholder value. The result of this analysis is expected to be presented to the Strategic Review Committee by the end of May. At that time, the Strategic Review Committee will review the findings and assess further courses of action for presentation to the Board.
About High River
High River is currently constructing two open-pit gold mines which are scheduled to commence production in 2007, the Taparko-Bouroum Project in Burkina Faso (June) and the Berezitovy Project in Russia (August). Annual gold production from Taparko-Bouroum is planned at 100,000 ounces for the first 12 months increasing to over 140,000 ounces in the third year of operation, and annual production from Berezitovy is planned to exceed 100,000 ounces. Combined with gold production from High River's 85%-owned Russian subsidiary, OJSC Buryatzoloto, High River's attributable gold production is expected to exceed 200,000 ounces in 2007, and 300,000 ounces in 2008. In addition, the Company has two advanced exploration projects, the Bissa Gold Project in Burkina Faso and the world-class Prognoz Silver Project in Russia. These projects are expected to significantly add to the Company's production profile in the future.
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)
March 31, December 31,
(unaudited) 2007 2006
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Assets
Current Assets
Cash and cash equivalents $ 7,643 $ 35,616
Restricted cash 73 73
Accounts receivable 18,577 11,055
Inventory 23,769 20,223
Other assets 630 1,231
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50,692 68,198
Available-for-sale securities 20,093 9,854
Property, plant and equipment 72,915 71,110
Exploration properties and deferred exploration 112,341 107,825
Development properties 282,349 259,846
Other assets 514 599
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Total Assets $ 538,904 $ 517,432
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 25,655 $ 24,207
Loans and interest payable 33,254 27,396
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58,909 51,603
Loans and interest payable 139,332 137,895
Reclamation 1,527 1,506
Future income taxes 21,030 17,776
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220,798 208,780
Non-controlling interest 17,313 16,341
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Total Liabilities 238,111 225,121
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Shareholders' Equity
Share capital 339,516 338,371
Warrants 6,290 6,294
Contributed surplus 11,635 11,363
Debenture conversion option 538 538
Deficit (43,920) (41,562)
Accumulated other comprehensive income/(loss) (13,266) (22,693)
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300,793 292,311
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Total Liabilities and Shareholders' Equity $ 538,904 $ 517,432
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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
Months Months
Ended Ended
March 31, March 31,
(unaudited) 2007 2006
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Revenue
Gold $ 30,644 $ 22,523
Other 1,038 91
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31,682 22,614
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Expenditures
Mining costs 18,357 15,419
Amortization and depletion 3,814 2,869
Exploration 118 65
Administrative costs 1,870 767
Financing costs 1,170 401
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25,329 19,521
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Income before the under noted 6,353 3,093
Financing costs on venture obligation - (462)
Stock-based compensation (731) (1,002)
Financial instrument accretion (2,452) -
Loss on sale of assets (11) (7)
Write-down of carrying value (9) -
Non-controlling interest in earnings of subsidiary (972) (358)
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2,178 1,264
Income tax expense 1,912 1,038
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Net income for the period $ 266 $ 226
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Net income per share
- basic $ 0.00 $ 0.00
- diluted $ 0.00 $ 0.00
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HIGH RIVER GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Canadian dollars)
Three Three
Months Months
Ended Ended
March 31, March 31,
(unaudited) 2007 2006
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Cash provided by (used in):
Operating activities
Net income for the period $ 266 $ 226
Non-cash items:
Non-controlling interest in earnings of subsidiary 972 358
Financing cost on venture obligation - 462
Amortization and depletion 3,814 2,869
Reclamation 35 31
Debenture accretion 85 -
Change in fair value of derivative financial
instruments 2,367 -
Write-down of carrying value 9 -
Loss on disposal of assets 11 7
Stock-based compensation 731 1,002
Future income taxes (30) 65
Other (3) -
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Subtotal 8,257 5,020
Change in non-cash working capital (8,666) (2,188)
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Total operating (409) 2,832
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Investing Activities
Property, plant and equipment (4,202) (2,574)
Proceeds on disposal (5) -
Exploration properties and deferred exploration (4,971) (1,132)
Development properties (22,225) (20,250)
Allocation to restricted cash - 2,042
Increase in other long-term assets (542) -
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Total investing (31,945) (21,914)
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Financing Activities
Loans received 10,580 23,427
Loans and interest paid (6,872) (9,516)
Dividends paid by subsidiary to
non-controlling interest - (1)
Issuance of common shares 683 19,818
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Total financing 4,391 33,728
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Effect of exchange rate changes on cash held
in foreign currencies (10) 102
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Increase (decrease) in cash and cash equivalents
during the period (27,973) 14,748
Cash and cash equivalents - Beginning of period 35,616 8,524
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Cash and cash equivalents - End of period $ 7,643 $ 23,272
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HIGH RIVER GOLD MINES LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Thousands of Canadian dollars)
Three Three
Months Months
Ended Ended
March 31, March 31,
(unaudited) 2007 2006
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Share capital
Balance at beginning of period $ 338,371 $ 276,575
Issue of common shares 1,145 20,148
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Balance at end of period 339,516 296,723
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Warrants
Balance at beginning of period 6,294 11,827
Issue of warrants - 652
Exercise of warrants (4) -
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Balance at end of period 6,290 12,479
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Contributed surplus
Balance at beginning of period 11,363 7,721
Stock option expense 4 -
Stock options exercised 268 816
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Balance at end of period 11,635 8,537
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Debenture conversion option 538 -
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Deficit
Balance at beginning of period (41,562) (72,607)
Transitional adjustment on adoption of new
accounting policies (2,624) -
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Balance at beginning of period as restated (44,186) (72,607)
Net income for the period 266 226
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Balance at end of period (43,920) (72,381)
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Accumulated other comprehensive income/(loss)
Balance at beginning of period (22,693) (23,050)
Transitional adjustment on adoption of new
accounting policies 8,819 -
Net change in unrealized gains in available
for sale securities 1,499 -
Unrealized loss on translation of net foreign
operations (891) 131
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Balance at end of period (13,266) (22,919)
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Shareholders' equity at end of period $ 300,793 $ 222,439
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Thousands of Canadian dollars)
Three
Months Ended
March 31,
(unaudited) 2007
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Net income for the period $266
Other comprehensive income (loss), net of taxes
Net change in unrealized gains in available
for sale securities 2
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Comprehensive income $268
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FOR FURTHER INFORMATION PLEASE CONTACT:
High River Gold Mines Ltd.
Dan Hrushewsky
(416) 947-1440
(416) 360-0010 (FAX)
Email: info@hrg.ca
Website: www.hrg.ca
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