High River Gold admits it's struggling for survival
Three-month TSX trading for High River Gold
High River Gold Mines Ltd. says its future is in doubt as it tries to cope with a cash shortage and project delays while the board of directors seeks new financing or a buyer for the company.
Among the Toronto-based miner's problems is a delay in its purchase of the remaining 50 per cent stake of the Prognoz silver project in Russia, which had been scheduled to close Friday.
The Prognoz transaction is delayed by at least a month until the end of November while the company awaits approval from Russian regulatory authorities, High River said in a release.
In addition, a delay in achieving "project completion" at the Taparko-Bouroum gold mine in the west African country of Burkina Faso has put the company's Somita SA subsidiary in breach of its financing agreements.
Investors responded to the news by selling off High River's shares, which closed down three cents, or more than 21 per cent, at 11 cents on the TSX. More than 5.6 million shares were traded. They had been as high as $3.50 during the past year.
Under an agreement with Royal Gold Inc., Somita was required to keep its debt to no more than $1 million US before project completion but the unit's debt has ballooned to $8.2 million US.
High River's 90 per cent stake in Somita is security under the lending agreement with Royal Gold. A revolving credit line provided to Somita by Standard Bank PLC is also in default.
Can't make upcoming bank paymentThe company also said its Berezitovy Rudnik subsidiary in Russia doesn't currently have enough money to make a scheduled $15.2-million US payment to Nomos Bank that will be due Nov. 21.
As of Sept. 30, High River had $4.1 million cash on hand and 8,300 ounces of unsold gold worth about $6.2 million US at a price of $750 US per ounce.
"The ability of the company to continue as a going concern is therefore dependent on the on-going discussions with and/or forbearance from the lenders, accommodations from trade creditors, establishing steady production at the two new mines and obtaining additional financing," High River said.
It added that there is no assurance that any of these conditions can be achieved.
2 directors resignAs a result, a special committee of directors has been considering strategic alternatives since September, including a possible sale of the company.
"At the present time there is no certainty that any financing or sale of one or more of the company's projects, or the company itself, will be completed," High River said.
Directors Graham Farquharson and Bob Buchan, who joined the board in September when the special committee was formed, have resigned.
The company said Farquharson was leaving for personal reasons but didn't give an explanation for the departure of Buchan, a mining industry veteran who founded Kinross Gold Corp.
With files from the Canadian Press
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