Rio Narcea gets banks behind Aguablanca

Spanish-based Rio Narcea Gold Mines (RNG-T) has arranged US$61 million in project financing for its Aguablanca nickel-copper development in southwestern Spain, putting the project on track for production in early 2004.

The financing has been arranged with Investec Bank U.K. and Australian-based Macquarie Bank, who will be providing a six-year loan of US$45 million as the basic component of the financing. Rio Narcea will also be taking out a US$5-million subordinated loan, a US$5-million line of credit against cost overruns, and a hedging facility.

The subordinated loan will be convertible to Rio Narcea shares at a 30% premium over their average daily closing prices in November and December.The company has also taken out EUR 6-million as a line of credit with Barclays Bank, to cover value-added taxes during project construction.

Proposals are in from a number of potential contractors and the company expects to award a project management contract shortly.

Rio Narcea is currently juggling negotiations with three nickel producers to take concentrates from Aguablanca. Nickel concentrates are in short supply at the moment and downstream nickel producers have been generous with offtake agreements over the past year.

A July feasibility study put the capital cost of a 10,000-tonne-per-day mine at US$64 million. The deposit has measured and indicated resources of 18.5 million tonnes grading 0.67% nickel and 0.49% copper, with cobalt, platinum-group-element, and gold credits. A further inferred resource contains 9.9 million tonnes grading 0.66% nickel and 0.49% copper.

The feasibility study assumed a minable reserve of 17 million tonnes at 0.7% nickel and 0.5% copper. An open pit, with a stripping ratio of 2.9-to-1, would have a life of 10.5 years at the expected production rate.

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