RNC boosts gold reserves (May 20, 2004)

Toronto-based RNC Gold (RNC-T), the owner and operator of most of Greenstone Resources’ old gold assets in Central America, reports an increase in its reserves and resources at the La Libertad and Bonanza mines in Nicaragua and the Cerro Quema project in Panama.

RNC’s wholly owned La Libertad open-pit, heap-leach mine is situated 115 km east of Managua. The mine is slated to produce an average of about 80,000 oz. annually over the next ten years at a cash cost of US$208 per oz., making it Nicaragua’s largest gold mine.

Using a gold price of US$375 per oz., reserves at La Libertad at the end of 2003 stood at 8.6 million tonnes grading 2.14 grams gold (or 588,600 contained oz.), divided equally between the proven and probable categories. A further 26.6 million tonnes of 1.45 grams gold (1.2 million oz.) are defined as measured and indicated resources.

RNC controls 18,300 ha of property around the mine, and intends to carry out further exploration both close to the mine and at a concession named Santo Domingo, 6 km from the mine.

At the 100%-owned Bonanza-Hemco concessions in northeastern Nicaragua, RNC has reserves of 300,000 tonnes grading 6.99 grams gold (67,000 oz.), plus resources of 3.9 million tonnes of 3.78 grams gold (474,000 oz.). Another 25.1 million tonnes of inferred material grade 1.19 grams gold.

At Bonanza-Hemco, RNC has the capacity to mine 31,000 oz. gold annually at a cash cost of US$250 per oz., from both underground and surface operations. The property has seen continuous production since 1940.

RNC is also actively exploring the Bonanza-Hemco concessions, with a particular focus on delineating bulk mineable deposits similar to those found at La Libertad.

(RNC recently bought out the remaining 20% of Bonanza-Hemco concessions it didn’t already own.)

At Cerro Quema, 190 km southwest of Panama City, reserves are pegged at 6.6 million tonnes of 1.13 grams gold (240,000 oz.). Measured and indicated resources, including reserves, stand at 15.9 million tonnes of 0.91 gram gold, or 465,000 oz.

RNC is completing a feasibility study for a US$14-million, open-pit, heap-leach mine at Cerro Quema, and hopes to begin building a mine there later this year, with production slated to begin in the fourth quarter of 2005.

At full swing, the mine could produce 48,000 oz. annually at a cost of US$190 per oz.

The company holds a 60% interest in the project and can boost this to 100% upon successful commissioning of the mine.

RNC’s remaining major gold asset is an option to acquire a 25% interest in the San Andres gold mine in western Honduras. The company is also exploring the Picachos gold-silver property in Mexico.

RNC Gold, which went public last December via a reverse takeover of Tango Mineral Resources, now ranks as the biggest gold producer in Nicaragua.

In the first quarter of 2004, RNC produced 20,412 oz. gold at a total cash cost of US$286 per oz. and a total production cost of US$359 per oz., but lost US$800,000 (4 per share) on revenues of US$7.8 million.

RNC sold its gold at an average of US$405 per oz., but lost US$39 per oz. on option contracts, for a net realized price of US$366 per oz.

In late April, RNC raised C$20 million by placing 10.1 million units priced at C$2 per unit. A single unit comprises a share and half a warrant, with a whole warrant entitling the holder to buy another share for C$2.50 within two years. The placement was sold by a syndicate led by Canaccord Capital and including Jennings Capital.

Net proceeds are earmarked for debt repayment, exploration, property acquisitions and for general corporate purposes.

A couple of months earlier, another US$1.1 million came into company coffers via the exercise of 681,000 share-purchase warrants.

At last count, the company had 18.7 million shares outstanding and a market capitalization of C$34.7 million.

RNC shares have taken a beating since they went public in December, gradually dropping from the C$3.50 range to their present value around C$1.80. The stock touched an all-time low of $1.57 in early May and has been recovering since then.