Russian gold raises High River (August 13, 2002)

Near record production from the 50%-owned New Britannia Mine in Manitoba and an increased stake in Russian gold miner Buryatzoloto powered High River Gold Mines (HRG-T) to a second-quarter net income of $2 million.

The earnings, which translate into 3 per share, came on revenue of $25.1 million, and compare with a year-ago loss of $1.7 million (a nickel per share) on revenue of $5.3 million. Cash flow from operations vaulted $5 million to $5.3 million.

For the first half of 2002, High River’s net income piled up to $1.4 million (3 per share) on revenue of $33.3 million, compared with a loss of $3.4 million (a dime a share) on $11.6 million. Cash flow improved to $6.7 million from $700,000.

For the half-year, High River’s take from the Buryatzoloto operations – the Zun-Holba and Irokinda mines in the Buryat region in eastern Russia, was 42,474 oz. produced at a total cash cost of US$191 per oz., up from the 19,302 oz. produced at US$167 per oz. the previous year. The increase is thanks to High River’s increased stake in Buryat, which now stands at 51% on a fully diluted basis. The company can boost its stake in Buryat to 54.45%.

An 86-km-long power line to connect Zun-Holba to the local power grid is on schedule for commissioning before the end of the year. The new line is expected to generate savings of up to US$25 per oz. gold.

The company’s haul from the New Britannia mine was 28,923 oz., 1,784 oz. more than a year ago. Total cash cost climbed US$6 per oz. to US$196 per oz. The mine is well ahead of its 2002 target of 110,000 oz.

The remaining half-interest in New Britannia is held by TVX Newmont Americas (formerly TVX Normandy Americas). As part of its three-way merger deal with Kinross Gold (K-T) and Echo Bay Mines (ECO-T), TVX, which already has a 50.1% stake, must purchase Newmont Mining‘s (NEM-N) 49.9% interest in the joint venture for US$180 million.

The Russian operations realized an average of US$299 for each oz. produced while New Britannia averaged UUS$308, both significantly higher than a year earlier.

During the quarter, High River boosted its stake in the advanced Taparko project in Burkina Faso, West Africa, by picking up Queenstake Resources‘ (QRL-T) 18.5% stake for $1.2 million. High River then inked a deal with Axmin (AXM-V), which owns the nearby, 275-sq.-km Bouroum property, to study the feasibility of jointly developing the two projects.

High River has begun a US$500,000 exploration program aimed at adding new near-surface resources to Taparko’s current resource totalling 12.6 million tonnes grading 2.6 grams gold at a cutoff grade of 1 gram per tonne.

More recently, High River agreed to acquire the Berezitovoye project in the Amur region of southern Siberia, from a Russian company, Khaikta Ltd. for 6.8 million shares plus US$2.75 million in cash. More shares will follow based on proven and probable reserves outlined in a final feasibility study.

The project hosts a resource of 14.1 million tonnes grading 3.05 grams gold and 14.3 grams silver per tonne, plus 0.93% zinc and 0.57% lead. The estimate is based on a cutoff grade of 1 gram gold per tonne and follows Russian classification guidelines, corresponding roughly to measured and indicated categories in the Western system. An audit of the reserves by Toronto’s Roscoe Postle Associates is ongoing.

High River is talking with Buryatzoloto about a joint venture on the project.

At the end of June, High River had working capital of $17.3 million, up from $1.9 million at the end of 2001.