Severstal Acquires Controlling Stake In High River Gold
November 22nd, 2008 | by mantrionline |A subsidiary of Severstal (LSE: SVST), the Russian mining group, added High River Gold to its growing list of acquisitions. Yesterday High River Gold announced that Severstal had participated in a heavily dilutive share placing that would take its equity stake to 50.1%.
Severstal took approximately 282.3 million shares of High River Gold Mines (TSX:HRG) at C$0.20 per share for a total consideration of C$56.4 million. Severstal was also issued approximately 40.7 million full warrants with an exercise price of C$0.64 per share. Following the close of the transaction Severstal will control 50.1% of High River Gold Mine’s share capital. Before the transaction was announced, Severstal already had a 9.9% interest in High River Gold.
The deal also included a substantial boardroom shakeup. David Mosher, CEO and President will step down, as will Valery Dmitriev. Severstal will place Roman Deniskin, Nikolay Zelenskiy, Evgeny Tulubensky and Oleg Pelevin to the board of directors. Nikolay Zelenskiy will be the new CEO.
Severstal is best known for its iron and steel operations in Russia, but in recent years has expanded its interests to include precious metals and coal. Last year it snapped up AIM listed Celtic Resources which owned interests in several gold and copper-gold projects in Russia and Kazakhstan. The company also recently completed the acquisition of PBS Coals which owns a coal mining complex in Pennsylvania, and the company also purchased a 61.5% stake in African Iron Ore Group which holds the exploration rights to an iron ore deposit in Liberia.
High River Gold has a portfolio of producing mines, mines under development, and advanced exploration projects in Russia and Burkina Faso with attributable gold production from these assets is expected to exceed 300,000 ounces “in the near future”.
Shares in High River Gold have been decimated in recent months after the Company breached its banking covenants when the ball mill driveline failed at the Taparko-Bouroum Gold Mine, forcing a prolonged shutdown. High River Gold had a financing facility with Royal Gold Inc and Standard Bank which required the mine to reach “project completion” by October 1, 2008. High River Gold is also due to pay Nomos Bank approximately US$15.2 million on November 21, 2008. The Company had been actively considering its strategic options, and Mark Rachovides, Murray Sinclair, Graham Farquharson and Bob Buchan had already resigned from the board of directors in October.
