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« Fronteer down 8.8% on Aurora vote! | Main | Gold-Prices.biz: Portfolio Update 05 April 2008 »
Monday
Apr072008

High River Gold: Acquire!

High River Gold Logo

The current pull back in gold prices has hit some gold mining stocks harder than others and should now be viewed as an entry point for our ‘opportunity cash’. One such stock is High River Gold Mines Limited, so we took the opportunity to acquire more of their shares today at $2.48 and we are signalling an additional BUY on this stock from a short term trading perpective.

HRG Chart 07th April 2008

Taking a quick look at the chart we can see that this stock has been sold down from a previous high of around $3.45 so today’s price levels offer a considerable discount. The technical indicators are almost at the bottom of their respective ranges indicating that the worst is behind us.

This stock may still fall a little further but we are of the opinion that the downside is limited. We are also expecting gold to put in a short rally over the next couple of weeks so this purchase fits well with both our long-term holdings and our short term trading account.

Part of the reason for the 'sell off' of High River Gold may lie in its recent financial statement where they said:

“Net loss for 2007 was $12.0 million, or $0.05 per share”


Enough to give some investors the jitters!

However, if we read deeper into this financial statement we find that all looks good to us. For instance;

“The groundwork has been set for 2008 gold production to double from 2007 levels”

- “Project specific working capital financing totalling US $25 million, private placements totalling $23.95 million, and a $100 million "bought deal" financing were completed to put High River and its mines on a strong financial footing going forward. High River, fully funded and with future cash flow from its two new mines, expects to be well positioned to capitalize on merger and/or acquisition opportunities accretive to the share price”.


“Total long-term financial liabilities decreased in 2007 due to the repayment of a portion of debt related to mine construction”.

Each mining stock will exhibit unique behaviour during a sell off, some will fall only slightly, others a little further and for some, the pendulum will swing right past a reasonable resting place. These aberrations may only exist for a short time, so it is up to us to recognise them and be ready to act swiftly in order to take advantage of them. So, following our ‘heads up’ in yesterdays portfolio update we have made our move.

As always don’t go too mad on this one and keep some capital on hand for there might be another opportunity coming your way shortly. A number of mining stocks look attractive at the moment, however we need to keep one eye on the calendar as the merry month May approaches.

If you do not have any investments in this sector and would like to follow our adventures in gold and associated precious metals mining opportunities then please click here to receive our free investors newsletter.


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Reader Comments (8)

Hi there!

I noticed you decision on High River but when try to analize it at etrade, it seems that the stock only appears as an OTC grey market with the symbol HRIVF.

I cannot find it at HRG.TO

Regards.
RR

April 8, 2008 | Unregistered CommenterRandolph

RR,

Yes, its unfortunate that etrade do not cover it, but it is there. If you go on to TSX.com and enter HRG it will bring it up. Not all brokers cover every stock, we have more than one account so as not to be limited by what any particular broker can offer.

April 8, 2008 | Unregistered CommenterGold Prices
April 12, 2008 | Unregistered Commenterep

April 24 may be a good day to buy some HRG??

April 24, 2008 | Unregistered Commenterep

I don't understand why I get an alert on High River dated April 4, 2008 two years later on April 27, 2010. At the least the info is "slightly" dated.

April 27, 2010 | Unregistered CommenterRex

Rex,

Some time ago our readers asked us to group together articles about a particular company so that they didn’t have to search the whole site to see what we had written in the past about that company.

So we came up with the idea of relating articles by the company name, which works well for Agnico as the system then groups together those articles about Agnico.

However for articles of a more general nature the system does not work so well. Hopefully we can improve on it in future.

Best wishes,

Bob

April 27, 2010 | Unregistered CommenterGold Prices

One question, does your acquire signal from 4/7/08 describe your sentiment today.

April 29, 2010 | Unregistered CommenterVincent

To HRG Shareholders/Potential Investors,

HRG released its Q4 and year end results last week and following are some important data points:

Existing

1) Gold revenues 2010 of $435.61M , Q4 of $123.3M ($493M annualized).

2) Cash flow 2010 of $155.9M , Q4 of $49.3M ($197.2M annualized).

3) Net income 2010 of $114.9M, Q4 of $22.3M ($89.2M annualized).

4) 2010 notable expenses – Mine Amortization & Depletion $60.7M, Exploration $15.5M

5) Gold production 2010 of 329.9K oz, Q4 of 87.9K oz. (351.6k oz annualized).

6) Liquid Assets of $263.5M ($153.9M cash and $109.6M third party stock).

7) Debt (& interest) of $25.2M

8) Liquid Assets net of debt - $238.3M

9) CIM Classified gold reserves (Proven & Probable) of 3.75M oz, CIM Classified gold resources (Measured and Indicated) 5.1M oz and Inferred of .7M oz. Silver resources of 103M oz (Measured & Indicated) and 102M oz of Inferred. HRG owns 50% of the silver property Prognoz. 50% in gold equivalent = 2.8M oz (@ 73 to 1)

10) Proven operational management team.

Potential

1) 2M oz of additional gold at Bissa.

2) 50% of 363M oz of additional silver at Prognoz (4.9M oz gold equivalent).

3) Severstal is built in buyer of minority shares.

4) Gold likely to trade at $1500-$1600 oz in 2011.

5) Zun-Holba and Irokinda mine lives likely to be extended.

HRG is trading at 3.7 times Q4 cash flow (net of liquid assets and debt). 840M shares @ $1.14= $958M market cap - $238.3M net liquid assets / $197M annualized cash flow).

It has been two years since we minority shareholders realized that Severstal (which had just made a controlling investment in HRG), was strategizing to buy us out. The signal for us was the string of extremely negative press releases put out by HRG management (Severstal employees). Our hunch was correct. The first proposal came in at $.18/share. 90% of us knew the underlying value of the business and did not tender our shares. It’s now 2 years later and the above results prove our point. Today, many of us remain invested with full resolve to see the fair value of this company. What is the fair value? Anyone would be hard pressed to find another gold producer that trades at HRG’s low cash flow multiple. By any comparisons, HRG should be trading at double to triple the current price. If Prognoz value is released, then even that would be conservative.

Those that invest now or remain invested will be rewarded. At some point, Severstal/Nord Gold will have to realize its value on its 72.64% ownership in HRG. Q1 results will come out on May 15th. If production remains the same as Q4, we will see $51M of cash flow (avg. gold price up $25 from Q4) - but we may get surprised with increased production from the second ball mill at Berezitovy. In the Nord Gold prospectus, Management said they spent $9.8M in the first 9 months of 2010 on drilling and exploration works at Irokinda and Zun-Holba. They also stated that they are “planning to invest US$23.2 million in 2011 on modernisation of the underground site within exploration projects and US$14.9 million on purchasing new production equipment and other mine fixed assets." As Irokinda and Zun-Holba mines are running low on gold, we look forward to the drill results due by the end of June.

Also, we look forward to a resolution between the battling parties that own Prognoz 50/50. Prognoz is ranked as the world’s 10th largest silver property but actually ranks first in grade at up to 704 g/ton. We hope that these 50/50 owners can come to some equitable agreement soon.

April 23, 2011 | Unregistered CommenterVincent

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