Gold Exploration in West Africa

[threadhead]

High River Gold to begin building Taparko-Bouroum plant


2006-02-15 10:43 ET - News Release

Mr. Don Whalen reports

HIGH RIVER GOLD PROVIDES UPDATE ON ITS TAPARKO-BOUROUM DEVELOPMENT PROJECT IN BURKINA FASO

High River Gold Mines Ltd. has released an update with respect to its Taparko-Bouroum development project in Burkina Faso.

Construction contract awarded to Senet

High River has entered into a contract with Senet CC, based in South Africa, to undertake the construction of the process plant and associated infrastructure. Senet is a highly reputable engineering and project management firm with extensive experience in Africa within the mining industry. Senet is scheduled to commence construction activities this month.

The company previously engaged MDM Ferroman Pty. Ltd. to complete the basic engineering work and purchase of long lead items and equipment through a soft start contract. This work was completed in December. The switch from MDM to Senet has had no material consequences for the project, but has resulted in some delays and cost increases associated with the revised development plan. Although there may be certain litigation issues with MDM, they are not expected to be of a material nature.

According to the Senet contract, construction of the process plant is scheduled to be completed by the end of 2006, with commissioning ramping up in the first few months of 2007.

Update on capital expenditures

With costs continuing to rise globally, High River has revised its capital expenditures for the project to $70.6-million (U.S.). The increase in capital expenditures is the result of a number of factors including: higher cost for construction materials, and higher freight charges and fuel prices; additional charges related to the decision of contracting with Senet; higher cost associated with the power plant; strengthening of the rand versus the United States dollar for South African-sourced material; and general and administrative charges relating to a longer construction period.

The company has also modified its construction and procurement schedule and is planning to install the hard-rock crushing circuit during the first four months of production. Mining activities will start in May, 2006, to provide soft ore stockpiles when the plant starts operating.

To the end of January, 2006, approximately $29.6-million (U.S.) has been spent on the project, of which $6.4-million (U.S.) was provided by Royal Gold Inc. as part of the $35-million (U.S.) financing for the project. Following the signing of the contract with Senet, an additional drawdown of $3-million (U.S.) was received from RGI. High River has also arranged for a $5-million (U.S.) equipment financing with Caterpillar Inc. ("CAT") for the construction of the heavy fuel oil power plant.

Internal rate of return

The higher gold price environment is positively impacting the economics of the Taparko-Bouroum project, outweighing the additional capital costs. With the revised capital expenditures and mineral reserves of 827,000 ounces of gold (estimated at a gold price of $400 (U.S.) per ounce), the after-tax internal rate of return for the project from first project expenditure based on various gold price assumptions is estimated as follows:


$450/oz $500/oz $550/oz
Internal
rate of
return 20% 27% 34%


Significant potential to add to the mineral reserves

The mineral reserves are sensitive to a higher gold price. The company anticipates optimizing its mining reserves and resources on the project using a higher gold price in the second half of 2006. It is envisaged that additional ounces will be added to the reserves resulting in further enhancing the economics of the project. During the second year of production, High River plans to expand the mill capacity to 1.5 million tonnes per year and to produce approximately 140,000 ounces of gold annually. The company is confident in being able to extend the current mine life beyond eight years and maintain this production level. This can be achieved through: (1) expansion of planned pits at depth and along strike; (2) delineation drilling of a number of potential satellite deposits that have been identified on the Taparko exploitation licence; (3) exploration for additional sources of ore within trucking distance of the mill on exploration licences controlled by High River and its partner, Goldrush Resources Ltd., where High River has back-in rights and a 19.9-per-cent equity interest; and (4) new acquisitions.

Update on construction activities

The company continues to make good progress on the construction of the project. The permanent camp is near completion with only the potable water and sewage systems to install. Earthwork for the plant facilities is complete with excavation and blinding for CIL tanks and tower crane foundation completed. Excavation for the mill and soft-rock crusher is in progress. Rising of the tailings dam is in progress and is expected to be completed within two months. The liner material for the tailings facilities is on site.

Prestripping activities at two of the three Taparko pits are also well under way with over 900,000 tonnes of waste removed. At the 3/5 pit, only one bench of waste remains to expose ore.

Construction of the service road for the Yalogo pipeline is in progress. The pipeline material and pumps are on site and will be installed before May. The company plans to pump overflow water to the project site water containment area from the Yalogo dam, located nine kilometres from the project, during the rainy season (May to September).

The power generation plant, contracted to CAT, is expected to be commissioned in September.

We seek Safe Harbor.

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