High River Gold soldiers on

Is debt-laden High River Gold Mines (HRG-T) clawing its way back from the brink?

News that the Toronto-based gold miner has managed to whittle down its debt load, increase cash flow and improve its working capital deficit sent its shares up 3 or 21.4% to 17 apiece today with 4.4 million shares changing hands.

In the first quarter High River Gold – with interests in producing mines and advanced exploration projects in Burkina Faso and Russia — reported that its current and long-term debt levels fell to $175.8 million in the first quarter from $188.1 million at the end of 2008.

But it still has a long, long way to go to regain its equilibrium and remains in breach of various financial covenants under loan agreements with Royal Gold and Russia’s Severstal, High River Gold’s largest shareholder, neither of whom have taken any action so far but have reserved the right to do so.

High River also reported that cash flow from operations moved out of the red to $29.7 million in the first quarter, while it cut its working capital deficit from $42.1 million at the end of 2008 to $29.7 million in the first three months to Mar. 31.

Cash and equivalents increased to $25 million from $19.1 million at the end of 2008. The struggling mining company also managed to pare down its operating and non-operating cash costs to $572 per oz. in the first quarter, down from $670 per oz. in the first quarter of 2008.

As of Apr. 30, consolidated debt outstanding was about $122 million (down from $137 million as of Mar. 1) including US$54 million under loans between Nomos Bank and High River’s Russian subsidiaries, Buryatzoloto and Berezitovy; US$27 million under a loan agreement between Royal Gold and High River’s subsidiary, Somita SA; and about US$27 million under loan agreements between Severstal and High River and Somita SA (this loan was previously held by Standard Bank and assigned to Severstal on Apr. 20).

Total scheduled principal and interest debt repayments due in May and June amount to about US$15.5 million, with about US$22 million additional repayments due in the second half of 2009.

Additionally, as of Apr. 30, High River Gold’s consolidated accounts payable totalled US$20 million.

The company is considering alternatives regarding additional financing required to ensure that it will be able to meet its obligations, but “there can be no assurances that the company will secure the required financing,” it conceded in a press release.