Siberian mines power High River Gold in 2002

Toronto-based High River Gold Mines (HRG-T) saw its revenues more than triple during the first half of the year as it began consolidating operating results from the Russian gold-mining company OJSC Buryatzoloto.

Since April 1, 2002, High River has held a fully diluted 51% equity interest in Buryatzoloto; prior to that, the company accounted for its interest on a 26.48% equity basis.

For the first half of 2002, taking into account the consolidation for the second quarter and equity accounting for the first quarter, High River posted net income of $1.4 million (or 3 per share) on gross revenue of $33.3 million. In the corresponding period of 2001, the company incurred a loss of $3.4 million (10 per share) on revenue of $11.6 million. Operating cash flow between the two periods rose dramatically to $6.7 million from $700,000 a year earlier.

For the second quarter, the Buryatzoloto consolidation and improved gold prices helped High River post a $2-million profit (3 per share) on revenue of $25.1 million, compared with a $1.7-million loss (5 per share) on revenue of $5.3 million in the corresponding period in 2001. Operating cash flow between the two periods increased to $5.3 million from $300,000.

High River’s consolidated working capital halfway through 2002 was $17.3 million, up from just $1.9 million only six months earlier.

Buryatzoloto’s principal assets are the Irokinda and Zun-Holba gold mines in southern Siberia’s Buryatia autonomous region, east of Lake Baikal. Combined, the two mines produced 147,176 oz. gold last year at a direct cash cost of US$143 per oz.

During the first six months of this year, the mines produced 76,036 oz. gold (High River’s share: 42,474 oz.) at a total cash cost of US$191 per oz., compared with 72,891 oz. gold (High River: 19,302 oz.) produced at US$262 per oz. in the first half of 2001.

High River describes Buryatzoloto as “essentially unhedged,” realizing an average gold price of US$299 per oz. during the recent 6-month period, up from US$262 per oz. a year earlier.

The company says the higher cash costs reflect the elimination of a Russian government rebate on exploration expenses.

Construction of a powerline connecting Zun-Holba to a low-cost regional power grid remains on schedule for commissioning by year-end, and High River expects Buryatzoloto to achieve its planned gold production of 150,000 oz. for 2002.

In July, High River, building on its success with Buryatzoloto, entered into an agreement to acquire the Berezitovoye gold project in southern Siberia’s Amur region.

Under the deal, High River will issue the Russian company Khaikta up to 6.8 million treasury shares and pay a total of US$2.75 million in cash. The final number of shares issued to Khaikta will depend on the size of the proven and probable gold reserves in the study’s open-pit model.

High River will issue the first 4.6 million shares and pay US$1 million on closing, plus 2.1 million shares and US$1.7 million once the feasibility study is completed.

The Berezitovoye project is centred on a deposit with a near-surface resource of 14.1 million tonnes grading 3.05 grams gold per tonne (1.4 million contained ounces) and 14.3 grams silver per tonne (6.49 million contained ounces silver), 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.

A reserve audit by Toronto-based Roscoe Postle Associates, now under way, should bring the reserve figures in line with Canadian standards.

Back in Canada, High River reports near-record gold production at its 50%-owned New Britannia gold mine in Snow Lake, Man. The mine, operated by equal owner TVX Gold (TVX-T), produced 57,847 oz. at a total cash cost of US$196 per oz. during the first half of 2002, compared with 54,278 oz. at US$190 per oz. a year earlier.

New Britannia realized an average gold price of US$308 per oz. over the period, up from the US$267 per oz. a year earlier.

On an annualized basis, High River says New Britannia is well ahead of the full-year target of 110,000 oz. gold.

High River is searching the region for satellite deposits within trucking distance of the New Britannia mill.

In Burkina Faso, West Africa, High River recently boosted to 80% its stake in the Taparko gold project by exercising an option to pick up an 18.5% interest from Queenstake Resources (QRL-T).

Already, High River has launched a US$500,000 exploration program at Taparko to find additional near-surface gold resources, and has entered into an agreement with Axmin (AXM-T) to evaluate jointly a combined mining operation comprising Taparko and Axmin’s nearby Bouroum deposit.

High River holds a 16% stake in Intrepid Minerals (IAU-V), which recently bought the Casposo gold-silver project in Argentina’s San Juan province for US$750,000.

Battle Mountain Gold discovered Casposo and carried out only scoping-level work, delineating a small but high-grade resource of 1.1 million tonnes grading 14.1 grams gold and 192 grams silver per tonne.

High River’s shares have had a wild ride in the past year, rising from the 50 mark in late 2001 to more than $2.50 in early June as gold prices peaked. The share price has since remained in the $1.50 range.