(All currency figures are in Canadian dollars unless
otherwise noted)
High River Gold Mines Ltd. (TSX:HRG)("High River"
or the "Company") today reported its financial
results and operational highlights for the year ended
December 31, 2011. The Consolidated Financial Statements
and related Notes along with the Management's
Discussion and Analysis have been filed under the
Company's profile at www.sedar.com and can be viewed
on the Company's website at www.hrg.ca.
HIGHLIGHTS FOR 2011
Financial Results
Net gold revenue of $563.8 million, an increase of 29%
from 2010.
Net income attributable to equity holders of $170.4
million ($0.20 per share) compared to a net income of
$111.7 million ($0.13 per share) in 2010.
Cash flow from operations of $188.9 million, up from
$154.3 million in 2010.
Cash and cash equivalents increased to $162.3 million, up
from $ 154.0 million in 2010.
Working capital increased to $276.7 million, up from
$210.9 million in 2010.
Current and long term debt decreased to $20.5 million,
down from $25.0 million in 2010.
In January 2011, Royal Gold, Inc. ("RGI")
agreed that the Completion Test (as such term is defined
in the amended and restated funding agreement (the
"Taparko Funding Agreement")
dated February 22, 2006 between RGI and
Somita S.A. ("Somita")) had been satisfied
and agreed to release its security interests in certain
collateral (including certain equity investments in
public companies) that it held pursuant to the Taparko
Funding Agreement.
In June 2011, High River has agreed to settlement terms
with its former contractor in respect of a previously
disclosed action brought against Somita. As previously
disclosed, a claim regarding services that were delivered
to Somita was filed against Somita before the arbitrator
in South Africa in 2009. The aggregate amount of the
claim was US$3.7 million and High River filed a statement
of defense and counterclaim for damages. The settlement
agreement provides for full and final settlement of the
contractor's claim against Somita for a settlement
amount of US$1,350,000.
Operations
Total gold production increased 11% to 367,690 (2010 -
329,971 ounces (100%)). Total cash cost per ounce
decreased 0.5% to US$650 (2010 - US$653 per ounce) (see
the Non-IFRS Financial Measures table).
The Zun-Holba and Irokinda Gold Mines produced 131,877
ounces (2010 - 135,636) (100%) at a total cash cost of
US$673 per ounce.
The Taparko-Bouroum Gold Mine produced 131,519 ounces
(2010 - 127,684) (100%) at a total cash cost of US$584
per ounce.
Gold production at Berezitovy was 104,294 ounces (2010 -
66,651 ounces) (100%) at a total cash cost of US$ 702 per
ounce.
High River's subsidiary in Burkina Faso, Bissa Gold
S.A. ("Bissa Gold"), was granted the mining
license for the Bissa Gold Project by the governmental
authorities of Burkina Faso for a term of 20 years with a
possibility of renewal. Bissa Gold has engaged an EPCM
(Engineering, Procurement, and Construction Management)
contractor and mining and processing suppliers.
Production (100%)
Oz
Cash Operating Costs
US$/Oz
Total Cash Costs
US$/Oz
Buryatzoloto
131,877
571
673
Berezitovy
104,294
601
702
Somita
131,519
537
584
Total/Weighted Average
367,690
650
671
2011 total operating and non-operating cash costs reached
US$671 per ounce. Non-operating cash costs per ounce mainly
represent corporate administration, exploration, and other
expenses such as realized foreign exchange losses.
Zun-Holba and Irokinda Underground Gold
Mines:
Continue to operate close to its full capacity.
Berezitovy Open-pit Gold Mine:
Production levels continue to be constrained by
technical problems.
Higher gold grade and recovery rate as compared to
2010 made it possible to reduce the decline in gold
production against the plan to 12%.
Taparko-Bouroum Open-pit Gold Mine:
Production increased compared to 2010, mainly due to
the higher amount of processed ore partially offset
by lower gold recovery rate and grade.
Unit cash cost increase was caused by several
factors, among them lower gold recovery rate, lower
ore grade, local currency inflation and its
strengthening against the US dollar.
Corporate
On January 24, 2011, the Company's shareholders
approved the change of the Company's governing
jurisdiction from the Canadian federal jurisdiction under
the Canada Business Corporations Act to the
Yukon Territory under the Business Corporations Act
(Yukon). The Company received its Letter of
Satisfaction dated January 25, 2011. Industry Canada
issued the Certificate of Discontinuance effective
February 2, 2011. The effect of these filings was to
transfer the governing jurisdiction of the Company from
the Canadian federal jurisdiction to the Yukon
Territory. In connection with the continuance, the
shareholders also approved a new general by-law. The
Articles of Continuance and the new by-law are available
on www.sedar.com.
The Arbitration Court of the City of Moscow (the
"Moscow Court") terminated the official
bankruptcy proceedings for Prognoz Silver LLC
("Prognoz Silver") in connection with the
application of Prognoz Silver claiming that the criteria
of bankruptcy are no longer in place.
In October 2011, the share capital of Berezitovy was
increased which resulted in the increase of the
Group's interest in Berezitovy up to 99.91%.
In addition, Argentum CJSC ("Argentum"), a
joint venture partner in the Prognoz Silver Project,
applied to the Moscow Court to commencing official
bankruptcy proceedings for Prognoz Silver.
Konstantin Sobolevskiy resigned as Chief Executive
Officer effective March 5, 2012.
DISCUSSION OF FINANCIAL RESULTS
Selected Financial Results
(in thousands of Canadian dollars except per share
amounts)
2011
2010
2009
Gold revenue
$563,789
$ 435,615
$ 363,259
Net income (loss)
170,364
114,852
(9,764)
Net income (loss) per share (basic)
0.20
0.14
(0.02)
Cash provided by (used in) operating activities
189,867
154,344
125,496
Total Assets
840,218,962
812,332
706,962
Loans and interest payable
$563,789
25,025
84,031
Weighted average number of shares outstanding (basic)
170,364
816,437,980
634,009,385
The Company's consolidated net gold revenue for 2011
increased to $563.8 million from $435.6 million in 2010. An
increase in the gold price was the main growth factor. The
average realized price was US$1,543 per ounce compared to
US$1,238 per ounce in 2010.
The Company reported a net income of $170.4 million ($0.20
per share) in 2011 compared to a net income of $111.6
million ($0.13 per share) during 2010.
Cash flow from operations of $188.9 million, up from $
154.3 million in 2010.
OVERVIEW OF OPERATIONS
Underground Mines
The Company's attributable gold production from
Buryatzoloto was 112,016 ounces in 2011, compared to
115,209 ounces in 2010. Buryatzoloto continues to be
profitable and in general achieved its production
objectives for 2011, with 131,877 ounces (100%) of gold
produced at an estimated total cash cost of US$673 per
ounce as compared to 135,636 ounces of gold produced at a
total cash cost of US$628 per ounce in 2010. (See the
section Non-IFRS Financial Measures regarding total cash
costs.)
Unit cash cost increase in 2011 was caused mainly by
macroeconomic factors such as local currency inflation and
its strengthening against the US dollar. Inflation rate is
on average around 10% per annum in Russia but could be
higher for some inputs used in mining industry. In
particular salary inflation was the case for Buryatzoloto
in 2011 as well. Russian currency strengthened against the
US Dollar during 2011 making US dollar denominated unit
cash cost higher.
Buryatzoloto continues to operate close to its full
capacity. The Company's goal is to maintain historic
production levels. The amount of mineable reserves is a
concern for the management. An exploration program to
extend the life of the mines is underway at Zun-Holba and
Irokinda mines and the Company expects the new reserve and
resource estimates for Buryatzoloto mines in 2012.
Open Pit Mines
Berezitovy Mine (Russia)
Berezitovy continued to experience technical problems
during 2011. However, higher gold grade and recovery rate
as compared to 2010 made it possible to reduce the decline
in gold production against the plan to 12%. Berezitovy,
like Buryatzoloto, was affected by stronger local currency
and inflation. However, unit cash cost growth at Berezitovy
compared to 2010 was limited by higher gold grade (which
required fewer tons to be processed) and a significant
production increase (due to the effect of fixed costs which
do not depend on production variance and therefore scale
back cost per unit of production).
Taparko-Bouroum Mine (Burkina Faso)
Somita was 17% behind production plan in 2011 due to lower
ore processing caused by lower availability of loading
equipment in mining and lower gold recovery rate caused by
the increase of the processing rate up to 200 tons per hour
partially balanced by higher ore grade. At the same time,
gold production increased as compared to 2010 due to the
higher amount of processed ore partially offset by lower
gold recovery rate and grade. Unit cash cost increase at
Somita in 2011 was caused by several factors, among them
lower gold recovery rate, lower ore grade, local currency
inflation and its strengthening against the US dollar.
Lower gold recovery rate and lower ore grade mean that to
produce the same amount of gold higher volume of mining and
processing is needed, which therefore pushes up the unit
cost.
Exploration Projects
In 2010, the Company applied for a mining license in
relation to the Bissa project and the license was granted
in June 2011. At the same time, High River continues
exploration at the Bissa group permits. In Q1 2011, a new
technical report compliant with National Instrument 43-101
-Standards of Disclosure for Mineral Properties
("NI 43-101") was released, which included
mineral resource estimates for the Bissa project and some
exploration properties in Burkina Faso (Yeou, Ankouma,
Bouly, Gougre, Zinigma).
AMENDED STATEMENT OF EXECUTIVE COMPENSATION
The Company has re-filed on SEDAR an amended and restated
Form 51-102F6 Statement of Executive Compensation for
the year ended December 31, 2010 (the "Executive
Compensation Statement"). The original Executive
Compensation Statement was filed on March 31, 2011. The
revised Executive Compensation Statement now provides
disclosure that complies with Item 1.3(4) of Form 51-102F6
regarding external management companies and includes
compensation of the Company's officers that is paid by
the Company's controlling shareholder to such officers
and is attributable to services provided to the Company by
such officers.
CLARIFICATION OF BOULY RESOURCE DISCLOSURE BY NORD GOLD
The Company wishes to clarify the statements made by
Nikolai Zelenski, the Chief Executive Officer of Nord Gold
N.V., the Company's controlling shareholder, at the
European Gold Forum in Zurich, Switzerland in April 2011.
During his presentation, Mr. Zelenski referred to estimated
mineral resources at the Company's Bouly property that
were higher than the mineral resources disclosed in the
Company's public record. Although the Company believes
that its public record in respect of its Bouly property
complies with the standards prescribed by NI 43-101, it
felt a clarification was appropriate following discussions
with certain shareholders and the Ontario Securities
Commission. Mr. Zelenski's statement was informed by
the Russian reporting standards rather than NI 43-101,
which standards include conceptual "prognostic
resources" that are similar to "exploration
targets" as defined in NI 43-101. The mineral
resources that Mr. Zelenski was referring to were
equivalent to "exploration targets" and therefore
should be considered by investors as "exploration
targets" rather than mineral resources, since the
potential quality and grade of such exploration targets is
conceptual in nature. In addition, the Company expects to
prepare an updated mineral resources estimate for its Bouly
property in Q2 2012, which shall be released shortly
thereafter.
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 2011 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.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of Canadian Dollars)
As at
As at
As at
Notes
December, 31 2011
December 31, 2010
January, 1 2010
ASSETS
(Note 23
)
(Note 23
)
Current Assets
Cash & cash equivalents
3
162,310
153,964
82,061
Inventories
4
121,690
97,663
81,090
Loans to related parties
5
24,361
7,951
-
Other assets
6
37,690
29,015
30,909
346,050
288,593
194,061
Non-Current Assets
Exploration and evaluation assets
7
80,035
114,610
102,852
Mine properties
8
107,105
53,296
76,166
Property, plant & equipment
9
244,131
188,788
210,566
Available for sale financial assets
86,023
109,633
64,810
Loans to related parties
5
57,219
-
-
Other assets
6
9,654
1,320
845
Deferred tax assets
10
77,610
56,223
42,720
661,777
523,871
497,959
TOTAL ASSETS
1,007,827
812,463
692,020
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities
11
51,566
34,576
33,753
Loans and other borrowings
12
20,531
23,794
69,454
Derivative Financial Liabilities
12
-
-
13,685
Income tax payable
16,705
19,787
5,695
88,802
78,157
122,587
Non-Current Liabilities
Loans and other borrowings
12
-
1,232
14,398
Provisions
13
19,147
17,437
15,126
Deferred tax liabilities
10
93,957
70,782
48,917
113,104
89,451
78,441
TOTAL LIABILITIES
201,906
167,608
201,029
EQUITY
Share Capital
16
641,298
641,298
611,815
Warrants
16
-
-
13,265
Contributed surplus
25,079
24,621
15,991
Debenture conversion option
-
538
538
Available for sale reserve
70,930
90,284
50,967
Foreign currency translation reserve
(45,071
)
(34,367
)
-
Retained Earnings/(Deficit)
58,515
(109,917
)
(221,576
)
Equity attributable to equity holders of the Company
750,751
612,458
471,000
Non-controlling interest
16
55,169
32,398
19,991
TOTAL EQUITY
805,920
644,856
490,991
TOTAL LIABILITIES AND EQUITY
1,007,827
812,463
692,020
High River Gold Mines Ltd.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
For the year ended 31 December
(In thousands of Canadian Dollars)
Note
2011
2010
(Note 23
)
Revenue
Gold
563,788
435,615
Silver
10,161
5,154
573,950
440,770
Cost of sales
(325,365
)
(264,232
)
Gross Profit
248,585
176,538
Exploration expenses
-
(15,518
)
General and administrative expenses
(7,389
)
(4,475.00
)
Other expenses
(11,495
)
(12,914
)
Interest income
8,609
2,004
Finance costs
(6,636
)
(10,630
)
Change in fair value of derivative
-
13,685
Profit before income taxes
231,673
148,690
Income tax expense
10
(40,470
)
(24,625
)
Profit for the year
191,203
124,065
Attributable to:
Non-controlling interest
20,839
12,407
Equity holders of the Company
170,364
111,658
Profit for the year
191,203
124,065
Other Comprehensive (loss) Income
Net (loss) gains on available for sale financial assets
(19,355
)
39,317
(net of tax of $4,510, 2010 - ($6,488))
Exchange differences on translation of foreign
operations
(10,704
)
(34,569
)
Other comprehensive (loss) income, net of tax
(30,059
)
4,749
Attributable to:
Non-controlling interest
20,839
12,407
Equity shareholders of the Company
141,219
116,407
Comprehensive Income, net of tax
162,058
128,814
Profit attributable to equity holders of the Company
170,364
111,658
Weighted average number of ordinary shares outstanding
840,218,962
840,218,962
Basic and diluted earnings per share
0.20
0.13
High River Gold Mines Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in thousands of Canadian Dollars)
Year ended
OPERATING ACTIVITIES
December 31, 2011
December 31, 2010
Profit after income taxes
191,203
124,065
Adjustments to profit for non-cash items
Depreciation of property, plant and equipment
79,829
58,199
Accretion expense
1,391
1,364
Write-down of exploration
34
1,533
Loss/(gain) on disposal of investments
1,873
(10
)
Non-cash mining costs
(3,264
)
(25,081
)
Fair value adjustment to financial instruments
-
(13,685
)
Gain/loss on disposal of property, plant and equipment
(231
)
57
Deferred tax expense
44,640
(1,171
)
Other non-cash items
(7,813
)
11,512
Working Capital Adjustments
Change in trade receivable and other assets
(34,240
)
5,296
Change in inventories
(22,631
)
(14,535
)
Change in other assets
(32,137
)
(2,535
)
Change in accounts payable and accrued liabilities
8,625
13,409
Income Tax Paid
(37,412
)
(4,073
)
NET OPERATING CASH FLOWS
189,867
154,344
INVESTING ACTIVITIES
Investment in exploration and evaluation assets
(26,874
)
(17,109
)
Expenditure on property, plant and equipment
(74,421
)
(39,176
)
Allocation of restricted cash
Proceeds on sale of property, plant and equipment
1,547
1,641
Loans advanced
(62,929
)
-
Other investing activities
(21,182
)
(818
)
NET INVESTING CASH FLOWS
(183,859
)
(55,462
)
FINANCING ACIVITIES
Proceeds from debt issuance
10,340
10,154
Payments of loans and borrowings
(5,935
)
(60,822
)
Proceeds from exercise of share options
-
26,248
NET FINANCING CASH FLOWS
4,405
(24,420
)
Increase in cash and cash equivalents
10,413
74,462
Net foreign exchange difference
(2,067
)
(2,559
)
Cash and cash equivalents, beginning of the period
153,964
82,061
Cash and cash equivalents, end of the period
162,310
153,964
distributed by
This press release was issued by High River Gold Mines Ltd. and was initially posted at http://www.thepressreleasewire.com/client/high_river_gold/release.jsp?actionFor=1592364&releaseSeq=0 &year=2012 . It was distributed, unedited and unaltered, by noodls on 2012-03-31 14:05:01 PM. The issuer is solely responsible for the accuracy of the information contained therein.
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