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High River Gold Update 23 September 2009

HRG Chart 23 Sep 09.JPG

Chris Charlwood has very kindly sent us this update on High River Gold’s (HRG) progress which we very much appreciate and hope that you find interesting and informative.

High River Gold’s (HRG) peer group of West African & Russian mid-tier public gold companies is trading at an average of approx. 15.2 times Q2 Operating Cash flow on an annualized basis. If HRG were trading at this average multiple, the share price would be C$2.33.

Over the last 12 months, HRG has been trading at a low multiple due to the perceived risks of unmanageable debt, potential bankruptcy, potential TSX de-listing, interrupted mill operations and a take-private bid on the company. These risks have mostly been mitigated in the recent past. Severstal (the controlling shareholder) has been doing a good job of turning this company around. If HRG continues to pay down its debt at the same rate as it did in Q2 2009 (C$30M from cash flow), then HRG could be nearly debt free in June  2010. If Severstal converts its debt of US$27M, then the company could be nearly debt free in March 2010. These timelines would be lengthened by any new capital investments and shortened by any sale of equity. In addition, HRG still owns approx. $45M in 3rd party public company investments and Severstal owns $.64 warrants of HRG that if exercised will provide $26M cash to the company.

With almost 90% of the minority shareholders holding on to their shares rather than tender to Severstal’s final bid, HRG now has a very strong investor base setting the stage for the next move up in the stock price with any good news. Minority investors are hopeful that the recent management shakeup at HRG is the beginning of a new strategy to maximizing shareholder value. HRG could restructure some of its debt to lower servicing costs and raise a bit of capital to make final repairs to its mills. If it succeeds in doing both over the next few months, then the future looks even brighter for the company.

Risks Alleviated
1)       Loan payments are all current.
2)       HRG meets all TSX listing requirements.
3)       Severstal made its final take-private bid with nearly 90% of minority not tendering.
Financial Performance for first 6 months to June 30th, 2009 
4)       $44.9M increase in working capital to a positive $2.8M balance.
5)       50% increase in Gold production to 141,554 attributable oz vs. 94,624 last year.
6)       $52.5M positive cash flow from operations – on track to over $100M for 2009.
7)       $53M of debt paid down to a balance of C$135M from $188M.
8)       $40M of this debt was paid down in Q2 (funded by approx. $30M cash flow and $10M Severstal private placement).
9)       $20.8M pro-forma profit for Q2 (excluding the Prognoz Silver asset write down)
10)   HRG says 300,000 oz to be  produced in 2009
11)   Bissa feasibility study to be completed in 2009 with goal to advance resource to multi-million oz level.
12)   Prognoz has 102M oz indicated and 103M oz inferred silver.
13)   Many analysts predict gold prices to trade into the 1100-1200/oz range in 2010.
HRG Q2, 2009
HRG Q1 2009    
Chris Charlwood
Retail Investor

Taking a quick look at the chart we can see that High River Gold has made steady progress since April lets hope that it continues to head north.

Enjoy this sparkling day but don't go to sleep, the economic environment is changing at a fast pace so read as widely as you can to stay on top of events and build your portfolio in this sector in an orderly fashion.

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Reader Comments (10)

Is anyone buying more?

September 23, 2009 | Unregistered CommenterGAry

A very good question, we'll see if any of our readers respond.

September 23, 2009 | Unregistered CommenterGold Prices


September 24, 2009 | Unregistered CommenterBONNIE

We bought 150,000 more shares yesterday at .36 american cents, w/ 300,000 oz. projected production for 2009 How can you go wrong?

September 24, 2009 | Unregistered CommenterVincent


If your stock broker cannot offer you the service that you need in order to trade globally then maybe its time to find another broker who can. We are not saying ditch your current broker but you could consider having two or more in order to get the coverage that you require. But we are not financial advisers so please discuss the matter with your adviser.

September 24, 2009 | Unregistered CommenterGold Prices


Good luck with your purchase, but as always go gently, its a sea of shark invested custard out there.

September 24, 2009 | Unregistered CommenterGold Prices

Please forgive my typo, that should read 15,000 shares at .36, and plan on buying more when she dips.Thx for the expousure and all the great insight, keep it up. Vincent

September 25, 2009 | Unregistered CommenterVincent

It looks like they have had a shake-up in their Board and Officers in September:

Resignation of their VP of Exploration,
Resignation of their CEO, a new CFO, change of board member, and a new investor relations contact.

Is this a good time to buy stock in HRG?

September 25, 2009 | Unregistered CommenterDiana

Who knows..My price on this stock is around two and change. It still seems on shaky footing to me. I will wait until I see Bob purchasing at the news letter. Then I would enter. Not until then. I am down enough on this stock.

September 25, 2009 | Unregistered CommenterGAry


We are not moving on HRG at the moment, however that does not mean that is not a good buy. We are watching the whole market and when an opportunity shows itself we will move then.

September 28, 2009 | Unregistered CommenterGold Prices

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