High River Financial Results for the Third Quarter Ended September 30, 2012

Marketwired

TORONTO, ONTARIO--(Marketwire - Nov 14, 2012) -

(All currency figures are in Canadian Dollars unless otherwise noted)

High River Gold Mines Ltd. (HRG.TO) ("High River" or the "Company") today reported its financial position and operational results for the three month period ended September 30, 2012. The Unaudited Interim Condensed Consolidated Financial Statements and related Notes along with the Management''s Discussion and Analysis have been filed on SEDAR (www.sedar.com) and can be viewed on the Company''s website at www.hrg.ca.

HIGHLIGHTS FOR THE THIRD QUARTER 2012

Financial Results

  • Net gold revenue of $142.6 million, an increase of 5% from $135.5 million in Q2 2012, an increase of 28% from $111.5 million in Q3 2011.

  • Net income attributable to equity holders of $35.5 million ($0.04 per share) compared to a net income of $31.5 million ($0.04 per share) in Q2 2012 and a net income of $41.3 million (0.05 per share) in Q3 2011.

  • Cash flow from operations of $57.9 million, up from $49.8 million in Q2 2012, and up from $23.1 million in Q3 2011.

  • Cash and cash equivalents increased to $55.0 million from $18.0 million at the end of Q2 2012, and down from $150.0 million at the end of Q3 2011.

  • Working capital decreased to $212.4 million from $214.8 million at the end of Q2 2012, down from $296.0 million at the end of Q3 2011.

  • Current and long term debt increased to $10.3 million from $10.1 million at the end of Q2 2012 and decreased from $22.7 million at the end of Q3 2011.

Operations

  • Total gold production decreased 5% to 86,906 ounces (Q3 2011 - 91,057 ounces) (100%). Total cash cost per ounce increased 11% to US$804 per ounce (Q3 2011 - US$720 per ounce).

  • The Zun-Holba and Irokinda gold mines produced 23,891 ounces (Q3 2011 - 34,100 ounces) (100%) at a total cash cost of US$997 per ounce.

  • The Taparko-Bouroum gold mine produced 29,774 ounces (Q3 2011 - 31,391 ounces) (100%) at a total cash cost of US$817 per ounce.

  • Gold production at the Berezitovy mine was 33,241 ounces (Q3 2011 - 25,565 ounces) (100%) at a total cash cost of US$654 per ounce.

  • The Bissa project is on track to deliver first gold in H1 2013 and we now believe that production of gold at Bissa can be started in the earlier part of the announced period. Mining fleet is available on site and started pre-stripping of the pits, while part of the fleet is assisting the tailings storage facility construction. Ball and SAG mills are installed and mechanical alignment is complete. CIL tanks are installed, while piping and other auxiliary mechanical equipment installation and most of electrical work is still to be finished.

Corporate

  • On July 18, 2012, Nord Gold N.V. ("Nordgold") announced its intention to make a formal offer to acquire the common shares ("Common Shares") of the Company that Nordgold and its affiliates do not already own, including Common Shares issuable upon exercise of convertible High River securities, for a price per Common Share, at the option of the tendering shareholder, of either: (a) 0.285 global depositary receipts of Nordgold; or (b) $1.40 in cash (the "Offer").

  • On July 18, 2012, the board of directors of the Company (the "Board") established a special committee of independent directors (the "Special Committee") to consider the Offer, alternatives to the Offer and engage a financial advisor to prepare the formal valuation of High River in accordance with Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Special Committee engaged Paradigm Capital Inc. ("Paradigm Capital") to prepare the formal valuation. The Special Committee also engaged Fraser Milner Casgrain LLP as its legal counsel.

  • The Company filed on SEDAR an amended and restated annual information form ("AIF") for the year ended December 31, 2011. The original AIF was filed on March 30, 2012. The amended and restated AIF now provides updated mineral reserve and mineral resource estimates for the Zun-Holba, Irokinda, and Berezitovy mines in Russia, as well as High River''s properties in Burkina Faso. In addition, the Company filed updated certificates of the Chief Executive Officer and the Chief Financial Officer for the year ended December 31, 2011, as required under National Instrument 52-109 - Certification of Disclosure in Issuers'' Annual and Interim Filings.

  • The Company also filed on SEDAR revised technical reports with respect to its Berezitovy and Burkina Faso properties that address minor deficiencies in the original technical reports filed on June 8, 2012. The technical report on the Berezitovy mine entitled "The Berezitovy Project, Russia, NI 43-101 Technical Report" dated July 20, 2012, was prepared by Mark Owen, BSc, MSc, MCSM, CGeol, EurGeol, FGS of Wardell Armstrong International ("WAI"). The technical report on the Taparko-Bouroum gold mine entitled "The Taparko-Bouroum Assets, Burkina Faso, NI 43-101 Technical Report" dated July 20, 2012, was prepared by Dr. Phil Newall, BSc (ARSM), PhD (MCSM), CEng, FIMMM, Director of Mining and Minerals of WAI. The technical report on the Bissa gold project entitled "The Bissa Asset, Burkina Faso, NI 43-101 Technical Report" dated July 20, 2012, was also prepared by Dr. Newall. Each of Mr. Owen and Dr. Newall is a "qualified person" as that term is defined in National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") and independent of the Company.

Subsequent Events

  • On October 22, 2012, High River acknowledged that Nordgold filed its take-over bid circular and formally commenced the previously announced Offer. The valuation prepared by Paradigm Capital was included in the take-over bid circular prepared by Nordgold. In the valuation, Paradigm Capital was of the opinion that, based upon and subject to the analyses, assumptions, qualifications and limitations discussed in the valuation, and such other factors as Paradigm Capital considered relevant, as of October 16, 2012, the fair market value of High River was in the range of $1.33 to $1.80 per share. Furthermore, Paradigm Capital was of the opinion that, as of October 16, 2012, the value of Nordgold was in the range of $4.02 to $6.60 per share.

  • On October 31, 2012, High River announced that it mailed to its shareholders a Directors'' Circular as required by applicable securities laws in response to the Offer. A copy of the Directors'' Circular is available online at www.sedar.com. The Board of High River (with those directors who are nominees of Nordgold abstaining), upon the unanimous recommendation of its Special Committee, unanimously recommended that High River shareholders accept the Offer and tender their Common Shares to the Offer.

DISCUSSION OF FINANCIAL RESULTS

Selected Financial Results

The Company reported a net income of $35.5 million ($0.04 per share) in Q3 2012 compared to a net income of $31.5 million ($0.04 per share) during Q2 2012 and net income of $41.3 million ($0.05 per share) in Q3 2011.

In thousands of Canadian dollars Three months ended   Nine months ended
(except per share amounts)   September 30, 2012   June 30, 2012   September 30, 2011   September 30, 2012   September 30, 2011
Gold revenue   $ 142,660   $ 135,526   $ 111,544   $ 417,083   $ 370,112
Net income (loss)   35,544   31,576   41,318   124,757   119,993
Net income (loss) per share (basic)   0.04   0.04   0.05   0.15   0.14
Cash provided by (used in) operating activities   57,915   49,812   23,131   179,159   119,542
Weighted average number of shares outstanding (basic)  
840,218,962
 
840,218,962
 
840,218,962
 
840,218,962
 
840,218,962

About High River

High River is an unhedged gold company with interests in producing mines, development and advanced exploration projects in Russia and Burkina Faso. Two underground mines, Zun-Holba and Irokinda, are situated in the Lake Baikal region of Russia. Two open pit gold mines, Berezitovy in Russia and Taparko-Bouroum in Burkina Faso, are also in production. Finally, High River has a 90% interest in a development project, the Bissa gold project in Burkina Faso, and a 50% interest in an advanced exploration project with NI 43-101 compliant resource estimates, the Prognoz silver project in Russia.

FORWARD LOOKING INFORMATION

This release contains forward-looking statements. Wherever possible, words such as "intends", "expects", "scheduled", "estimates", "anticipates", "believes", and similar expressions or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, have been used to identify these forward-looking statements. Although the forward-looking statements contained in this release reflect management''s current beliefs based upon information currently available to management and based upon what management believes to be reasonable assumptions, High River cannot be certain that actual results will be consistent with these forward-looking statements. A number of factors could cause events and achievements to differ materially from the results expressed or implied in the forward-looking statements. These factors should be considered carefully and prospective investors should not place undue reliance on the forward-looking statements. Forward-looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause High River''s actual results, events, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Although High River has attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not to be anticipated, estimated or intended, including those risk factors discussed in the Company''s most recent Annual Information Form. There can be no assurance that the forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, prospective investors should not place undue reliance on forward-looking statements. Any forward-looking statements are made as of the date of this release, and High River assumes no obligation to update or revise them to reflect new events or circumstances, unless otherwise required by law.

High River Gold Mines Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
For the three and nine months ended 30 September
(In thousands of Canadian Dollars)
                 
  Three months ended   Nine months ended  
  30 September, 2012   30 September, 2011   30 September, 2012   30 September, 2011  
                 
Revenue                
Gold 142,660   111,544   417,083   370,112  
Silver 2,011   2,292   5,375   7,194  
  144,671   113,836   422,458   377,305  
Cost of sales (92,515 ) (52,621 ) (249,568 ) (189,103 )
Gross Profit 52,155   61,216   172,889   188,202  
                 
                 
General and administrative expenses (2,788 ) (933 ) (3,915 ) (2,310 )
Other expenses, gains and losses 1,349   (8,833 ) 571   (17,877 )
Interest income 2,043   4,112   8,156   7,134  
Finance costs (1,269 ) (2,037 ) (3,926 ) (5,166 )
Profit before income taxes 51,490   53,526   173,776   169,984  
Income tax expense (12,741 ) (6,512 ) (36,807 ) (33,040 )
Profit for the year 38,749   47,014   136,969   136,943  
                 
Attributable to:                
Non-controlling interest 3,205   5,696   12,212   16,951  
Equity holders of the Company 35,544   41,318   124,757   119,993  
Profit for the year 38,749   47,014   136,969   136,943  
                 
Other Comprehensive (loss) Income                
Net (loss) gains on available for sale financial assets 17,765   (11,592 ) 2,866   (13,515 )
                 
Exchange differences on translation of foreign operations (3,123 ) (2,597 ) (14,759 ) 9,287  
                 
Other comprehensive (loss) income, net of tax 14,642   (14,189 ) (11,893 ) (4,228 )
                 
Attributable to:                
Non-controlling interest 3,205   5,696   12,212   16,951  
Equity shareholders of the Company 50,186   27,129   112,865   115,765  
Comprehensive Income, net of tax 53,392   32,824   125,076   132,715  
                 
Profit attributable to equity holders of the Company 35,544   41,318   124,757   119,993  
Weighted average number of ordinary shares outstanding 840,218,962   840,218,962   840,218,962   840,218,962  
Basic and diluted earnings per share 0.04   0.05   0.15   0.14  
                 
                 
High River Gold Mines Ltd.  
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION  
(In thousands of Canadian Dollars)  
   
  As at   As at  
  30 September, 2012   31 December, 2011  
ASSETS        
Current Assets        
  Cash & cash equivalents 55,045   162,310  
  Inventories 142,755   121,690  
  Loans to related parties 63,922   24,360  
  Other assets 53,241   37,690  
  314,963   346,050  
Non-Current Assets        
  Exploration and evaluation assets 101,898   80,035  
  Mine properties 103,556   107,105  
  Property, plant & equipment 412,372   244,131  
  Available for sale financial assets 89,361   86,023  
  Loans to related parties 49,363   57,219  
  Other assets 3,090   9,654  
  Deferred tax assets 77,606   77,610  
  837,245   661,777  
TOTAL ASSETS 1,152,208   1,007,826  
         
LIABILITIES        
Current Liabilities        
  Accounts payable and accrued liabilities 82,835   51,566  
  Loans and other borrowings 10,356   20,531  
  Derivative Financial Liabilities -   -  
  Income tax payable 9,368   17,846  
  102,559   89,942  
Non-Current Liabilities        
  Loans and other borrowings     -  
  Provisions 19,956   19,147  
  Deferred tax liabilities 102,003   93,957  
  121,959   113,104  
TOTAL LIABILITIES 224,517   203,047  
         
EQUITY        
  Share Capital 640,157   640,157  
  Contributed surplus 25,079   25,079  
  Available for sale reserve 73,797   70,930  
  Foreign currency translation reserve (59,830 ) (45,071 )
  Retained Earnings/(Deficit) 183,273   58,515  
  Equity attributable to equity holders of the Company 862,476   749,610  
  Non-controlling interest 65,215   55,169  
TOTAL EQUITY 927,691   804,779  
TOTAL LIABILITIES AND EQUITY 1,152,208   1,007,826  
   
   
High River Gold Mines Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in thousands of Canadian Dollars)
 
  Year to Date  
OPERATING ACTIVITIES 30 September, 2012   30 September, 2011  
  Profit after income taxes 136,969   136,943  
  Adjustments to profit for non-cash items        
    Depreciation and amortization 47,134   42,293  
    Accretion expense 911   1,087  
    Write-down of exploration -   2,122  
    Loss/(gain) on disposal of investments (167 ) (463 )
    Non-cash mining costs (563 ) 2,415  
    Gain/(loss) on disposal of property, plant and equipment 15   (258 )
    Deferred tax expense 43,566   13,286  
    Other non-cash items (1,350 ) 5,881  
  Working Capital Adjustments        
    Change in trade receivable and other assets (17,304 ) (12,075 )
    Change in inventories (21,065 ) (52,483 )
    Change in other assets 1,481   (17,874 )
    Change in accounts payable and accrued liabilities 26,149   5,173  
             
  Income tax paid (36,617 ) (6,504 )
NET OPERATING CASH FLOWS 179,159   119,542  
 
INVESTING ACTIVITIES        
  Investment in exploration and evaluation assets (25,888 ) (32,354 )
  Expenditure on property, plant and equipment (223,077 ) (49,607 )
  Other Investing activities (797 ) (455 )
  Proceeds on sale of property, plant and equipment 111   1,325  
NET INVESTING CASH FLOWS (249,651 ) (81,091 )
 
FINANCING ACTIVITIES        
  Payments of loans and borrowings (10,597 ) (72,120 )
  Other Financing activities (23,978 ) (41,810 )
  Dividends paid to minority interest (2,165 ) -  
  Proceeds from exercise of share options -   67,336  
NET FINANCING CASH FLOWS (36,741 ) (46,594 )
 
Increase (decrease) in cash and cash equivalents (107,232 ) (8,143 )
Net foreign exchange difference (33 ) 4,208  
Cash and cash equivalents, beginning of the period 162,310   153,964  
Cash and cash equivalents, end of the period 55,045   150,029  
Contact:
High River Gold Mines Ltd.
Yury Lopukhin
CEO
011 7 495 981 0910 ext. 6821
info@hrg.ca
www.hrg.ca

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