High River (HRG.TO) borrows for Burkina Faso project
HIGH RIVER ARRANGES US $36 MILLION DEBT FINANCING FOR TAPARKO
Toronto, Ontario, August 12, 2004 (TSX:HRG) - High River Gold Mines Ltd. (“High River”) is pleased to announce the signing of an indicative term sheet for a financing debt package totalling approximately US $36 million, representing 65% of the estimated capital requirements for the construction of the Taparko-Bouroum Gold Project in Burkina Faso, West Africa. The financing package is to be provided by Absa Bank Limited of South Africa, acting through its division Absa Corporate and Merchant Bank (“ACMB”), and is subject to the bank’s due diligence process and credit committee approval.
High River owns an 80% interest in the 1,204 square kilometre Taparko property, with the Government of Burkina Faso holding the remaining 20% interest (5% of which is participating), and recently High River purchased a 90% interest (Government 10%) in the nearby Bouroum property. There are a number of deposits on both properties of which six will be exploited, three located on each of Taparko and Bouroum.
The undertaking of the debt financing package:
* has been arranged without a requirement for hedging gold production from the project, thereby providing full participation for the shareholder from higher gold prices. Downside price protection will be satisfied through the purchase of a rolling “put options programme”; and
* will maximize the benefit of the project for High River shareholders by minimizing share dilution.
David Mosher, President and CEO commented, “The project financing is a strong testament to the quality of the Taparko and Bouroum deposits. We are very pleased with the support that we have received from the Government of Burkina Faso and look forward to working with ACMB and the Government in a joint effort to expedite the construction of Taparko. High River plans to use the mining operation at Taparko as a base for expansion in Burkina Faso and throughout the rest of West Africa".
High River recently announced the granting of the “exploitation permit” for the Taparko Project (PR – July 7, 2004) and released results of the bankable feasibility study for the combined Taparko-Bouroum gold project (PR – June 14, 2004). Capital expenditures for the project, including a contingency of 10%, are estimated to be US $51.9 million. Annual gold production is expected to average approximately 91,000 ounces over a seven year period but should exceed 100,000 ounces in each of the first three years. High River believes there is excellent potential to expand both the annual production rate and the mine life.
Highlights of the Financing
The financing provided by ACMB is a limited recourse facility to High River as project sponsor during the construction and commissioning stages. The debt facility becomes non-recourse project financing once technical and financial completion conditions are achieved. The loan facility is expected to be
supported by the Export Credit Insurance Corporation of South Africa Limited (“ECIC”). The loan principal and interest is payable in ten semi-annual amounts commencing after commercial production is achieved. Commercial production is anticipated to occur early in 2006.
Interest is chargeable on a fixed or floating basis as follows:
* at the ECIC floating rate of 6 months LIBOR plus a funding margin per annum; or
* at the ECIC fixed US dollar Commercial Interest Reference Rate (“CIRR”) for the term of the loan.
The loan facility is subject to a “put” purchase programme. The undertaking of a “put” purchase programme is intended to protect a minimum revenue stream to service the loan facility while leaving the upside potential in the price of gold available to the project.
About Absa Bank
The Absa Bank Group is one of South Africa’s largest financial services organizations. The Absa Group provides services to selected markets in the United Kingdom, Germany, the United States, China, Singapore, Hong Kong and throughout Africa. Project financing for Taparko is being provided by the Absa Corporate and Merchant Bank division of the Absa Bank Group.
Expansion Strategy for Taparko
High River has designed the Taparko facility with a longer term operation in mind with the belief there is excellent potential to define additional satellite deposits. High River controls, directly or indirectly through an agreement with Jilbey Gold Exploration Ltd., in excess of 4000 square kilometres of prospective property within trucking distance of the planned Taparko mill. The agreement with Jilbey provides High River with back-in and operatorship rights on discoveries within trucking distance of the mill and a right of first refusal on discoveries outside trucking distance.
A sensitivity study, using a gold price of US $400 per ounce, more than doubles the gold resource to 1.3 million ounces within the three Taparko pits. This significantly increased resource at US $400 gold demonstrates the potential for expanded production and/or an extended mine life at Taparko.
Forward-Looking Statements
This report contains forward-looking statements based on current expectations. These forward-looking statements entail carious risks and uncertainties that could cause actual results to differ materially from those reflected. Risk and uncertainties about the Company’s business are more fully discussed in the Management’s Discussion and Analysis published in the Company’s Annual Report and Annual Information Form.
For further information, please contact:
David Mosher, President and CEO or Don Whalen, Chairman
High River Gold Mines Ltd.
(416) 947-1440 or visit our website at www.hrg.ca
