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Sunday, July 22nd, 2018 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

Why We’re Not Selling Into High River Gold Mines’ Good News

HRG Chart 18 Jan 2011.JPG

As we can see from the chart, High River Gold Mines Limited (HRIVF.PK) has spiked on recent developments

It looks like things are heating up again for a possible Severstal (SVJTF.PK)/Nord Gold IPO on the LSE. Four recent articles state that pre – IPO marketing starts next week and that ex-Anglo American exec, Phillip Baum, is to become Chairman of Nord Gold.

The articles mention Nord Gold’s value at up to £3.2B or US$5B. HRG made up approximately 57% of Nord Gold’s total production in 9 months to September 30, 2010 (233k oz vs. 408k oz). Shareholders await drill results and the Prognoz bankruptcy decision to bottom out HRG’s resource numbers. But on a production only basis, HRG’s pro-rata value would be $2.85B or $3.39/share.

Q4 and year end results will probably be out on March 31. The expectation is that HRG is back up to its Q2 production level of 87k oz. The average gold price in Q2 was $1195/oz whereas in Q4 it was $1389/oz – an increase of $194/oz. In Q2 HRG had $48.8M in cash flow. Assuming costs have remained the same, the extra $16.8M in revenues would bring HRG’s cash flow to $65.6M. If so, then the current market cap of $1.02B has HRG trading at a low 3.9 times cash flow. At the end of Q3, HRG had $125.6M in cash and equivalents. HRG’s third party stock holdings are currently worth $101M. Therefore, at the end of Q4, HRG should have $226M (cash, equivalents, third party stock) plus Q4 cash flow less exploration expenses. Perhaps we will see a net number over $250M or $.30/share.

As we wait for the Q4 results, we are hoping for announcements stating that our $101M of third party stock investments have been freed up for liquidation and that the Prognoz Silver bankruptcy has been resolved in HRG’s favour. Also, we are expecting updates on exploration and drilling at Bissa, Zun-Holba and Irokinda mines.

Footnote:

It’s official! This announcement came out a few hours after I sent my previous communication. Severstal/Nord Gold is referencing the Prognoz asset as if it will be retained in the portfolio – a positive sign.

We are still holding on to our position in High River Gold Mines Limited and have no intention of selling any of this stock in the foreseeable future.

Disclosure: I am long HRG.

The original article is published at http://www.c2ads.net/full-text-rss/makefulltextfeed.php?url=http://seekingalpha.com/sector/gold-precious.xml&format=rss&submit=Create+Feed


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