INVESTMENT COMMENTARY — Exposure to foreign projects boosts High River Gold’s potential

A new gold mine in Manitoba and a growing roster of international projects have enhanced the growth potential of High River Gold Mines (TSE).

Mining analyst David James of Canaccord Capital describes the company as an evolving gold producer. In late January, he predicted the company’s share price would reach a target of $5-$6 by early 1997. This prediction proved to be conservative, as the share price has already reached the $5 level.

High River’s current production base is from the recently opened New Britannia gold mine in Manitoba’s Snow Lake camp, a 50-50 joint venture with TVX Gold (TSE). The project is a past producer (formerly known as Nor-Acme), which, between 1949 and 1958, produced more than 600,000 oz. gold.

Now that the mine is up and running, High River’s share of annual production is expected to average 50,000 oz., which, at a gold price of US$380 per oz., should contribute a pretax operating profit of about $12 million for at least eight years. The company’s current share of reserves is about 400,000 oz. However, James notes that an aggressive “area” exploration program is planned.

With this domestic cornerstone in place, High River is attracting interest from mining analysts because of several new foreign projects. Of particular note, James says, is the company’s recent US$2.9-million investment for a 22.9% interest in Russian gold producer Buryatzoloto Gold Mines. Reserves are reported at 3.2 million oz. (proven and probable). This total increases to 8.5 million oz. when possible reserves are taken into account. (High River’s equity share of this total resource is 1.9 million oz.).

The Russian project has a current production rate of about 50,000-55,000 oz., although James says an expansion program is being considered, which would help build the company into a larger producer.

High River also has acquired concessions in Burkina Faso, where gold deposits are the primary target. The company can earn a 61.5% interest in the land package, which features underlying rocks of Birimian age, similar to those that host the Ashanti gold mine to the south in Ghana.

Some previous work has been carried out on the properties, including trenching and drilling on five zones. One of these, the GT, is reported to have a minimum tonnage of about 120,000 tonnes grading 0.4 oz. gold per ton.

More recently, High River and partner Focal Resources announced the start of an exploration program at the Rio Siquia concession in Nicaragua. Exploration will focus on several gold occurrences.