Goldrush tries to walk away from High River

Goldrush Resources (GOD-V) says it is severing its ties with High River Gold Mines (HRG-T), but just how clean such a break will be remains to be seen.

The Vancouver-based company blames an inability to modify a three year old strategic agreement between the companies for the split.

The agreement gave Goldrush permits to a large swath of gold exploration ground in Burkina Faso and gave High River certain back-in rights.

But disagreements over who is on the hook for money that could be due to the Burkina Faso government for lapsed fees on some of the land has been a sticking point for the companies.

“Goldrush has been a loyal partner to High River and has very patiently waited while High River has attempted to resolve its financial and management issues over the past year. Regrettably, the parties have not been able to agree on modified terms to the (agreement) in a manner that would be considered fair by both parties,” Goldrush’s president and chief executive Len Brownlie said in a statement.

The financial and management “issues” alluded to Brownlie have to do with the intense corporate upheavals that have transpired at High River over the past year.

Mounting debt issues, fuelled by continuing operational problems at its producing gold mines in Burkina Faso and Russia, led to one of its largest creditors — the Russian-based steel giant Severstal — taking a major stake in the company.

Severstal moved up to a 61.7% interest in the company on Aug. 10 and has replaced almost all of High River’s former management team with Russian nationals.

The changes at High River’s head office have, no doubt, made negotiations with Goldrush more difficult, leaving Goldrush to decide on a switch in strategies in an effort to release itself from the quagmire.

“We look forward to reactivating Goldrush’s exploration efforts to take advantage of the current strong gold market,” Brownlie said.

And while Goldrush is left with the promising Ronguen gold deposit it finds itself in a delicate financial position.

As of Sept. 30th the company had just $128,808 of cash in its coffers and $250,402 in accounts payable under its current liabilities.

While it had been negotiating with High River on $159,699 of the accounts payable sum as recently as November, its break with the company leaves the status of the liability in question.

Brownlie was not immediately available for comment.

The $159,699 sum comes from administrative charges due to High River in connection with exploration work done from 2007 to 2008.

Also key to the former negotiations was the money shortfall in connection to certain exploration permits – which have since been returned to High River.

High River exercised its right under the agreement to retain ten of the permits released by Goldrush back in 2008.

Some of those permits, however, were not in good standing and Goldrush admits it may owe High River a portion of the shortfall once the amount has been decided, but could not estimate how much that would be.

It did, however, say that the amount required for the permits is beyond its resources, and that if negotiations didn’t go well it could result in its inability to maintain and develop its properties in Burkina Faso.

The deal between the two companies was initially announced back in 2006 and gave Goldrush 21 of High Rivers exploration permits that covered 4,690 sq. km of gold prospective land in Burkina Faso.

In connection with the agreement Goldrush issued 6.5 million shares common shares to High River and gave it a $1.9 million non-interest bearing loan that is due in 2011.

The deal also gave High River a one-time right to purchase a 50% interest in each property at a cost of 1.5 times Goldrush’s expenses, whereupon a joint venture would be formed with High River as operator.

Goldrush has since dropped or returned all but 5 of the exploration permits, leaving the Ronguen gold deposit as its key asset.

High River’s back-in rights on Ronguen would cost it roughly $4.8 million.

Ronguen is part of the Kindo Group, located only six km northwest of the High River’s Bissa Deposit.

The deposit has an inferred resource of 5.9 million tonnes grading 1.31 grams gold for 249,000 oz of gold.

Bissa has a measured and indicated resource of 15.9 million tonnes grading 1.81 grams gold for 926,000 oz. of gold.