Numbers add up for El Valle gold project

A bankable feasibility study on El Valle, the Spanish gold project of Rio Narcea Gold Mines (RNG-T), points to a profitable mine life.

The study, based on 19,000 metres of infill drilling conducted over one year, recommends an open-pit gold mine and a plant designed to treat 600,000 tonnes per year at a mill feed grade of 5.22 grams gold per tonne. Such a mine would produce about 100,000 oz. per year.

With pre-stripping costs capitalized, the average cash operating cost over a projected 7.5-year pit life is estimated at $141 per oz. If ongoing pre-stripping costs are included, the cost rises to $186 per oz.

The study calls for preproduction capital expenditures of US$45 million, payback of which, at an average gold price of $390 per oz., would occur a little more than three years after production begins.

Infill drilling has increased Rio Narcea’s gold resource and minable reserves, including those of El Valle’s three open pits, which contain total reserves of 720,000 oz. The addition of 242,000 oz. gold from high-grade, underground reserves, which average 9.7 grams, would extend the project’s life to 10 years.

A previous feasibility study on the company’s Carles deposit, 10 km north of El Valle, indicated run-of-mine reserves of 434,000 oz. Metallurgical tests on the Carles ore confirm it can be treated in the Valle plant with high recoveries, and without process modifications.

Two rigs are currently conducting infill drilling to upgrade and confirm reserves at Carles, while a third explores the possible extension of mineralization to the northwest.

The company’s geologic resource in the region’s Rio Narcea gold belt is estimated at 1.8-2.1 million oz. The estimate, however, does not include the resource at the nearby Black Skarn, a recent discovery.

According to Chairman Chris von Christierson, Rio Narcea intends to proceed with development financing for a projected startup in early 1998.

“We are delighted that the results of the bankable feasibility confirm the economic viability of our first gold project, and we are especially pleased with the excellent rate of return,” he says.

Noting that the existing deposits are open at depth and along strike, Christierson says: “I believe the addition of gold reserves, and ultimately production, will be as much a function of drilling the extensions to these [deposits] as it will be of new discoveries in other areas within the company’s extensive land holdings.”

Rio Narcea plans to continue exploring targets both in the Rio Narcea gold belt (which occupies the northwestern region of Asturias) and along parallel gold belts to the west.