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TORONTO, ONTARIO--(Marketwire - May 28, 2008) - High River Gold Mines Ltd. ("High River" or the "Company")(TSX:HRG) today reported that it has entered into an agreement to spin out its ownership share of the Prognoz Silver Project ("Prognoz"). Prognoz, located in the Republic of Sakha (Yakutia) in Russia, is one of the largest and highest grade undeveloped silver projects in the world. It has an "Initial" NI 43-101 compliant resource estimate (based on only 2 of more than 30 veins on the property, and on drilling only up to May 31, 2007) of:
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Indicated Resources(i)
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Tonnage (t) Silver grade (g/t) Contained Silver (oz)
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3,500,000 636 71,500,000
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Inferred Resources(i)
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Tonnage (t) Silver grade (g/t) Contained Silver (oz)
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2,210,000 551 39,200,000
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(i) using a cut-off grade of 100 g/t
An "updated" NI 43-101 resource estimate will be completed shortly, and will reflect results from drilling conducted during the second half of 2007.
Terms of the Spin-out
The spin-out transaction consists of the vending of High River's 50% indirect interest in Prognoz, together with the other 50% interest held by a private company, to Roscan Minerals Corporation ("Roscan"). The purchase price of Prognoz (100%) will be equal to $0.55 per ounce of silver outlined in the "updated" NI 43-101 resource estimate (or a NI 43-101 compliant resource estimate incorporating full year 2008 drill results), using a minimum cut-off grade of 50 g/t, to a maximum of 200 million ounces of silver (or $110 million). Roscan will also assume certain liabilities related to the 2007 and 2008 Prognoz exploration programmes. High River's share of proceeds from the sale will be received in shares of Roscan; the private company will receive shares (9.9% post financing) and cash.
As part of the transaction, Roscan will be completing a marketed financing led by GMP Securities L.P. and Jacob & Company Securities Inc. Post financing, High River will be the largest shareholder of Roscan, with an expected ownership interest of approximately 30% to 40%.
Spin-out Background and Rationale
In October 2007, High River reported on the results of a Strategic Review, undertaken by the Company's board of directors, to unlock shareholder value. 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 the benefit of High River shareholders. It was concluded that to maximize the value of Prognoz for High River shareholders, 100% of Prognoz needed to be held within a pure silver vehicle. Roscan negotiated the acquisition of the 50% interest in Prognoz from the private company and recently approached High River with a proposal to combine 100% of the ownership interest in Prognoz into Roscan. To assess this proposal, High River formed a committee of independent directors and retained an independent securities dealer to provide a fairness opinion. The Roscan transaction follows an earlier transaction whereby High River increased its interest in Prognoz to 50%.
The spin-out provides the following benefits to High River shareholders:
- A "daylighting" of the value of High River's interest in Prognoz, by having Prognoz separately listed on an exchange where the fair market value of High River's interest will be reflected.
- Elimination of any minority ownership discount, by combining 100% of the ownership into one corporate entity.
- Increasing the market valuation of Prognoz, as the strong market demand for world class pure silver plays will result in premium valuation.
Looking Forward
The transaction, including the financing, is expected to close in July 2008. High River believes that Roscan's share price could rise significantly over the medium and long term as the true value of Prognoz is revealed through continued exploration on the property (which will be carried out under contract by Buryatzoloto) and subsequent project development. As such High River has no intention of selling its controlling interest in Roscan, as the Company's shareholders should benefit from the increasing value of the shareholding. High River also intends to evaluate the possibility of dividending the Roscan shares to High River shareholders.
About Roscan
Roscan is a junior mining exploration company listed on the TSX Venture Exchange. Roscan anticipates that a new management team will be appointed in connection with the proposed transaction. An experienced President and Chief Executive Officer has already been identified and will soon be appointed. Roscan currently has 26.7 million shares outstanding (27.8 million shares fully diluted). Current shareholders of Roscan include David V. Mosher, President and Chief Executive Officer of High River (1.4 million shares), Donald A. Whalen, Executive Chairman of High River (625,000 shares), and Valery Dmitriev, a director of High River and General Director of Buryatzoloto (2.65 million shares). Their shares in Roscan were acquired in 2004 through the initial private placement of the company. In March 2008, Mr. Mosher and Mr. Whalen resigned as directors of Roscan and declared their shareholding in Roscan and the potential conflict of interest to High River's Board of Directors.
About High River
High River is an unhedged 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. Annual gold production is planned at 100,000 ounces at Taparko-Bouroum, increasing to a rate of approximately 140,000 ounces during 2009, and is expected to exceed 100,000 ounces at Berezitovy. Attributable 2008 gold production is planned to be approximately 80,000 ounces at Taparko-Bouroum and approximately 75,000 ounces at Berezitovy. 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, the world-class Prognoz Silver Project and the Chaya Nickel Project in Russia. These projects are expected to significantly add to the Company's shareholder value 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.
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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