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Message: High River Gold Reports First Quarter 2009 Results

High River Gold Reports First Quarter 2009 Results

posted on May 16, 2009 02:36AM
May 15, 2009
High River Gold Reports First Quarter 2009 Results
TORONTO, ONTARIO--(Marketwire - May 15, 2009) -

(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, 2009. The Unaudited Interim 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 2009

Financial Results

- Net income for Q1/2009 of $0.9 million ($0.00 per share).

- Cash flow from operations was $29.7 million, up from ($0.3) million last year.

- Cash and cash equivalents increased to $25.0 million from $19.1 million as at 2008 year-end.

- The working capital deficit improved to ($29.7) million from ($42.1) million as at 2008 year-end.

- Current and long term debt levels declined to $175.8 million from $188.1 million as at 2008 year-end.

- Q1/2009 gold production and cash operating costs were as follows:

                     -------------------------------------------------
                     Production      Production  Cash Operating Costs
                           (100%) (attributable)              (US$/oz)
                           (ozs)           (ozs)
----------------------------------------------------------------------
Zun-Holba                18,236          15,490                   467
----------------------------------------------------------------------
Irokinda                 16,554          14,061                   374
----------------------------------------------------------------------
Placer Operation (1)        N/A             N/A                   N/A
----------------------------------------------------------------------
Taparko-Bouroum          22,408          20,167                   386
----------------------------------------------------------------------
Berezitovy               19,596          19,400                   430
----------------------------------------------------------------------
Total                    76,794          69,118                   414
----------------------------------------------------------------------

(1) non-operational in winter months
- Q1/2009 operating and non-operating cash costs combined totalled US $572 per ounce, compared to US $670 per ounce in Q1/2008. Non-operating cash costs per ounce mainly represent corporate administration, exploration, and other expense such as realized foreign exchange losses.

Operations

- Zun-Holba and Irokinda Underground Gold Mines:

-- Production and cash costs on budget.

- Taparko-Bouroum Open-pit Gold Mine:

-- Lower than expected gold production due to mill shutdowns during the quarter.

- Berezitovy Open-pit Gold Mine:

-- Production levels continue to be constrained by disk filter plant under-performance.

- Bissa Gold Exploration Project:

-- Work related to feasibility study continued during the quarter.

- Prognoz Silver Exploration Project:

-- Due to capital constraints, no exploration activity occurred on the project.

Corporate

- On January 2, 2009, High River announced that it had advised Somita trade creditors that it will slow down payments for accounts payable for a brief period in light of lower than expected cashflows from the group's operations, and that it planned to pay suppliers for current purchases of goods and services. High River also indicated that it was continuing to pursue discussions relating to additional debt and equity financing required to ensure that it is able to meet its financial obligations.

- On March 17, 2009, High River announced the results of a NI 43-101 compliant gold reserve and resource estimate, as of December 31, 2007, on the Zun-Holba and Irokinda Gold mines.

- On March 25, 2009 High River reported that the acquisition of the Chaya Nickel Deposit will not be completed. An initial payment of approximately US $4.15 million made in February 2008, which represents all acquisition costs incurred to-date, has been written off as at the 2008 year end.

- On March 30, 2009, High River announced that OAO Severstal ("Severstal") and a Special Committee comprised of High River independent directors have been unable to agree on terms of any transaction whereby Severstal would acquire the remaining outstanding common shares of High River and/or provide debt or equity financing to High River. It was also announced that Terrence Lyons, Chairman of the Board of High River and a member of the Company's Special and Audit Committees, had tendered his resignation, effective March 31, 2009, due to the demands of his other business interests.

- On March 31, 2009, High River announced that it would be late in filing its audited financial statements, management's discussion and analysis, annual information form and related CEO and CFO certifications for the year ended December 31, 2008 due to concerns raised by the board of directors regarding production numbers received by the Company from the Berezitovy Gold mine. The concerns were subsequently addressed to the satisfaction of the board of directors and the financial statements and other filings were released on April 29, 2009.

Events Subsequent to Quarter-end

- On April 8, 2009, High River announced the resignation of John W. Crow from the Company's board of directors, and the appointment of Alexey Khudyakov and Karl Glackmeyer to the board of directors. Alexey Khudyakov assumed the role of Chairman of the board of directors.

- On April 20, 2009, High River announced that two loans, with a total amount outstanding of US$ 27 million, were assigned by Standard Bank Plc to Severstal, and continue to be in default. It was also announced that Steven Poad, CFO of High River, was appointed to the board of directors on an interim basis until the next annual meeting of shareholders of High River.

- On May 1, 2009, High River announced the resignation of Roman Deniskin from the Company's board of directors.

DISCUSSION OF FINANCIAL RESULTS

Selected Financial Results
--------------------------

(in thousands of Canadian dollars
except per share amounts)
                                        Q1/2009     Q1/2008
------------------------------------------------------------
------------------------------------------------------------
Gold revenue                           $ 88,779    $ 45,009
Net income (loss)                           931      (2,308)
Net income (loss) per share (basic)        0.00       (0.01)
Cashflow from operations                 29,672        (252)
Weighted average number of shares
 outstanding (basic)                590,193,673 307,787,242
------------------------------------------------------------
------------------------------------------------------------
Gold revenue for the quarter was almost twice that of last year mostly due to a higher amount of gold ounces sold and a weaker Canadian dollar. Ounces sold increased by 54% to 77,091 ounces from 49,991 ounces in Q1 of last year, with the increase due to higher production from Taparko-Bouroum and Berezitovy. The average US$/C$ exchange rate declined 19% to .81 during the quarter versus 1.00 in Q1/2008. The average gold price realized on sales was US $926 per ounce during Q1/2009, up 3% from US $898 per ounce last year.

The change to net income ($3 million) from a net loss last year reflects higher revenues ($44 million), as discussed above, a reduction in financing costs ($3 million), and a change to an income tax recovery from an expense last year ($3 million), partially offset by: (a) proportionately higher mining costs ($18 million); (b) higher amortization and depletion ($8 million) related to higher production levels; and (c) an increase in other expenses ($22 million) related to higher unrealized foreign exchange losses.

Cashflow from operations increased from last year as higher production levels resulted in increased sales volumes.

Working capital improved to a deficit of ($29.7) million, from a deficit of ($42.1) million last year, due to decreases in accounts payable and current loans and interest payable as the Company repaid certain amounts owing to trade creditors and made scheduled repayments on loans.

OVERVIEW OF OPERATIONS

Underground Mines

Zun-Holba Mine (Buryatia, Russia)

In Q1/2009, Zun-Holba produced (100%) 18,236 ounces of gold, up 5% from last year's level, due mostly to an increase in mill throughput. Cash operating costs decreased to US $467 per ounce from US $554 per ounce in Q1/2008. The decrease in cost per ounce was due largely to the impact of a weaker rouble on input costs, and cost control measures.

Irokinda Mine (Buryatia, Russia)

Production (100%) at Irokinda during the first quarter was 16,554 ounces, virtually unchanged from the first quarter last year. Higher mill throughput and slightly higher recoveries offset marginally lower grades. In Q1/2009, cash operating costs decreased to US $374 per ounce compared to US $471 per ounce in 2008. The decrease in cost per ounce was largely due to the impact of a weaker rouble on input costs, and cost control measures.

New Open Pit Mines

Taparko-Bouroum Mine (Burkina Faso)

In Q1/2009, Taparko-Bouroum produced (100%) 22,408 ounces of gold, up 77% from last year's level, due to higher grade ore from the Bouroum pit processed during the quarter. Cash operating costs decreased to US $386 per ounce compared to US $679 per ounce largely due to this increase in production. The mill utilization rate during the quarter averaged approximately 68% as the mill experienced continuing problems related to excessive vibrations in the ball mill drive train. Various remedial actions, recommended by specialized mill and vibrations consultants, were undertaken to correct this issue during two scheduled mill shutdowns totalling 25 days. However these actions resulted in only temporary reductions of vibrations to normal levels, and failed to achieve stable operation of the mill. In fact, the mill performance deteriorated during the quarter with throughput rates estimated at about 95, 94 and 87 tonnes of ore per operating hour in January, February and March, respectively. As reported in an earlier press release, the maximum production capacity of the mill is now estimated at about 100 tonnes per hour, which is 20% less than the original design capacity of 125 tonnes. While vibrations are currently at levels that allow operation of the mill at throughput rates of 80-90 tonnes, to ensure proper long term functioning of the mill and the achievement of the maximum production capacity, a reduction to lower levels of vibrations is required. Analysis of the problem and a plan of further action are currently being undertaken by the operating team in conjunction with consultants.

Berezitovy Mine (Amur Oblast, Russia)

Production (100%) at Berezitovy during the first quarter was 19,596 ounces of gold, compared to no ounces produced in the Q1/2008, as commercial production was only declared on October 1, 2008. Cash operating costs were US $430 per ounce during the quarter. The mill utilization rate during the quarter averaged 65% due to two mill shutdowns (totalling 16 days) and continuing disk filter plant underperformance. The first mill shutdown, which began on January 28th and lasted for 7 days, was unplanned and was undertaken to correct damage incurred to clutch disks. The second mill shutdown, largely a scheduled maintenance operation, ran for 9 days in mid-March. During this time, SAG mill liner replacement and additional work was completed. The disk filter plant continues to perform poorly, limiting mill throughput rates. The Company continues to undertake action to permanently resolve this problem.

Advanced Exploration Projects

Bissa Gold Project

A feasibility study was initiated early in 2008 to evaluate the economic viability of a mining and processing facility based on the current Bissa resource area. Substantial progress was made on this study during the quarter. Work included resource block modelling, pit design, ore reserve estimation, etc.

Other Burkina Faso Exploration

During the quarter, a 3,000 metre (68 hole) rotary air blast drilling programme was completed on the Nongo-Fayere permit which adjoins the Taparko mining license on its eastern boundary. The purpose of the programme was to test for a potential eastern extension, onto the Nongo-Fayere permit, of mineralization identified on the Taparko mining license (the Kangarse target). Assay results yielded no significant intersections.

Prognoz Silver Project

Due to capital constraints, no drilling or other exploration activity occurred at the Prognoz project site during the quarter. Prognoz drill hole data compilation and analysis, as well as work programme planning, were undertaken at the Buryatzoloto exploration offices in Ulan Ude.

About High River

High River is a gold company with interests in producing mines and advanced exploration projects in Burkina Faso and Russia.
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