TORONTO (miningweekly.com) – Toronto-based High River Gold and majority shareholder Severstal have not been able to agree on terms for a transaction to recapitalise the gold-miner, and the discussions have been terminated, High River said on Monday.

Russian steelmaker Severstal already owns more than 50% of cash-strapped High River, after it bought 282,29-million shares late last year for $45-million.

However, the gold-miner still had consolidated debt outstanding of about $137-million on March 1, and the firm remains in breach of financial covenants under loan agreements that it has with Royal Gold and Standard Bank, which have, as yet, not taken any action, but reserve their rights to do so in the future.

On March 1, the company's consolidated accounts payable amounted to $23-million, and the firm also had principal and interest repayments due in March of about $7-million, plus an additional $27-million that will be due in the second quarter of 2009, and $22-million payable in the second half of this year.

High River said on Monday its ability to continue as a going concern will depend on the outcome of negotiations with its lenders, the company obtaining additional financing, as well as “ongoing accommodations” from its trade creditors.

The firm had been in arms-length discussions with Severstal on the possibility of the Russian group buying the rest of High River's shares that it does not already own, and/or providing debt or equity financing.

These talks have now been abandoned, and although the company will continue reviewing alternative financing arrangements, no specific proposals have been identified at this point.

As of March 24, High River's head office cash position totalled approximately $3-million, and consolidated cash totalled approximately $ 23-million.

High River produces gold from three mines in Russia and one in Burkina Faso, but has battled operational setbacks at its two new openpit gold mines: Taparko in Burkina Faso, and Berezitovy in Russia.

Shares in the company dropped 27,3% on Monday, to C$0,16 apiece by 13:35 in Toronto.

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