Russian gold raises High River (August 19, 2002)

Near-record production from the 50%-owned New Britannia mine in Manitoba, combined with an increased stake in Russian gold miner Buryatzoloto, propelled High River Gold Mines (HRG-T) to a second-quarter profit of $2 million (or 3 per share) on revenue of $25.1 million.

In the corresponding period of 2001, the company suffered a loss of $1.7 million (5 per share) on revenue of $5.3 million. Cash flow from operations vaulted $5 million between the two periods, to $5.3 million.

For the first half of 2002, High River’s net income amounted to $1.4 million (3 per share) on revenue of $33.3 million, compared with a loss of $3.4 million (10 per 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, which consist of the Zun-Holba and Irokinda mines 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. in the year-earlier period. The increase reflects 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 powerline to connect Zun-Holba to the local power grid is on schedule for commissioning before year-end. 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., or 1,784 oz. more than a year earlier. Total cash cost climbed US$6, 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 3-way merger deal with Kinross Gold (K-T) and Echo Bay Mines (ECO-T), TVX Gold (TVX-T), which already has a 50.1% stake, will 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 ounce produced, whereas New Britannia averaged US$308. Both figures are significantly higher than they were 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. The resource was last pegged at 12.6 million tonnes grading 2.6 grams gold, based on 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 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 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.

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