INVESTMENT COMMENTARY — High River low-risk junior with

A joint-venture deal with excellent exploration and earnings potential has prompted Ken Gillis, an analyst with Research Capital Corporation, to recommend High River Gold Mines (TSE) as a buy.

In a recent report, Gillis noted that High River is an emerging Canadian gold producer. Its main asset is a 50% interest in the New Britannia gold project (formerly called Snow Lake) in northern Manitoba.

High River and senior partner TVX Gold (TSE) are equal joint-venture partners in the project, which includes a past-producing mine. TVX has arranged financing for New Britannia and will act as operator once mining gets under way this September.

Annual production is projected at 100,000 oz., and reserves are estimated at 4.6 million tons averaging 0.28 oz. per ton. The expected mine life is eight years.

This past year, the mine was dewatered to the bottom of the existing shaft, and construction of surface buildings was undertaken. Also, the headframe was raised, and hoists are now being installed. Development from the No. 3 zone is ongoing, with ore being stockpiled for later processing.

Gillis considers the mine’s exploration potential to be significant. In other developments, the junior has taken an option on gold and silver production rights from 17 nearby properties controlled by Hudson Bay Mining & Smelting. The option has been rolled into the New Britannia venture, thereby increasing its exploration potential further.

Meanwhile, High River is negotiating for land positions in West Africa and expects to have its first concession, in Burkina Faso, granted in the near future.

For 1996, Gillis estimates that earnings per share, on a fully diluted basis, will be 25 cents and that operating cash flow will be 49 cents per share. The estimates are based on a capital cost of $46.4 million, an operating cost of US$210 per oz., a gold price of US$400 per oz. and a Canadian dollar pegged at US73 cents.

High River has a 52-week high-and-low range of $2.97-to-$1.67. On a fully diluted basis, the junior has 20.6 million shares outstanding, and the latest closing price was $2.20

Gillis believes shares of High River are an inexpensive buy. The production and exploration potential of New Britannia alone leads him to think the issue will likely trade in the $4.50 range.