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« What’s More Important: Price Per Ounce or Ounces Owned? | Main | Yamana Gold Incorporated Results 04 March 2010 »
Thursday
Mar042010

March 3, 2010 Bloomberg article - indirectly values HRG

HRG Logo 31 July 2009.JPG


Team, Thanks to Chris Charlwood for alerting us to this news item on Bloomberg regarding High River Gold (HRG) for your information:

Yesterday's Bloomberg  article (posted below) reiterates some of the statements made in the recent Reuters article. Severstal is definitely not making a low ball offer to High River Gold (HRG) shareholders short term, are probably going to buy out Troika's (?) shares and have acknowledged that when they do take their gold assets public, they may do so with only the stakes they own. As mentioned, this is good news as the HRG shares will have to move up to mirror the values Severstal would be stating to the investment banks taking them public. Otherwise, if HRG is still trading at these low levels, the banks could be doubting the Severstal Gold values with HRG as the measuring stick
 
Could this be the turning point for us shareholders in that Severstal may start promoting the HRG turn around story?  The answer could be in this article where Severstal for the first time puts a value on their gold asset at  $3.9B - similar to Polymetal. If true, then HRG should be worth 56% of this number due to its projected 300,000 oz of production out of  Severstal's 533,000 total for 2009.  In essence, this values HRG near $2.2B or  $2.75/share. Also, I suspect a majority of the projected 25% growth in production will come from HRG. Not surprisingly, the $2.75/share value is not too far off  the recent $2.48/share target price Olma put on HRG.
 
 

 
Bloomberg
Severstal May Buy Foreign Assets to Boost Gold Output (Update1)
March 03, 2010, 12:22 PM EST

By Ilya Khrennikov
March 3 (Bloomberg) -- OAO Severstal, the steelmaker controlled by Russian billionaire Alexei Mordashov, said its gold unit may buy more foreign assets as it seeks to expand production of the precious metal.

“We will consider acquisitions in those regions where we operate already, which are Russia, Kazakhstan and West Africa,” the unit’s Chief Executive Officer Nikolai Zelenski said.
Mordashov, 44, vowed in 2007 to turn Severstal into Russia’s third-biggest gold miner. Last year, it became Russia’s second-largest, after OAO Polyus Gold, as the price of the precious metal rose to a record. Crew Gold Corp., a producer of the metal in Guinea, last week said it received a 2.35 billion- kroner ($400 million) offer from Severstal.

Severstal’s bid “represents a good opportunity for minorities to cash out at a good price,” Zelenski said in a Feb. 27 interview in Moscow. Severstal has a 27 percent stake in Weybridge, England-based Crew, while Canadian bank Endeavour Financial owns 38 percent.

Severstal, which is Russia’s largest steelmaker, entered the gold industry in 2007 when it bought a stake in London-based Celtic Resources Holding Plc. Severstal Gold has the potential to increase output by as much as 25 percent at current mines to about 650,000 ounces a year, Zelenski said.

It hasn’t decided whether to sell shares of the gold unit in an initial public offering and has no timetable for any potential sale, Zelenski said.

Company Valuation
“We aren’t preparing for an IPO,” he said. “What we could list some day is a holding company which owns all stakes in gold producers that Severstal currently owns.”
Severstal Gold should be valued at a similar price to OAO Polymetal, the Russian gold and silver producer, Zelenski said.

“We are approximately the same size, if you convert Polymetal silver production into gold equivalent,” he said. St. Petersburg-based Polymetal’s depositary receipts closed yesterday in London at $9.80, valuing the company at $3.9 billion.

Spinning off the gold unit would mean Severstal doesn’t need to buy out minority shareholders in High River Gold Mines Ltd., which accounts for more than half of its output, he said.
“We may buy out one or two large minority holders of High River but plan no tender offer for all of the holders,” he said.

Largest Minority
Troika Dialog is the largest minority shareholder in Toronto-based High River with 19 percent, according to data on High River’s Web site.

Severstal plans $130 million of capital expenditure for gold this year, after spending a combined $200 million in 2008 and 2009, Zelenski said. Severstal has carried out studies on two potential mines with output of as much as 250,000 ounces, he said.

Severstal rose 2.8 percent today in Moscow and closed at 364.18 rubles. Crew Gold fell 11.3 percent in Toronto to C$0.315. High River Gold rose 1.3 percent in Toronto to C$0.79.
--Editors: Tony Barrett, Simon Casey

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net
To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net
 




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Reader Comments (2)

All nice and fine.The problem is that 2.48 or 2.75 share value is going to take forever to reach.
{{{With all due respect}}} The reason being is that we have {to many idiots}out their who can't hang on to their shorts to let this thing develop.
As soon as they see this going to 1.20 or 1.40 they run.......
I have to run run before it drops again and it will.
If you can't afford to play the game stay home.Just like the last run up. This stock has nothing to do with the price of gold going up or down.
If they would have stayed in , then we would be at a 1.40 to 1.60 @ this point & time..............................
Now that is my opinion take it for what it's worth.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * *
The old bull & the young bull are standing on top of the hill overlooking a herd of cows. The young bull says to the old one, let's run down & do one of does cows.Hold on young feller, let's just take our time & mosey on down & take them all to the ""BANK"" Do you catch the drift?
HAVE A NICE DAY

March 5, 2010 | Unregistered CommenterHERMENATOR

Hrg Is a waste of time over 700 million share outstanding
its about as diluted as an financial apothacary can make it.
And frankly with so little ounces of gold to show the money
it isnt worth the risk.
If you want to purchase a risk like this it's better to buy
something like
Santa Fe Gold instead. They have a million ounce proven reserves and only 68 million shares outstanding
and they trade at only a $1.00 a share.They are listed on the OCTBB also. .26 cents to 1.76 for the year high and low
You can trump all you about HRG but there just another Harken Energy. Better to stay away from tghis loser!!!!

March 14, 2010 | Unregistered CommenterDoug Grant

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