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TORONTO, ONTARIO--(Marketwire - March 31, 2008) -
(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, 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 2007
Financial Results
- Net loss for 2007 was $12.0 million, or $0.05 per share, compared to net income of $31.0 million, or $0.13 per share in 2006. The 2006 results reflected a one time non-cash gain related to the sale of High River's share of the New Britannia Mine. The 2007 loss resulted from higher mining costs, higher interest costs related to increased project debt, and a new non-cash expense "Fair value adjustments to financial instruments" related to the adoption of new accounting standards.
- Funds flow from operations before working capital changes was $14.6 million.
- 2007 gold production and costs were as follows:
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Production (ozs) Production (ozs) Cash Operating Costs
(100%) (attributable) (US$/oz)
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Zun-Holba 69,474 59,011 422
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Irokinda 75,224 63,895 367
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Placer Operation 3,143 2,670 552
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Taparko-Bouroum 13,110(1) 11,799(1) 905(2)
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Berezitovy 1,504(1) 1,489(1) N/A(3)
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Total 162,455 138,864 430
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(1) includes all ounces produced prior to commercial production
(2) includes one time start-up costs estimated at US $499 per ounce
(3) not applicable as costs are capitalized prior to declaration of
commercial production
Operations
The groundwork has been set for 2008 gold production to double from 2007 levels.
- Taparko-Bouroum Open-pit Gold Mine:
-- Construction was completed in 2007 with the first gold pour in July and commercial production declared effective October 2007.
-- Gold production in 2007 totaled 13,110 ounces, of which 4,459 ounces remained in inventory at year end.
-- Revenue from 2007 gold sales of 8,651 ounces amounted to US $6.4 million.
- Berezitovy Open-pit Gold Mine:
-- Construction was essentially completed in 2007 with the first gold pour in August from the gravity circuit and declaration of commercial production is expected in Q2/2008.
-- An internal scoping study concluded that the installation of two flotation circuits, to recover lead, zinc and additional silver from the tailings stream, has the potential to significantly reduce cash costs of producing gold on a by-product credit basis.
- Bissa Advanced Gold Exploration Project:
-- A new gold zone was discovered at Gougre.
-- Work continued on advancing high potential drill targets with the goal of increasing NI 43-101 resources to the multi-million ounce level.
- World-class Prognoz Silver Project:
-- Significant exploration work (over 500 diamond drill holes and a 17 tonne metallurgical bulk sample) was completed during the year to advance the project.
-- An "Initial" NI 43-101 resource estimate was released in January 2008 based on drill results to the end of May 2007 on only 2 of over 30 veins identified on the property.
-- High River announced that it is considering the "spin-out" of the Prognoz Silver Project after receiving independent advice on ways to unlock shareholder value.
- Zun-Holba and Irokinda Underground Gold Mines:
-- NI 43-101 reserve and resource estimates were completed for Zun-Holba and Irokinda and reflect the ability of the two mines to replace mined reserves on an ongoing basis.
Corporate
- High River was added to the S&P/TSX Composite Index, the S&P/TSX Global Mining Index, and the S&P/TSX Global Gold Index in 2007 due to increased trading volume and market capitalization.
- Project specific working capital financing totaling US $25 million, private placements totaling $23.95 million, and a $100 million "bought deal" financing were completed to put High River and its mines on a strong financial footing going forward. High River, fully funded and with future cashflow from its two new mines, expects to be well positioned to capitalize on merger and/or acquisition opportunities accretive to the share price.
- In February 2008, High River's 84.9%-owned Russian subsidiary, OJSC Buryatzoloto, acquired a 100% ownership interest in the Chaya Nickel Project, located in Russia.
DISCUSSION OF FINANCIAL RESULTS
Selected Financial Results
($ thousands)
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2007 2006
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Total Gold Revenue $ 115,641 $ 103,255
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Net Income (Loss) (11,991) 31,045
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Net Income (Loss) per share
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- Basic and Diluted (0.05) 0.13
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Total Assets 666,055 517,432
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Total Long-term Debt 107,470 137,895
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Revenues from gold sales increased to $115.6 million in 2007, up from $103.3 million last year, largely due to higher realized gold prices partly offset by a weaker US dollar.
The Company realized a consolidated net loss of $12.0 million, or $0.05 per share, in 2007. High River's operations contributed a net positive $1.5 million of earnings, as earnings from the Zun-Holba and Irokinda mines totaling $7.6 million were partly offset by a $6.1 million loss at Taparko-Bouroum due to one time start-up charges and commissioning challenges. Corporate Activities generated a $13.5 million loss (comprised of approximately $6 million from the new non-cash expense "Fair value adjustments to financial instruments" related to the adoption of new accounting standards, plus approximately $8 million in Administrative costs which declined from $10 million in 2006). The high level of earnings in 2006 relates to the one time non-cash gain of $32.9 million on the sale of High River's interest in the New Britannia Mine to a third party.
The increase in total assets from 2006 reflects the Company's investment in construction of the Taparko-Bouroum and Berezitovy gold mines, and in exploration at the Prognoz Silver Project.
Total long-term financial liabilities decreased in 2007 due to the repayment of a portion of debt related to mine construction.
OVERVIEW OF OPERATIONS
Underground Mines
Zun-Holba Mine (Buryatia, Russia)
In 2007, Zun-Holba produced 69,474 ounces of gold, virtually unchanged from last year's level. Increases in tonnes milled (to 259,574 tonnes of ore) and recovery (to 93.9%) were offset by a slightly lower head grade of 8.9 g/t. Cash operating costs increased to US $422 per ounce from US $384 per ounce in 2006. The increase in costs was due largely to deeper underground workings, higher labour and material costs, and lower grade ore.
The 2008 budgeted cash operating cost for Zun-Holba has been revised to US $575 per ounce gold to reflect an updated budget from the mine.
Irokinda Mine (Buryatia, Russia)
Production levels at Irokinda, declined during 2007 to 75,224 ounces from 80,066 ounces of gold, largely due to lower mill throughput and head grade. In 2007, cash operating costs increased to US $367 per ounce compared to US $298 per ounce in 2006. The increase in costs was mainly the result of higher wage and materials costs, and lower grade.
The 2008 budgeted cash operating cost for Irokinda has been revised to US $478 per ounce gold to reflect an updated budget from the mine.
New Open Pit Mines
Taparko-Bouroum Mine (Burkina Faso)
During 2007, construction of the Taparko-Bouroum Gold Mine was completed and production began. The first gold pour occurred on July 17, 2007. Commercial Production was achieved during September when the criteria of 30 consecutive days of mill operation at 60% capacity or better was met. The effective date of Commercial Production for accounting purposes was October 1, 2007.
During 2007, mine and mill operation was characterized by mechanical adjustments and process optimization activities that are typical for the start up of new mining operations. The mine produced 13,110 ounces in 2007, of which 8,651 ounces were sold during the year at an average price of US $740.43 per ounce gold for revenue of US $6.4 million.
Mill alignment issues early in 2008 have been resolved and the mill has since been running at the design throughput rate or higher. The mine is on track to produce the budgeted 91,000 ounces in 2008 (82,000 ounces of gold attributable to High River).
The 2008 budgeted cash operating cost for Taparko-Bouroum is US $416 per ounce gold.
Berezitovy Mine (Amur Oblast, Russia)
Construction of the Berezitovy Gold Mine was substantially completed in 2007. Gold was poured out of a gravity circuit on August 8, 2007, and out of the leach circuit in mid-December. In early January 2008, 808 ounces pertaining to December production were sold at a price of US $869/oz for revenue of US $703,000.
Problems with the filter plant are currently being addressed with the objective of achieving early resolution. Commercial Production is anticipated to be declared by the end of the first half of 2008. Commercial Production is defined as 30 consecutive days of production at 60% or better of mill capacity. Gold production in 2008 is expected to total approximately 77,000 ounces (76,000 ounces of gold attributable to High River).
In May 2007, an internal scoping study concluded that the installation of two flotation circuits, to recover lead, zinc and additional silver from the tailings stream, has the potential to significantly reduce cash costs of producing gold on a by-product credit basis. The flotation circuit project will undergo further study in 2008. Planned work includes additional bench-scale confirmatory test-work to refine flotation equipment sizing, permitting and detailed engineering work. Construction is expected to begin in 2009.
The 2008 budgeted cash operating cost for Berezitovy is US $351 per ounce gold.
Advanced Exploration Projects
Bissa Gold Project
During 2006, High River established a NI 43-101 resource (Measured: 753,000 tonnes at 3.39 grams of gold per tonne for 81,980 ounces, Indicated: 11,253,000 tonnes at 1.60 grams of gold per tonne for 580,270 ounces, Inferred: 16,394,000 tonnes at 1.29 grams of gold per tonne for 679,470 ounces) over just 6 kilometres of the anomalous 35 kilometres of strike, on High River's property, of the regional structural trend called the Sabce Deformation Corridor.
Surface exploration completed in 2006, together with earlier exploration work, identified 12 target areas for drilling. In November 2006, High River initiated an exploration programme to test the 12 drill target areas. The goal of the programme was to increase current resources to the multi-million ounce level.
During 2007, programme drilling resulted in the discovery of a new gold zone at Gougre. At Gougre, nine holes intersected pervasive alteration and gold mineralization over a 300 metre strike length.
During 2008, High River plans to spend $20 million to explore the Bissa targets and targets on other exploration permits in Burkina Faso. High River, together with its strategic alliance partner Goldrush Resources, is the largest exploration permit holder in Burkina Faso, together controlling approximately 10,000 square kilometres. High River controls approximately 4,000 square kilometres, with 1,000 square kilometres at Bissa.
Prognoz World-Class Silver Project
During 2006, High River's 84.9%-owned Russian subsidiary, OJSC Buryatzoloto, acquired a 50% interest in and operatorship of the Prognoz Silver Project, situated in the Republic of Sakha (Yakutia) of the Russian Federation. This 56 square kilometre property hosts over 30 epithermal veins which are on average several kilometres long, 2 to 4 metres wide, and several hundred metres deep. The world-class Prognoz Silver Project is one of the largest and highest grade undeveloped silver projects in the world.
During 2007, Buryatzoloto drilled 548 diamond drill holes on Prognoz. Subsequent to year-end, in early January 2008, High River announced the results of an "Initial" NI 43-101 resource estimate on the Prognoz Silver Project (Indicated: 3,500,000 tonnes grading 636 grams silver per tonne for 71.5 million ounces of silver, Inferred: 2,210,000 tonnes grading 551 grams of silver per tonne for 39.2 million ounces of silver). This resource estimate was based on drilling results from only 198 holes received up to May 31, 2007. As well, the resource estimate was only based on drilling conducted on the Glavnoye and Boloto veins, two of over 30 known veins on the Prognoz property, some of which may prove to be just as extensive as Glavnoye and Boloto. As such, the author of the resource estimate, MICON, estimated a potential resource for 8 other veins which could range from 97 to 194 million ounces. Other activity during the year included the extraction of a 17 tonne bulk sample for metallurgical testing to determine preliminary flowsheet parameters and base metal content.
In October 2007, High River reported on the results of a Strategic Review, undertaken by the Company's board of directors. Cormark Securities Inc., engaged by the board of directors to assist in the review, recommended that the Company consider spinning out the Prognoz Silver Project to fully realize the value of the project for High River shareholders.
An exploration programme, budgeted at US $11 million, is planned for 2008. The programme, consisting of 30,000 metres of drilling and 4,999 metres of trenching, will continue exploring the entire 4 kilometre strike length of the Glavnoye vein, the Boloto and other vein targets on the Prognoz property.
An "updated" NI 43-101 resource estimate is planned for completion in Q2 2008, which will reflect results from drilling conducted during the second half of 2007 and early 2008.
Chaya Nickel Project
In February 2008, OJSC Buryatzoloto acquired a 100% ownership interest in the Chaya Nickel deposit ("Chaya"), as the successful bidder in an auction conducted in Ulan Ude by the Russian Ministry of Natural Resources. The cost to acquire this mining license was 260 million rubles (approximately US $10.6 million). The acquisition of Chaya, located in the Republic of Buryatia, was seen by High River as an excellent opportunity to capitalize on local knowledge and expertise in mining and logistics through Buryatzoloto, which has been operating the Zun-Holba and Irokinda underground mines in Buryatia for more than 15 years and is a contract driller in the region for numerous third parties.
Chaya has been subject to nearly 50 years of exploration activity including geophysics, trenching and drilling, with historical Russian classified resources (C2: 51.1 million tonnes grading 0.6% nickel and 0.19% copper, P1: 70.6 million tonnes grading 0.46% nickel and 0.17% copper)(i). The deposit strikes approximately 1,500 metres in an east-west direction, dips sub-vertically, is on average 20 metres thick, and is open at depth. The dimensions of the deposit appear to be amenable to open-pit mining.
(i) Historical Russian classified resource estimates for the Chaya Nickel Project have been calculated according to standard Russian industry practice and do not conform to the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) standards and definitions for resource estimates, as set out in Canadian National Instrument 43-101 (NI 43-101). These estimates should not be relied upon until fully confirmed by a NI 43-101 compliant independently estimated resource calculation.
About High River
High River is a gold company with producing mines, mines under development, and advanced exploration projects in Burkina Faso and Russia. High River is bringing two new open-pit gold mines into production. The Taparko-Bouroum Gold Mine in Burkina Faso achieved commercial production in October 2007, and the Berezitovy Gold Mine in Russia is expected to achieve commercial production in Q2 2008. Attributable gold production from Taparko-Bouroum for 2008 is planned at approximately 80,000 ounces, increasing to a 100% rate of 140,000 ounces per year in mid-2009, and attributable 2008 production from Berezitovy is expected to be approximately 75,000 ounces. Combined with gold production from two underground mines in Russia, Zun-Holba and Irokinda, High River's attributable unhedged gold production is expected to total approximately 280,000 ounces in 2008. In addition, the Company has three advanced exploration projects, the Bissa Gold Project in Burkina Faso, and the world-class Prognoz Silver Project and the Chaya Nickel 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
As at December 31
(Thousands of Canadian dollars)
2007 2006
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Assets
Current Assets
Cash and cash equivalents $ 51,491 $ 35,616
Restricted cash 69 73
Accounts receivable 25,339 11,055
Inventory 48,777 20,223
Other assets 4,318 1,231
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129,994 68,198
Available-for-sale securities 38,131 9,854
Property, plant and equipment 202,780 71,110
Exploration properties and deferred exploration 115,643 107,825
Development properties 177,417 259,846
Other assets 2,090 599
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Total Assets $ 666,055 $ 517,432
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 24,186 $ 24,207
Loans and interest payable 67,793 27,396
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91,979 51,603
Loans and interest payable 107,470 137,895
Reclamation 7,866 1,506
Non hedge derivatives 9,867 -
Future income taxes 13,062 17,776
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230,244 208,780
Non-controlling interest 17,830 16,341
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Total Liabilities 248,074 225,121
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Shareholders' Equity
Share capital 453,225 338,371
Warrants 19,951 6,294
Contributed surplus 11,192 11,363
Debenture conversion option 538 538
Deficit (57,494) (41,562)
Accumulated other comprehensive income (loss) (9,431) (22,693)
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Total Shareholders' Equity 417,981 292,311
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Total Liabilities and Shareholders' Equity $ 666,055 $ 517,432
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HIGH RIVER GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31
(Thousands of Canadian dollars except per share
figures)
2007 2006
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Revenue
Gold $ 115,641 $ 103,255
Silver 1,596 1,501
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117,237 104,756
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Expenses
Mining costs 75,908 62,173
Mine administrative costs 5,939 5,285
Mine amortization and depletion 17,486 14,323
Asset retirement obligation accretion 363 124
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99,696 81,905
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Income before the undernoted 17,541 22,851
Administrative costs (8,394) (9,734)
Amortization and depletion (691) (121)
Exploration expense (6,636) (4,183)
Financing costs (13,470) (2,761)
Other income/(expense) 5,916 32,455
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Income (loss) before tax and non-controlling
interest (5,734) 38,507
Income tax expense (4,767) (5,777)
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Income (loss) before non-controlling interest (10,501) 32,730
Non-controlling interest in earnings of subsidiary (1,490) (1,685)
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Net income (loss) for the year $ (11,991) $ 31,045
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Net income (loss) per share
- basic (0.05) $ 0.13
- diluted (0.05) $ 0.13
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HIGH RIVER GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
(Thousands of Canadian dollars)
2007 2006
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Operating Activities
Net income (loss) for the year $ (11,991) $ 31,045
Non-cash items:
Non-controlling interest in earnings of subsidiary 1,490 1,685
Financing cost on venture obligation - 1,518
Settlement of venture obligation - (32,940)
Amortization and depletion 18,396 15,152
Asset retirement obligation accretion 363 124
Debenture accretion 348 47
Financial instrument accretion expense 592 -
Fair value adjustments to financial instruments 6,200 -
Loss on disposal of assets 449 259
Stock option benefit expense 2,325 3,388
Future income taxes (1,027) 239
Writedown of carrying value and other (2,501) 649
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Subtotal 14,644 21,166
Change in non-cash working capital (19,497) (15,187)
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Net cash (used in) provided by operating
activities (4,853) 5,979
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Investing Activities
Property, plant and equipment (15,370) (15,089)
Proceeds on disposal 4 366
Exploration properties and deferred exploration (20,607) (5,698)
Development properties (91,689) (116,279)
Investment in joint venture - (26,214)
Increase in investments (9,726) -
Allocation of restricted cash - 2,016
Increase in other long-term assets (69) (265)
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Net cash used by investing activities (137,457) (161,163)
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Financing Activities
Loans received 72,590 152,955
Loans repaid (38,584) (24,868)
Dividends paid by subsidiary to non-controlling
interest (1) (6)
Common shares issued 124,592 54,133
Warrants issued 921 -
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Net cash provided by financing activities 159,518 182,214
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Effect of exchange rate changes on cash held
in foreign currencies (1,333) 62
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Increase in cash and cash equivalents during the
year 15,875 27,092
Cash and cash equivalents - Beginning of year 35,616 8,524
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Cash and cash equivalents - End of year $ 51,491 $ 35,616
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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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